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Brexit: EU Free Trade Agreements

Volume 795: debated on Thursday 24 January 2019


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

“Mr Speaker, as a member of the EU, the UK currently participates in around 50 free trade agreements with over 70 countries. These free trade agreements cover a wide variety of relationships, including economic partnership agreements with developing nations; association agreements, which cover broader economic and political co-operation; trade agreements with countries that are closely aligned with the EU, such as Turkey and Switzerland; and more conventional free trade agreements.

Businesses in the UK, EU and partner countries are eligible for a range of preferential market access opportunities under the terms of these free trade agreements. These can include, but are not limited to, preferential duties for goods. This includes reductions in import tariffs across a wide range of products; quotas for reduced or nil rates of payable duties; quotas for more relaxed rules of origin requirements; enhanced market access for service providers; access to public procurement opportunities across a range of sectors; and improved protections for intellectual property. For continuity and stability for businesses, consumers and investors, we are committed to ensuring these benefits are maintained, providing a smooth transition as we leave the EU.

The Department for International Trade, the Foreign Office and the Department of International Development are currently working with partner countries to prepare to maintain existing trading relationships”.

My Lords, I am grateful to the Minister for repeating in the form of a Statement the Answer given to the Urgent Question in another place. The Government have made it clear that prudence dictates that sensible planning should be undertaken as we are only some 10 weeks from leaving under a no-deal scenario—except, apparently, in the Department for International Trade. Yesterday in Committee, the Minister said that while the Government have been engaging actively with the countries which currently have a free trade agreement in the variety of forms that it takes with the EU, she could not say what steps are necessary in each of those countries to roll over their agreements to the UK, how many are ready to do that and how many are not. This seems incredible.

If we do crash out on 29 March, we will not be in a free trade agreement, a customs union or a preferential agreement with any of these countries. Have the Government told these countries what tariff rates the UK will apply from one second after 11 pm on 29 March 2019? More importantly, have they told UK businesses what the rules will be? If not, why not?

My Lords, I thank the noble Lord for the question. The Government have been clear. We are aiming to have a deal and an implementation period. On that basis we are confident of the continuity. My honourable friend Minister Hollingbery said in another place that he was confident that most of those 40 agreements would be continued.

My Lords, they can be continued only if they are ratified both by this Parliament and the third-country parliament. Revelations from the Government yesterday in Committee on the Trade Bill highlight the fact that, even if we have an agreement and even if the EU asks those countries to treat the UK as a continuing member of the EU for the purposes of trade treaties, the Government do not currently know whether or not they will. That leaves a very large question mark—even if we leave with an agreement. If we leave without an agreement on WTO terms, we know through the objections already lodged in Geneva to our goods and now our services schedules that we are likely to leave without any certified schedules under WTO rules, adding even more instability and uncertainty. We know already the consequence of leaving on WTO rules. From day one it would be a tripling of the tariff rates to our trading partners. But we now know that leaving with an agreement also has major uncertainty. Will the Government now, as a matter of urgency, update their impact assessment, already published, to take into consideration these new facts? Will they honour the clear vote of this House to have an urgent update and a policy statement on how the Government intend to take forward their future trading relationships? This House voted for it: when will the Government honour that commitment?

To clarify, I said in the debate that it was for those third countries to determine what their processes are. Some are not public knowledge. I did not say that we did not know. With regard to the WTO rules, it is true that we have submitted our schedules and they have not been certified. However, countries can operate on an uncertified schedule. The EU currently operates on an uncertified schedule. In terms of more information about the process, I said in the debate that I would reflect on the clear desire from this House for more information. I have taken that back to my department.

My Lords, will my noble friend respond to the question put both yesterday and this morning by the noble Lord, Lord Stevenson, on what the tariffs will actually be, so that we can have a level of certainty going out from Parliament to businesses that are directly concerned? Can she elaborate a little more on the process? For example, yesterday she mentioned the process of signing the agreement with Switzerland. When will that free trade agreement come into effect? How long will the processes of the respective parliaments take, both in Switzerland and here?

On any tariff rates, I repeat that this Government are clear in their aim to have a deal and an implementation period. There is of course a chance of no deal. There will come a time when we know the exact basis on which we are to leave. When that moment is clearer, the DIT will come forward with its day-one tariff schedules. I say again that we hope that that does not happen because we will have a deal. I can confirm that the Switzerland agreement has been initialled; it is expected to be signed very shortly. As my noble friend will know, the continuity agreement will wait until we have left the EU, because it is at that time that it becomes relevant.

My Lords, does the Minister agree—I am not suggesting that it is her personal fault—that this represents a massive failure of policy on the part of the British Government? The Secretary of State, Mr Liam Fox, and Mr George Hollingbery gave assurances to the other place that the 40 agreements would be novated by the proposed leaving date. Hardly any of it has happened. Surely this is a demonstration of the failure of government policy, and an apology from the Government is required for letting us down on this aspect of Brexit, as on so many others.

My Lords, the Government’s policy remains to have a deal and an implementation period. If that is pursued, there is confidence that those agreements can be continued. That is in the interests of our businesses and our consumers. My urge would be that we find a way to a deal, so that that process can happen in a clear way. As for no deal, I have been clear in this House that timing is extraordinarily tight and our confidence would be much greater if there was an implementation period.

My Lords, as my noble friend the Minister rightly said, participating in the withdrawal agreement in a treaty with the European Union will enable us to be treated as if we are continuing in the free trade agreements currently in place between the European Union and third countries. We will participate in those through the mechanism of the withdrawal agreement. However, does she agree that many of those third countries are not keen to publish what they regard as their arrangements with the United Kingdom in the event of no deal, not least because they do not know what our relationship with the European Union will look like immediately after a no-deal exit? Under the most favoured nation rules, they would expect in the short term to be able to benefit from whatever arrangements we arrived at with the European Union.

I thank my noble friend for that question. He is absolutely right. An example referred to in another place was Turkey. As your Lordships will know, Turkey does not have a normal free trade agreement; it is part of a customs union. Therefore, it is particularly difficult to agree continuity with Turkey until we know the exact terms of the relationship with the EU.

My Lords, I have every sympathy with the position my noble friend finds herself in, which none of us would wish to be in, but can she confirm that if we were to leave with no deal, that would be a choice that the Government could have avoided by revocation of Article 50, which is in their gift? Will she also confirm that the former Brexit Secretary claimed in an article the weekend before last that leaving with no deal would be the way to make Britain a global free-trading nation? Leaving with no deal actually has the impact of losing all the free trade deals we currently have with our nearest neighbours and, it would appear, losing the trade deals we have with non-EU countries as well. Indeed, it would be a monumental act of protectionism for this country to leave with no deal.

I thank my noble friend. My right honourable friend the Prime Minister has been very clear about her attitude towards Article 50, so I do not want to take that one on. As for leaving without a deal, I question that there would be no free trade agreements. As I have said, the Switzerland one has already been initialled and is expected to be signed, and we are making good progress on a number of trade agreements. Let me be clear that most of our trade with the US, which is approximately one-fifth of our trade, is on WTO rules.