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House of Lords Hansard
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06 March 2019
Volume 796

Report (1st Day)

Relevant document: Processes for making free trade agreements after the United Kingdom has left the European Union (CP 63)

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That the Report be now received.

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My Lords, this House has debated many issues during the passage of the Trade Bill, none more important than the scrutiny of future free trade agreements. That was the subject of the Motion tabled by the noble Baroness, Lady Smith, seeking further details of the Government’s intentions in this respect. In response, last Thursday we published a Command Paper setting out further proposals for the parliamentary scrutiny of future FTAs. Those proposals drew heavily on the views put forward by Members of this House.

Noble Lords raised questions about Parliament’s role in future FTAs, the role of the devolved Administrations and legislatures, and public transparency. We listened, we considered carefully and we have acted. In particular, we hear concerns about transparency and scrutiny of negotiating objectives, transparency over negotiations themselves and the desire for Parliament to be involved at every stage of the negotiations and not just at the ratification stage. As a result, we have brought forward comprehensive proposals on public transparency and the role of Parliament and the devolved Administrations. I will not go into detail on those proposals now, as we will debate them fully during Report, but they give Parliament, and this House in particular, the reassurance that this Government are fully committed to effective parliamentary scrutiny and public transparency.

It is often said that no legislation passes the scrutiny of this House without being improved. From my perspective, this is unquestionably true here. Equally, it should be recognised that this House can and does influence and improve thinking beyond the strict confines of the Bills that pass through it. The Trade Bill focuses on continuity of existing trade agreements, but throughout its passage we have touched on issues of great importance outside of the scope of the legislative provisions before us and, as I said, none is more important than the scrutiny of future FTAs. It is perhaps not often that the Government welcome a Motion tabled by the Opposition on one of their Bills, but in this instance I can say that the Motion tabled by the noble Baroness, Lady Smith, served our common objective of ensuring that the scrutiny arrangements for future FTAs are robust, effective and informed by the passionate and expert Members of your Lordships’ House.

This Bill is essential to providing continuity and certainty for UK businesses as we leave the EU. I look forward to making progress on the Bill this afternoon and I beg to move.

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My Lords, first, I thank the Minister for her efforts to meet the requirements of the Motion in the name of my noble friend Lady Smith of Basildon, who is unfortunately indisposed at the moment. I know that my noble friend keeps a beady eye on everything that goes on here, so she will have noticed the welcome given to her Motion, even though it was not quite so well received on the Government Benches at the time. Nevertheless, we are where we are and we have made some progress. It cannot have been easy for the Minister or the Government as a whole to get a White Paper prepared and laid in an atmosphere that is probably best not gone into and in the very short time available. It is a major achievement and we appreciate it. It is also clear that the Government’s thinking has progressed in recent weeks and we welcome much of the analysis set out in the White Paper.

As we all know, trade negotiations are complex and difficult. They should engage civil society and feed in the views of consumers, trade unions and companies. The negotiations require a proper and effective system, involving this Parliament and the devolved Administrations, in relation to the negotiating mandate, and feedback on the negotiations as they progress and the final agreements. We think that requires underpinning with a statutory framework so, in the absence of any government amendments covering these points on Report, and in view of the assertion in the White Paper that no legislation is needed to deliver the Government’s proposals, we have tabled an amendment setting out a possible scheme. It is on that basis that we are happy to agree with the Motion moved by the noble Baroness and proceed to Report.

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My Lords, like the noble Lord, Lord Stevenson, we welcome the Minister’s comments from the Dispatch Box. This is an occasion when parliamentary persistence has proved effective. We started this process when the Government had indicated that the Bill would be about only the existing continuity agreements and we made a very strong case, across all parts of the House, that it should also signal a direction of travel which, in many respects, would create precedent. It is on that basis that we on these Benches welcome the Command Paper that the Minister has published and her willingness to engage with and meet opposition parties and Members from across the House.

One reason this has been so important is that it has been a consistent practice of this Government, in relation to continuity trade agreements or starting discussions with countries about future trading relationships, to delude themselves that it will be easy, then deny that there is a problem when it is highlighted that they are difficult. Then they demur when frustrated officials leak information that allows us to glean the reality from the media. Then, unfortunately, on occasions, they deflect the problem, saying that is not their problem or responsibility; it is other countries that are not lifting the burden, or the European Union that is not being forthcoming with its position on a future relationship. We want to be in a position where we can put all that behind us and move on to a platform where we have much greater clarity as to what the trading relationships, and the role of Parliament and the devolved Administrations in their oversight and approval, will be. I welcome the Command Paper as the start of that.

To quote the noble Baroness, Lady Manzoor, from Question Time, this can be only the start of the process, and this is the platform on which we will seek to build. This is not the end. In that spirit, I hope the Government will be very favourable to Amendment 12 later today to ensure that that platform can be built on in the most constructive manner. On that basis, I look forward to hearing the Minister’s comments.

