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Trade Agreements

Volume 795: debated on Thursday 14 February 2019


My Lords, with the leave of the House, I will repeat in the form of a Statement the Answer given to an Urgent Question in the other place by my right honourable friend the Secretary of State for International Trade. The Statement is as follows:

“Mr Speaker, as a member of the EU, the UK currently participates in around 40 free trade agreements with more than 70 countries. In 2018, the trade agreements in force constituted about 11% of our trade. These cover a wide variety of relationships, including: free trade agreements; economic partnership agreements with developing nations; association agreements that cover broader economic and political co-operation; and mutual recognition agreements.

The Government’s programme for providing continuity and stability for businesses, consumers and investors in our international agreements is of the utmost importance. We are committed to ensuring that those benefits are maintained, providing for a smooth transition as we leave the EU, but the best way to provide that continuity and stability is to ensure that we have a deal with the European Union so that the UK can remain covered by all those agreements during the implementation period.

We have already signed a number of agreements, including with Switzerland—the largest in terms of our trade flows, representing more than 20% of the value of all our rollover agreements. We have also signed agreements with Chile and the Faroe Islands and an economic partnership agreement with eastern and southern Africa—ESA. The text of these agreements, the Explanatory Memorandums and the parliamentary reports for them have already been laid in the Libraries of both Houses.

As we leave the EU, we have no intention of making our developing country partners worse off, as the Opposition would have us do, and it is important for the prosperity of their people that we maintain our trading relationships so that they have the opportunity to lift themselves out of poverty. We have recently reached agreements with Israel and the Palestinian Authority, and we intend to sign those agreements shortly. We have also signed mutual recognition agreements with Australia and New Zealand and will be closing two with the United States soon. A number of negotiations are at an advanced stage. All international negotiations—indeed, any negotiations—tend to go down to the wire, and I would expect nothing less from these agreements. That is the way that countries do business.

To put the economic value of the agreements in perspective, the countries covered by 20 of the smallest agreements account for just 0.8% of the UK’s total trade. For those countries where we may not be able to get a full agreement signed by exit day, it is responsible to ensure that we have contingencies in place should we end up in a no-deal scenario. That is exactly what my department, alongside the Foreign Office and the Department for International Development, is doing. We will shortly be updating businesses and the House about progress on these agreements and will continue to inform the House as soon as further agreements are signed”.

My Lords, I am grateful to the Minister for repeating as a Statement the Answer to the UQ in the other place yesterday. The mystery which this Statement is supposed to address is why there is such secrecy about progress on the rollover of existing EU FTAs. It was always going to be much harder than was ever promised; it was always going to take time, and it has; and, as the Minister said, it was always going to be up to the last minute, so we should not be surprised by anything that has been leaked to the papers. Having said that, it is good to see the leaked report because it gives some clarity to what is otherwise a rather obscure situation.

If the Minister will forgive the comment, the Statement still has Micawberish undertones. It has been clear for many months that, at best, only a very small number of agreements will be in force if we leave without a deal on 29 March. It is also becoming clearer that the focus on these 40 EU FTAs with 70 or so countries is a bit of a distraction. Even counting the Japan agreement that recently came into force, although it takes a number of years to have its full effect, we are talking about 16% of our overall gross imports and about the same—16.5%—of our gross exports, so it is a small proportion of our overall trade.

If you go a bit further into these EU FTAs, over 80% of their value is provided by some six of them. Obviously, they are important but they are not that important, particularly when you go further into what they comprise. The much-vaunted Swiss agreement accounts for a very large proportion of the six that provide 80% of the value but it is in a very restricted sector—pearls, precious metals and jewellery. Therefore, we have to understand a much wider issue. The majority of the EU FTA agreements and the ones that account for 80% of their value deal with precious metals, pearls, jewellery and mineral fuels. They do not supply food or medicines—the sorts of things that will be in short supply if we crash out on 29 March.

To focus a little more on the wider context, can the Minister now confirm clearly to the House that, if there is a withdrawal agreement, after 29 March 2019 the UK will be a third country, no longer participating as an EU member, and that it will have to rely on the EU’s promise to notify its current partners that the UK is to be treated as a member state? But of course that will be entirely up to the countries concerned and, as things stand, a very small number of the agreements with those countries will be in place on 29 March.

