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Brexit: World Trade Organization

Volume 785: debated on Wednesday 11 October 2017


Asked by

To ask Her Majesty’s Government what is their response to the letter of objection from the governments of the United States and other non-European Union countries to proposals to split World Trade Organization tariff rate quotas following Brexit.

My Lords, the United Kingdom wants to ensure a smooth transition in the World Trade Organization that minimises disruption to our trading relationships. We intend to discuss intensively our proposals on tariff rate quotas and other matters with our partners in the WTO over the coming period. This is the start of an ongoing process and it is very much our intention to respect and preserve existing trade flows.

Does the noble Baroness agree that the United States’ rejection of the EU-UK plan for splitting existing quotas within the WTO raises serious doubts about the ability of the UK to negotiate the proposed “beautiful trade deal” with them? Can she further explain the Government’s options in conducting trade deals during the likely years of delay it will take to resolve this matter, which will restrict and encumber the ability to conclude agreements covering areas such as agriculture and government procurement?

I am afraid I do not agree with the noble Lord about our relationship with the US. The US is a very important partner for us—already our largest trading partner, with a fifth of our exports outside the EU. Of course, it is not just about trade. The US is the largest single investor into the UK. We remain positive about our trade and investment relationship with the US. Both the Prime Minister and the President have repeatedly made clear our shared commitment to bilateral trade discussions, including a future trade deal.

My Lords, surely the reaction of the US and other agricultural exporting countries did not come as a surprise to the Government—it was entirely predictable that they would use the potential leverage of Brexit. Have the Government prepared British farmers for a possible flood of competing imports and the halving of their incomes, as a report yesterday from the Agriculture and Horticulture Development Board warned?

My Lords, we have obviously been speaking regularly with our WTO partners and the EU Commission about preparations for these negotiations. Today, the EU Commission in the UK sent a letter to all WTO partners, setting out our initial position, which has been published today on GOV.UK. Detailed discussions will follow in the coming weeks and months but we remain confident that we will be able to replicate as far as possible the UK’s current trading regime.

My Lords, will the Minister say whether the Government believe they will have to abide by the WTO post Brexit in opening up access to agricultural markets and goods from third countries far more than they want to, even before they agree new trade deals with those countries?

As I said, our primary aim is to replicate as far as we can our trading deal and we remain confident that we will be able to do so.

My Lords, does the Minister agree that it is not unusual in WTO negotiations for the first answer to be no? That is not a surprise. It will not be easy, but we will work together with the WTO over a long period, not just on agricultural projects but on a range of issues. That reinforces the need for a transition period in the Brexit negotiations.

Yes, absolutely. We are discussing agriculture, as well as many other issues, with our partners. It will take time—we were expecting that—but we are committed to working constructively and openly with our partners. As I say, the aim is to replicate our existing trading regime as far as possible.

My Lords, a hard Brexit—indicated as a possibility, or in some cases, a preference, by the Prime Minister this week—means that in that event, our country would be entirely dependent on the WTO rules regime. In view of that reality and the potential damage it would cause to agriculture and several other industries in this country—not even mentioning that that regime does not extend to services, upon which our economy depends—can the Minister give us a much clearer understanding of the Government’s planning for the event of us being dependent on the WTO regime so that, at least in this respect, the obscurity that is now characteristic of the Government in their dealings with the EU is at least diminished?

An agreed deal with the European Union is a mutually beneficial choice and we are confident that we can achieve that. But as the Prime Minister said, while we think that that is by far and away the highest probability, we have a duty to plan for the alternative, and that is exactly what we are doing, in detail.

My Lords, the leave campaign suggested before the referendum that being on WTO terms would be easy and straightforward —or that is how I understood its case. Do Her Majesty’s Government have in place sufficient trade negotiators able to deal with both the European Union and the WTO? If not, what are they doing to rectify that?