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My Lords, as one of those who supported the amendment of the noble Baroness, Lady Smith, I thank the Minister for her efforts in the meantime and for the publication of the Command Paper, which is a useful production and provides greater clarity on the Government’s intentions.

I shall make two small points. First, this legislation really matters. It could be—I hope it will not be—that within three weeks we will have left the European Union without a deal, in which case the Bill, by then perhaps an Act, will be the basis for Britain’s future independent trade policy. So we need to get it right. On the issue of parliamentary oversight, mandating and scrutiny, the Bill currently before your Lordships’ House on Report contains not one word added in that respect to the version we saw in Committee. The problem is the Government’s unwillingness to put in the Bill the provisions described in the Command Paper. That is at the heart of the debate we will have on Amendment 12.

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My Lords, with the indulgence of the House I should like to welcome the start of Report. A number of points were made on the preceding Motion, but I believe that they will be picked up in our discussions on further amendments over the course of the day.

I have listened carefully to the thoughtful contributions that this House has made on the Bill so far—not just in our debates, but in meetings I have had with a great number of noble Lords over the past few weeks. I look forward to continuing to benefit from the experience, expertise and knowledge of your Lordships, and the continuation of the constructive dialogue we have had so far.

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I would like to ask one question of the Minister. I welcome the White Paper; it is full of commitments to transparency. What will be the tariff regime of the United Kingdom for imports on 30 March if we have left the European Union on 29 March with no deal? We know what the European Union’s tariff will be against us—it is the one we are currently applying—and we know that two months ago the European Union sent out instructions to the member states on how to apply the common external tariff against United Kingdom goods in the event of a no-deal Brexit. As far as I know, however, we know nothing apart from rumour about the regime that British importers will pay. Could the Minister enlighten us?

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As the noble Lord will be aware, the Government’s aim is to achieve a deal. As this House will also be aware, we seek to achieve some important agreements on or before 12 March. We are therefore not planning for no deal, which is not our preferred option. If and when that occurs, that would be the appropriate time to publish those schedules, but as I have said before on the Floor of this House our objective is to achieve an agreement, at which point we will move into the implementation period.

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I understand that that is the Government’s aim, but it is also the case that the Government have deliberately kept no deal on the table. British importers, businesses and farmers do not know what no deal means for them. Is that fair?

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I understand the point that the noble Lord is making. As we have always said, we will seek to balance the protection of our consumers and downstream users from the possible price impact of no deal. The tariff regime will be subject to the approval of the House, and secondary legislation to give effect to the tariff will be laid in line with the Taxation (Cross-border Trade) Act 2018. The Government aim to secure a deal, so we hope that that announcement will not be required.

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Before my noble friend sits down, I draw the attention of the House to Amendment 10, in my name and that of the noble Lord, Lord Stevenson, which relates to tariffs. It permits a debate of the kind that I think the noble Lord, Lord Kerr, was hinting that he wanted. It seems to me that we do not start on 29 March without a schedule. We have notified a schedule to the WTO, and it is in line with the EU’s external tariff. On that basis, we should talk about it later rather than now. We know where we start from. The issue is to what extent we might vary—that is, apply a rate of duty lower than the EU’s external tariff at some point after 29 March were we to leave without a deal.

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I thank my noble friend for his clarification. That is indeed true but I think he will also accept that, if we were aiming to have a deal, we would not need to publish. If we got to a stage where no deal looked likely, clearly we would have to provide the information that he and the noble Lord, Lord Kerr, mentioned.

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My noble friend will be aware that the Secretary of State for Agriculture promised, at the NFU Conference more than two weeks ago, that the tariffs would be published. It would be immensely helpful for the House to have that information before us for the purposes of the Bill today. I wonder if there is a reason why the tariffs have not been published now.

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I hope I have addressed that. Should no deal appear to be what is happening, they will be published. We are focusing very much on achieving a deal, so we do not feel that this is the right time to publish.

I thank all the noble Lords for their additional contributions. I look forward to debating these and other issues as we progress through Report.

Report received.

Clause 1: Implementation of the Agreement on Government Procurement

Amendment 1

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1: Clause 1, page 2, line 13, after “direct” insert “principal”

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My Lords, as this amendment touches on the GPA, I inform the House that the UK has formally received an invitation to accede to the GPA. This was agreed by the GPA committee at a meeting in Geneva on 27 February, and I am sure that the House welcomes that news.

Government Amendments 1 and 2 have been tabled to clarify that the powers in the Trade Bill may be used to modify retained direct principal European Union legislation. These amendments are very simple in nature. They make it clear that the regulations made under either Clauses 1 or 2 may, like the powers conferred under the European Union (Withdrawal) Act, modify retained direct principal EU legislation. This will allow qualifications to be made which make retained direct principal EU legislation workable in the context of a UK outside the EU.