If there is no deal and we leave on WTO terms, the crucial question that is missing from this whole discussion is: what tariffs will be applied when we leave? Can the Minister confirm when we will get some information about the tariff rates that will be applied? We gathered from the exchanges yesterday in another place that the much-touted story over the weekend that the Government would go for zero tariffs has no credibility. The Minister in the other place said that that would not be the case. Can the Minister also confirm that the Government will announce the tariffs very shortly? If so, when will that be?

I thank the noble Lord. I think I heard two questions there. First, he asked whether it is true that if, as is the Government’s priority, we leave with a deal—that is, with a withdrawal agreement and an implementation period—the EU has to propose that the UK is treated as a partner for the purposes of these trade agreements. That is correct. I do not believe that that is a secret. My understanding is that the countries with which we have been having these discussions are happy about that and are supporting continuity on that basis. That has been the basis on which we have been proceeding.

Secondly, the noble Lord asked what tariffs would be in place in the case of no deal. Again, I stress that a lot of the focus is on getting a deal, although there is a risk of no deal. We have already started to provide information on GOV.UK and have provided technical notices to businesses with some elements of specificity and suggestions about what they can do. If it looks as though there will be no deal, clearly the Government will come forward with a day-one tariffs paper. As I imagine the noble Lord would expect, I cannot confirm the date of that but I can confirm that it will happen.

My Lords, I join the noble Lord, Lord Stevenson, in thanking the Minister for bringing this Question to the Floor. As the Statement makes clear, these deals account for around 11%—or 16% if you include Japan—of our total trade. That figure pales into insignificance when compared with the 48% of trade that we have with the European Union; nevertheless, it is important, and it is important to the companies that trade on that basis. It is important too because it is something of an act of faith. The Secretary of State was very clear that these deals would be easy and that they would be in place on the stroke of midnight, or one second after midnight. He was unequivocal and confident.

In Committee on the Trade Bill, my noble friend Lord Purvis of Tweed pressed the Government time and again to come forward with details of the progress on these deals. However, the Government did not give any and it is very regrettable that we are having this discussion due to a leak. The details having leaked, it seems that the Secretary of State’s bulletproof confidence is slipping.

In answer yesterday to the Member for Eddisbury in the other place, the Secretary of State said:

“The Government are assessing where we are with each of the agreements. Where we believe that it will not be possible fully to replicate, we will set out a technical notice in the coming days”.—[Official Report, Commons, 13/2/19; col. 895.]

Additionally, in answer to my right honourable friend Tom Brake, he said that he would now keep Parliament updated on progress “in the coming days”. Can the Minister tell us on which day this update will be forthcoming?

My Lords, I can only repeat the Statement from my right honourable friend the Secretary of State for International Trade. The update will be given shortly—as he said, in the coming week.

My Lords, I am most grateful to have the opportunity to raise what was debated in the other place yesterday. The noble Lord, Lord Stevenson, asked about tariffs. What will the mechanism be for setting the tariffs? Will a statutory instrument be brought before both Houses to set them?

On a different matter, I am personally very enthusiastic about the Faroes and would like to put down a marker about that. I am probably one of the few people to have visited the Faroe Islands. I am slightly concerned that the Faroes account for 0% of our trade when we have £60 million of exports and £229 million of imports.

My Lords, in terms of tariff-setting, there are the powers under the Taxation (Cross-border Trade) Bill. With regard to the Faroe Islands, I think that the figure of 0% has been rounded. We are talking about the total amount of trade to the UK but I agree with my noble friend that the trade agreement with the Faroe Islands, as well as many other smaller trade agreements, is vital.

My Lords, I too am very excited about the prospects of doubling or tripling our trade with the Faroe Islands. Can the Minister confirm that the facile optimism of the Secretary of State must surely now melt as he sees the reduction in our negotiating power when we are on our own compared with having the weight of the EU behind us, particularly in relation to the big hitters. Each of them—Japan, the US and India—will demand concessions, some of which might be painful for us; for example, it is clear that India will demand concessions on visas. That will be unpalatable to many Brexiteers.

I can only say to the noble Lord that we will remain the fifth-largest trading nation in the world. Third countries are very keen to work with us and to have access to our products, and they are very keen to make sure that they can export their goods to us. There is also the argument that in dealing with one country we will be able to focus on areas of particular interest to this country. I highlight in particular the service industry, which makes up 80% of our GDP.