Absolutely: within the WTO we have committed additional resources to our UK mission to strengthen our ability to carry out work there and we are currently expanding within the Department for International Trade. We have gone up to nearly 3,500 members of staff and employed Crawford Falconer, who is an internationally recognised trade expert. We are fairly confident that we have enough capacity to make all these deals.

My Lords, the noble Baroness said on a number of occasions that she is confident that the Government will be able to replicate our existing trading position. Can she enlighten us as to how on earth the Government propose to do that?

Well, quite a lot of the detail with the WTO will actually be on a quite technical basis, but some of the more complicated areas, such as TRQs and AMS, are absolutely part of our conversation. We have agreed with the EU Commission to split the TRQs and we are now discussing that with our partners to ensure that we get the best deal we can.

My Lords, does my noble friend agree that the nature of splitting a tariff rate quota is such that the initial response from any of our international trading partners will be to try to get the entirety of that quota shifted to the remaining members of the EU, and therefore as my noble friend Lord Livingston said, initially we are bound to get objections to our proposed split, but ultimately it is actually a matter for negotiation?

I absolutely agree with my noble friend. We have made it clear that we are not looking to increase access for our trading partners. Obviously, if we did say that, we would displace local producers in the UK and affect other WTO members who export to the UK through different schemes—for example, developing countries which would also see their trade erode.

My Lords, I want to ask the Minister about the issue of farmers’ incomes being halved, as mentioned in the report that came out yesterday. If that happens and it is so uneconomic to stay in farming, does the Minister not think that that will affect this country’s food security terribly badly?

Obviously, we are still in the process of negotiation, so we cannot know how this will affect our farmers. In the letter today we have talked about our agricultural support. We intend that the EU’s current annual and final bound commitment level specified for domestic agricultural support will be apportioned between the future EU and the UK on the basis of an objective methodology, so there will be money to support our farmers.

My Lords, may I ask the Minister politely to request of the department a better-written brief, so that some of us achieve answers to the questions we put to her?

I am quite happy with my brief but if there is anything specific which I have not answered then I will write to the noble Lord.

I commend my noble friend on her command of her brief on what is probably her first outing. Is it not of the utmost importance that the department clarifies what our status is with the World Trade Organization if there is any possibility at all, as the Prime Minister raised yesterday, of us leaving the European Union without a deal and without a transition period, so that we can then proceed to do those negotiations, as my noble friend has set out so clearly today?

Absolutely; and as part of our conversations with the WTO we are, of course, planning for the unlikely eventuality of there not being a deal. We will continue to have those discussions as time goes on.

The Minister has twice said that the Government’s aim was to “replicate” the current trading regime. I thought the Government’s aim was to introduce a new suite of wonderful trading regimes with benefits as yet unspecified. Can the Minister explain whether the Government have lowered their sights already?

Absolutely not—the main goal at the moment during our Brexit negotiations is to establish the UK’s position in a way that minimises any disruption by, as I say, replicating the arrangements as far as we can. In future, once we have left the European Union and are able to negotiate our own trade deals, we will retain our ambition for those.

Has the Minister noted the number of policy areas where the reply from the Front Bench is, “We need to replicate as nearly as we can the current arrangements”? Is that not food for thought? Picking up the point made by the noble Lord, Lord Newby, is that not rather different from, “With one leap we are free”?

As I said, I think, in response to the last question, we clearly understand that these are complex negotiations, and we have until March 2019 to continue them. No one expected them to be simple and we will continue to make sure that we get the best deal for the British people.

It is a rough and tough world out there. We have seen how the American Government—with whom we apparently have such wonderful relations that the state visit of the President was downgraded today, as I understand it—will play a very hard game, as you would expect. Can the Minister tell us how the Government expect even to achieve the downgraded objective of perhaps just simply maintaining our current trading position?

Our objective of maintaining our current position is due to happen when we leave the European Union. Following that, there will be opportunities, as I said, to improve and expand on our relationships. Leaving the European Union does offer us an opportunity to build on our relationships across the world, including with the US, and I look forward to doing so.