The Constitution Committee recommended in its report of 15 October 2018 that the Bill was clearer in its definition of retained direct EU legislation. I welcome the work that the Constitution Committee has undertaken on the Trade Bill, which shows the very best of the expertise that can be applied in this House. Consequently, and in light of its recommendation, we have brought forward this amendment, which I hope brings greater clarity to the Bill and will be supported by this House.

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My Lords, perhaps there is a report from the Constitution Committee that would answer the question I am about to ask, but what is the concept of direct principal European legislation? I do not recall it being referred to—perhaps I should. Is it the main pieces of legislation? Could my noble friend be more specific?

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My Lords, the concept of retained direct principal EU legislation is that of EU legislation that will come into UK law upon leaving the EU. This amendment will make a clarification to ensure that the same wording is used as in the withdrawal Act. Just for further clarification, because I asked it myself, saying “retained direct principal EU legislation” includes minor legislation.

Amendment 1 agreed.

Clause 2: Implementation of international trade agreements

Amendment 2

Moved by

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2: Clause 2, page 2, line 41, after “direct” insert “principal”

Amendment 2 agreed.

Amendment 3

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3: Clause 2, page 2, line 47, at end insert—

“(5A) Regulations under subsection (1) may not be used to make provision which will have the effect of reducing standards in comparison to those applying immediately before exit day.(5B) Standards in subsection (5A) include, but are not limited to, those relating to—(a) marketing of agricultural products,(b) animal health, hygiene or welfare,(c) environmental protection,(d) food safety,(e) public health,(f) employment and labour,(g) human rights.”

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My Lords, I will also speak in support of Amendment 4, which I have put my name to.

I thank the Minister and her civil servants for meeting me to discuss my amendment outside this Chamber. She has been incredibly generous with her time, and I very much appreciate that. It is thanks to the meeting with the Minister and the constructive criticism from noble Lords in Committee that I have tabled this much refined amendment on Report.

The sole purpose of my amendment is to give legislative effect to the Government’s own policy, which, as I understand it, is that the Bill will be used only to roll over existing free trade agreements that we enjoy as a member of the EU so that we can continue to enjoy them after we leave. Rolling over means no renegotiation, changes in terms or reduction in standards. My amendment is a way of giving effect to the Government’s own policy. I am not looking to cause trouble here, nor to undermine the Government—for a change.

The problem with the Bill as it currently stands is that it does not give effect to this policy. The Clause 2 powers are much broader than they need to be, and would allow for a significant undermining of precious protections for our environment, workers’ rights, food safety and a whole host of other provisions. Clause 2(1) allows an appropriate authority to,

“make such provision as the authority considers appropriate for the purpose of implementing an international trade agreement”.

Clause 2(2) and (3) restrict the regulation-making power only to implement agreements with signatories which are already signatory to a trade agreement with the EU, but that is the only limit on the power. There is nothing to say that the terms of an agreement have to be the same or similar to the existing EU trade agreements. There is no reference to protecting standards and no limit on renegotiation, nor on implementing a totally new trade agreement. There is not even a time limit, or sunset clause, on how long into the future these powers can be used. Hundreds of years from now, a Government could implement a completely new trade agreement on the sole condition that the partner country had a deal with the EU before Brexit. If this sounds ridiculous, it is because it is. Clause 2 grants Ministers an incredibly broad, almost uncurtailed power to enact whatever trade agreements they negotiate.

At Question Time today, chlorinated chicken was mentioned with regard to trading with the USA. A Bryan Smith got in touch with me to say, “As a microbiologist, I can tell you for sure that washing chicken carcasses in bleach does not kill all salmonella. It forces the bacteria to form cysts which can hatch later. It is much harder to detect in this form, so it hides the problem”. I used to joke that it was just as well that chickens were chlorinated because at least they were clean. In fact, they do not now use a chlorinated wash; they use other substances—for example, peracetic acid. This is an organic peroxide—a colourless liquid—and it can be highly corrosive. The practice is not dangerous in itself but it might hide poor farming hygiene practices. Other animal welfare issues are very concerning, such as stocking density, sow stalls, animal transport, antibiotic use, veal crates, battery cages, debeaking, tail docking and castration. We could be subjecting our food to these practices and people to whom I talk outside this House are absolutely horrified.

The Minister told the Committee that none of this mattered because the European Union (Withdrawal) Act brought all European standards and rules into UK law. They say that everything is fine; everything is protected. This is completely undermined by Clause 2(5)(a) which allows the Minister, by regulations, to modify,

“retained direct EU legislation or primary legislation that is retained EU law”.

So the Government, having incorporated all EU law into the withdrawal Act, would have the unrestricted power to tear it all up in order to implement whatever terms they agreed in these trade deals. The Government’s assertion that the withdrawal Act resolves all my concerns could be correct only if Clause 2(5)(a) were removed from the Bill or curtailed by restrictions, such as those in my amendment.

The truth is that we are not protected by retained EU law at all because the Bill allows the Government to scrap it in the interests of trade. The only protection left is the assertion from the Government that they will not use the powers in the Bill to undermine our prevailing standards. This is not good enough. If the Government are not going to use the powers, as they have promised they will not, my amendment will not make the slightest difference. It would cause a problem for Ministers only if they go against their promises and try to undermine prevailing standards when incorporating a trade agreement. We must not allow this to even be an option.

I have tried to draft my amendment in the simplest possible terms. This is for my own reference and not because this House in any way lacks understanding. The amendment uses as reference all the standards which apply immediately before exit day—the existing standards on which current trade deals operate. Some trade deals might have higher standards than others, so my amendment is designed to allow whatever level exists in each specific trade deal to be rolled over. The Government have a problem only if there is any reduction in standards in the rolling-over process. This is a much more restricted approach than I would have liked. Amendment 4 expands on it and could be much more powerful. I have gone to great lengths to develop an approach that can be supported by noble Lords across your Lordships’ House, and even be accepted by the Government. Personally, I should like much higher standards, but I am compromising here, which is not easy.

The Bill gives far too much freedom to Ministers to change the law and undermine our precious standards on a whole range of issues. The Government’s promises and ambitions will easily give way to the harsh reality of trade negotiations. By that point, it will be too late for Parliament to reject whatever deals are made. Your Lordships’ House must put a backstop on the Government’s promises, so that these trade deals cannot be renegotiated in a way which would undermine any of our prevailing standards. My amendment will achieve this. I beg to move.

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My Lords, I have put my name to Amendments 3 and 4 and speak in support of the noble Baroness, Lady Jones. We had a wide-ranging debate in Committee about standards and Members from across the House argued that we should not allow standards to fall in a whole range of important areas, as outlined in the amendment. The Government’s reply was to agree in principle. The Minister said at the time that the Government were committed to high standards and that they were the right policy for the country, but that they should not be written in the Bill. When asked why not, she was unable to give a convincing reply.

It is essential that we take this opportunity to ensure that existing standards in a number of areas cannot be lowered as a result of the Bill and that that is made explicit in the Bill. One reason for that comes down to the issue of trust. In 2017, the Trade Secretary promised that the United Kingdom would not lower the standards. He said:

“We have made very clear we are not going to see reductions in our standards as we move forward, partly because British consumers wouldn’t stand for it”.

But at the same time, the self-same Trade Secretary has prioritised a trade deal with the United States. It is no secret that the prime aim on the United States’ side will be to negotiate lower food standards with the United Kingdom to enable their food products to flood in to the UK. There is no secret that that is their ambition.

Asked about this last weekend, when asked about food standards, the Trade Secretary replied:

“The question is not about safety”.

This is a bigger issue than the safety or not of a way of preparing food, which is also subject to rules at the World Trade Organization: it is about the decisions we make between the EU and United States approach to regulation. It is about the barriers to trade that that may impose, the impact on our producers and, most of all, the level of trust over trade policy.

The absolute worst way to make significant changes would be through the power under the Bill, because that would cause huge resentment and distrust of United Kingdom trade policy, which would damage our long-term prospects of achieving consensus and wide support for trade deals in future. As the noble Baroness, Lady Jones, points out, under the Bill, the Government could make any change they liked to any regulations as long as it was relevant to implementing a trade agreement and that tariff changes are handled by another piece of legislation. Let us take the much cited chlorinated chicken, which she mentioned, beloved of the United States.

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My Lords, surely the point is that the Bill relates only to agreements in place before exit day. There is no agreement on chlorinated chicken or with the United States, so any such argument is irrelevant to the Bill.

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The noble Lord is clearly prescient, because I am just about to cover the very point he raises. As I said, let us take the question of chlorinated chicken. There is nothing to stop Ministers making that change in implementing existing trade agreements. For example, perhaps Mexico would want us to declare that we will accept chlorinated chicken in return for continuing our trade agreement. There is nothing to stop a country with which we have an existing agreement asking for that in future as a part of the rollover, which is what I think he was asking about. Slightly more far-fetched, perhaps, there may be a change of Minister. Perhaps the current Secretary of State for Transport takes over at trade and makes the change by mistake. Who knows?

That is why it is so important to agree the amendment. Major changes in standards in all these important areas should not be covered under the Bill: they need to be fully discussed in terms of our future trade relationship with the United States and the EU in the light of the terms under which we depart from the European Union and with the involvement of a wide range of businesses, trade associations, producers, consumers and local communities. The Bill should not allow a departure from standards, and that is why I put my name to the amendments.

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I am delighted to follow the noble Baroness, Lady Henig, and thank her, the noble Baroness, Lady Jones of Moulsecoomb, and the noble Baroness, Lady Brown of Cambridge, for their support for the amendment in my name. Since we last met in Committee, there have been two positive developments. One is the fact that the Government have published their report on the implications of no deal for business and trade. The second is the promise to publish the tariffs.

I shall speak about my Amendment 4, which I thought was superior to Amendment 3, although there is not a great deal in it. I am particularly concerned that, when we look at the rolled-over agreements with some countries, we see that a number of African countries do not necessarily have the same animal health and hygiene standards that we do. This is a matter of concern with continuity agreements as well as with future agreements.

I hope that my noble friend the Minister will agree that any relevant trade agreement that we wish to see as part of the continuity agreements should be consistent with the standards laid down by primary and subordinate legislation, whether those are principal or minor. I hope that her department can help a little more by explaining what “principal legislation” means, because I still do not entirely follow that. I want particularly to look at food safety and animal welfare issues in this regard, and to ensure that any goods imported under a relevant trade agreement have been produced to standards comparable with those already effective in the UK, as per the aspects listed in subsections (1) to (3) of my amendment.

I also insist that both Houses should have,

“approved a motion that the relevant trade agreement does not have the effect of lowering marketing standards for agricultural products below the standards used by the European Union on the day the motion”—

that is, the motion to leave—

“is passed”.

The noble Baroness, Lady Henig, made that point eloquently in Committee.

The figures are quite telling. On 2018 figures, trade between the UK and the EU amounts to £286,000 million, accounting for 45.6% of total UK trade. That is overwhelmingly our major market. UK participation in the roughly 40 current trade agreements covering 70 countries—again, on 2018 figures—is infinitely smaller, and accounts for 11% of UK trade. UK trade with the rest of the world currently amounts to about 40% of our trade. UK-US trade is 18% of our trade. There is lots of talk about a future agreement with Japan, as currently we have no agreement with that country, but that would account for only 2.1% of our present trade. With Turkey the figure is 1.9%.

I understand that since Committee stage the Government have issued a Written Ministerial Statement in the other place outlining the implications of the fact that the Turkey agreement and the EU-Japan agreement cannot be rolled over. It is very helpful to have that Statement on the record.

As I said at the opening of Report stage, I regret that the House is not yet in possession of the tariffs. I understand that we have some figures from the Secretary of State for Environment, Food and Rural Affairs, given at the NFU conference last month, and that in the event of no deal we are looking at potential tariffs on imports of 70% on beef and 45% on lamb. It is important to grasp those figures, and what the impact on our home producers will be.

Under a previous Conservative Government—I welcomed this at the time, although it made us very uncompetitive—we had the unilateral sow stall and tether ban, which gave our UK pig producers a seven-year disadvantage. It put prices up because we had to impose the ban seven years in advance of the rest of the EU, and many of our producers went out of business because consumers voted with their feet and bought the cheaper meat produced to lower animal welfare standards. I hope that the Minister will not lose sight of the fact that consumers, the public and farmers welcome these higher standards of animal welfare, and that they will not be sacrificed in this dash for future free trade agreements.

On the continuity agreements—the rolled-over agreements—the most unfavourable one relates to the Faroe Islands. We export £6 million-worth of goods to the Faroes and import £200 million-worth, mostly fish. That will be of concern to the Scottish fisherman, as the fish are mostly salmon, halibut, haddock and many of the other products the Scots seek to sell.

I hope the Government will look favourably on Amendment 4. We recognise all the work that successive Governments of various political persuasions—including both main parties—have pursued in setting a high bar for animal welfare and food safety. In the amendment, I have added animal health and hygiene to any future rolled-over agreements.

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My Lords, we now know for a fact that only a tiny fraction of those rolled-over trade agreements to which we are a party and will have ratified before exit day will be considered continuity agreements. The reality is that within a short period of time—a number of weeks, in fact—we will not be able to rely on the fact that our existing trade agreements will be considered as continuity agreements. The noble Baroness, Lady Henig, is absolutely right that, for the vast majority of the agreements we enter into prior to exit day, there will have to be a degree of certainty as to the underpinning, replicating or agreement of standards after exit day.

In many respects, the only continuity agreements that will exist are those we will have ratified before exit day, which is a tiny fraction of those that exist. Everything else will be, in effect, a trade deal. The concern is that the Government may choose to use the regulatory framework in this Bill rather than the CRaG procedure in making treaties. It is absolutely right that in this Bill we should have a degree of legal underpinning of the standards to which we are now a party and which we wish to see continued after exit day.

In Committee there were a number of amendments from me, my colleagues on these Benches, the noble Lord, Lord Stevenson, the noble Baronesses, Lady Henig and Lady McIntosh, and others. I am happy that this has coalesced around a cross-party amendment and I look forward to the Government’s response. On exit, we are looking to baseline the standards that already exist. It is necessary to maintain these standards in any of the agreements now that we are likely to carry forward—which can be permanent. Regulations made under this Bill would last for three years, but could be extended for a further three years and then a further three years. The lifetime of the regulations could become very long indeed.

As much as the Government say there is no difference in them as they are simply continuity and will not include any of the contents, that is merely a statement of policy. As we just heard on tariff policy, we know what schedules have been submitted to Geneva. However, we now know that if there is a likelihood of no deal, potentially there will be a revision to the schedules put forward by the Government. We cannot rely simply on the policy of the Government: we must rely on the legislation being clear.

We already know through the EU Select Committee of this House that there are some differences in the agreements that have already been signed beyond legal terminology. We know that interpretation of text can sometimes be as important as the text itself when it comes to trading relationships. That is why I have lodged Motions to debate each of the three deals that have so far been agreed, so that the Chamber has an opportunity to look at them. The noble Baroness, Lady McIntosh, and others will, I am sure, want to take part in a debate on the Faroe Islands agreement and others. I have had to lodge the Motions to debate those agreements because the Government did not intend to do so. The EU Select Committee report said it was “bizarre” that the Government chose not to bring those agreements at least for consideration in the Chamber. However, they will be debated because I have ensured that. The Minister, who has expressed openness and transparency all along, was seemingly content for there to be no debate on those agreements—the only ones that we are likely to have, with the addition of Switzerland in the next week or so. That is regrettable.

With regard to the amendment, the Minister may say that she has difficulty with the words “reducing”, “standards” and, in particular, “animal … welfare”. Proposed new paragraphs (a) to (g) are reasonable areas in which we have current regulatory standards as a baseline that we wish to protect. The Government should have no problem in accepting proposed new paragraph (f) on labour rights. The Prime Minister seems to have accepted it as regards guaranteeing employment and labour rights, and I would be surprised—putting it lightly—if, the day after the Government said a “lock” would be put in place to guarantee the future of these standards, they opposed an amendment that secured those standards’ continuity.

If the Minister says that she is concerned about the word “reducing”, she need not be. We have well-established systems of oversight through the courts to consider whether the current regulatory regime for standards is being upheld. The Government seem content with their approach on migrating such existing laws into domestic law so it should not pose problems for civil society groups or any interested parties to consider whether or not standards are being reduced. In the amendment, we are stating that they should be upheld in the implementation of any new agreements by virtue of the continuity agreements being new treaties. That is reasonable.

The Minister should also be content with the use of the word “standards”, as this is commonplace. Indeed, that is clear in, for example, the Air Quality Standards (Amendment) Regulations 2016, which this Government brought forward and Parliament passed. None of those areas should pose them any difficulties.

The Government also seem to have been opaque in recent days about animal health, hygiene and welfare—the point made by the noble Baroness, Lady Henig—and whether it is necessary to continue these approaches when we engage in trade agreements. In many respects, this is the litmus test for how the Government will approach the discussions. The Secretary of State’s rather glib comparison on television at the weekend between the process of surface-washing salads with chlorine prior to packaging and its use as a decontaminant in the United States as a replacement for good hygiene practice at farm level and in slaughterhouses, thereby directly masking poorer hygienic practices, was utterly misleading. He should not have said that. The EU, with full UK support, has made it clear that good hygiene practice is a prerequisite to the application of hazard-based controls, and that these are an essential element in any discussion on market access for such animal products.

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I am grateful to the noble Lord for pointing out the distinction between whether chlorine washing is bad for our health or masks the different treatment of animals during their lives. Is he saying that chlorine washing is not bad for our health, whether it is used on fruit from the EU or animals from the US? He and others have been using the issue as a scare to make us think that our health would be put at risk by having things rendered salmonella-free by this kind of treatment, whether by the EU or the US.

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It is a shame that processes do not allow interventions on interventions. When have I said that this is a health risk? When has the noble Lord heard me say that? He intervened on me and said “he”, as in “me”.

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I apologise and withdraw in that case.

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I am grateful for that. The point I am making is that the EU, with full UK support, has had a consistent position on the use of chlorine on chickens—that it should not be used to mask the lack of hygiene on farms and in slaughterhouses. The separate issue of the effect of its use on public health is, and always has been, a moot point which the European Union has always recognised, and that is why it has consistently commissioned a number of reports. The final conclusion from those reports, which the EU and the UK have relied upon, has come from the World Health Organization, which has said that, as far as the use of chlorine in agriculture is concerned, the current position is the one to be maintained, because the primacy is that the United States, as a policy, uses it to mask poor hygiene practices in farms and slaughterhouses. When it comes to trade and the trading of goods, that is the critical aspect, and that would be reflected in a trade agreement.

I was disappointed that the noble Baroness, Lady Manzoor, was not careful to say that the United States’ negotiating objectives would be only the start, when we have in the past, as a policy, categorically ruled out the importation of chickens that have gone through that process. It is black or white: we either maintain our position or adopt the American position. Neither can be finessed, and the Minister should have been categorical that we will not move from our position on the use of chlorine on chickens. That is why it was very disappointing that the Secretary of State blurred the lines and conflated its use with the process of surface-washing salad.

Some have therefore suggested, as the Secretary of State did, that animal welfare should not have a place in the trade discussions. Some have indicated that that is not permitted under WTO rules. I hope that the Minister will not say that when she responds to this debate, because the UK has a number of trade bans relating to animal protection that have been implemented as part of international obligations or agreements, such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora. For example, the UK has had an import ban on products from endangered species, such as tiger skins, ivory and pangolins, dating back to 1975, 1989 and 2016. This has been a consistent approach by the UK. Furthermore, we have a number of trade bans which have been implemented across the EU and have never been challenged or tested, so they can remain in place. They include an import ban on fur produced from cats and dogs, which was implemented due to concerns about the killing methods used. All those indicate that we have a wide set of standards which need to be protected in the existing continuity agreements. However, I repeat that only a tiny fraction of them will have been agreed before exit day and therefore after exit day they might not be considered by the Government to be merely continuity agreements—they would be trade deals. That is why this amendment to correct some of the misleading statements from the Secretary of State needs to be made and why these standards need to be underpinned as we go forward.

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What else does the noble Lord have in mind in proposed new subsection (5B) when he uses the expression,

“but are not limited to”?

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As the noble Lord will know, we have engaged in a number of legislative standards across all the different aspects of the British economy. If they are not captured in proposed new paragraphs (a) to (g), which we believe to be comprehensive, and if there are some elements of the economy where legislative standards currently exist and we would consider them to be of equal status, there is a requirement for them to be protected. That is why these are baseline standards. If areas are excluded, they will be captured by “not limited to”. The list of standards is not necessarily designed to be open-ended; these are meant to be the existing legislative standards that are already on the statute book that we wish not to be impacted by any of the regulations that could be made through this legislation.

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My Lords, we have had a very good debate on an important and long-lasting topic which we need to draw to some form of conclusion. We have before us two amendments that cover the ground very admirably, although their approaches are rather different. Indeed, the essence of what we are trying to get at may become a little masked in the timing. That last exchange is a good example of the way in which aspiration, interests and enthusiasm can sometimes lead us to a position where the drafting does not support where we are trying to go to.

We should be clear that there is support around the House for putting into the Bill at an appropriate place a clear and unambiguous statement which reiterates what the Government have said on a number of occasions—and we will probably hear again in a few minutes when the Minister responds—that they are committed to not lowering domestic standards in the EU agreements that are transitioning into bilateral agreements or in any future trade agreements that they wish us to enter into. If we can hold on to that and find the appropriate words rather than the ones before us, which need to be merged if we are to get the best out of this, we might make a way forward. I hope the Minister will give us hope that there will be the opportunity for further meetings and discussions on this issue. It is worth trying to go the extra mile to get us to a point where, by Third Reading, we have an agreed procedure.

The noble Lord, Lord Purvis, was right to try to drill down into some of the points that may need to be bottomed out. I will not repeat where there are difficulties but simply acknowledge that we need to be clear about whose standards we are talking about, where they are to be found in current statute, how they apply to UK interests and how they are limited in what they might say to any future Government about third-party Government arrangements, which are clearly not right.

Another point is to pick up how the WTO and other international agreements and treaties that we make covering the list in subsection (5B)(a) to (g) would fit best in a statutory form. That is the way that we need to go. I therefore hope that all parties will accept that this is not the time to force through either of these amendments but to come forward with an agreed position, if we can, in time for Third Reading.

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My Lords, I appreciate the attention that this House has paid to the vitally important issue of standards at each of the Bill’s stages, and for the amendments tabled by the noble Baronesses, Lady Jones of Moulsecoomb, Lady Henig, Lady McIntosh of Pickering, Lady Brown of Cambridge, and by the noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed. I also thank their Lordships for the productive meetings that we have had on the subject.

The Government, like your Lordships, do not want and do not intend the strong environmental protection, food safety, and animal welfare standards that the UK is proud of to be lowered once we leave the EU. As I mentioned in Committee, the Prime Minister and Ministers from across government, including Defra and DIT, have made public commitments to the maintenance of the current protections and offered many assurances that we will not lower these rigorous levels of protection in order to secure trade deals.

Let us not forget that, first and foremost, our policy is one of continuity. We seek to carry over the effect of the existing EU agreements. Our trade continuity programme is rooted in our desire to deliver consistency to businesses and consumers as we leave the EU. This approach has been widely endorsed by partner countries, businesses and Parliament. The International Trade Select Committee report in March 2018, for example, stated:

“Almost no one who contributed to our inquiry suggested that the Government’s policy objective of seeking continuity was the wrong one”.

In relation to standards, I can confirm that, under the provisions of the EU withdrawal Act, we will start at a point of maintaining the high standards that we have benefited from as an EU member. This provides us with a strong basis to build on in future. This includes those provisions that the House will be aware of on chlorinated chicken or hormone-treated beef, which will not be able to enter the UK market. The UK has already transposed the relevant EU Council directive into UK law prohibiting the use of artificial growth hormones in both domestic production and imported products. This is now UK law. No products, other than potable water, are approved in the EU to decontaminate poultry carcasses, and this will still be the case in the UK when we leave the EU. EU food safety provisions will come across through the European Union (Withdrawal) Act 2018, where they will be enshrined in UK law.

The noble Baroness, Lady Jones, raised an issue about the unlimited duration of this clause. I would just like to clarify that there is a sunset clause for this power: unless it is extended by both Houses of Parliament, it will expire three years after exit day. That is set out in Clause 2(7).

I turn to the issue of reducing standards in future trade agreements. Our future trade agreements provide us with the greatest opportunities for the UK to develop its global trading position. The demand for UK goods, as I have seen first-hand, is based heavily on our outstanding reputation for quality and the British mark of excellence. The Government have no intention of harming this reputation. Indeed, we intend, as a minimum, to maintain the standards that we currently have, which are set out in our primary and subordinate legislation, and the high standards that we have led on maintaining as a member of the EU. We will continue to retain these as part of the retention of EU legislation, as we exit the EU, through the EU withdrawal Act. The desire to maintain the high levels of standards that we enjoy in the UK is therefore at the heart of the Government of this country and, more than not planning to reduce those standards, we have a strong policy of ensuring that those standards are maintained.

The noble Lord, Lord Purvis, raised a point about the WTO schedules and the fact that we are already suggesting that we might change them. I want to clarify that our WTO schedules will not change. These set out the maximum tariffs that the UK would impose. The UK, like any country, remains free to impose lower tariffs than those set down if it so chooses.

On Amendment 3, I thank the noble Lords for their amendment and for my conversations with them on this important issue. I fully understand the sentiment with which the amendment is laid and have already reiterated in my response the Government’s strong commitment to maintaining standards as we leave the EU. However, we feel that the amendment as currently drafted is problematic for a number of reasons.

First, the amendment comes with some uncertainties as to its scope. The term “standards” does not have a single legal definition which can easily be called upon. Any legislative commitment not to lower standards would need to make crystal clear what regulations are in scope. This amendment does not, and instead requires the Government to report against an open-ended list of potentially relevant standards, as my noble and learned friend Lord Garnier highlighted. This would require the establishment of a process to determine what constitutes “standards”, not only in each of the listed groups of standards but beyond. Outcomes of this process could then be easily questioned in a court and, until a court ruled on the matter, they would simply be the Government’s own assessment rather than legal certainties.

Secondly, on the notion of “reducing” standards, how the Government would prove that they were or were not reducing them would be problematic. This contains a degree of subjectivity, which would create considerable legal uncertainty if it were to be added to the Bill. Again, the term “standards” can mean a voluntary, best-practice way of doing something. Standards are often not set by Governments but developed by consensus among relevant stakeholders. Of course, there are minimum levels of safety, quality and environmental protection—for example, where voluntary approaches are not effective. These rules and regulations are mandatory and enshrined in our laws, which, of course, are subject to parliamentary approval.

We sincerely believe that the best way to influence standards in other countries is to forge strong trading relationships where we can positively influence those countries through the reputation of UK businesses. Through such relationships, we can insist on the proper treatment of workers and their rights, so that UK consumers are assured that the products they buy from reputable UK businesses are from suppliers whose practices those businesses have assured. In order to achieve that, we need to have trade agreements in place.

On human rights, which are referred to in paragraph (g) of the amendment, noble Lords will recall that the Government have already reaffirmed that the UK is a signatory to the ECHR and will continue to uphold human rights in the UK under the Human Rights Act. The Clause 2 power cannot be used to amend the Human Rights Act, and it would be unlawful for any regulation under the Trade Bill to be incompatible with the rights enshrined in the ECHR.

On Amendment 4, I have listened with interest to the useful debate, and I thank my noble friend Lady McIntosh of Pickering for her well-argued contribution. In relation to this amendment, let me make it clear that, before any regulations are laid under the Clause 2 power for the purpose of implementing a free trade agreement, the Government will lay reports before Parliament which will clearly detail any significant trade-related differences from the EU third-country agreements. This would include significant differences which had an effect on the standards that we or our trading partners were required to meet.

The Government have already laid such reports for the UK’s agreements with Chile, the Faroe Islands, the eastern and southern African region, Israel, the Palestinian Authority and Switzerland and Liechtenstein. I am pleased that my noble friend Lady McIntosh of Pickering welcomed the updates that we have made and will continue to make as these progress. I hope that it is clear from these reports that our continuity agreements are compatible with the maintenance of the UK’s high standards in the areas of environmental protection, animal welfare and food safety.

The noble Lord, Lord Purvis, has called for debates on the continuity agreements which the Government have already made. His Motions will be dealt with in the usual way and the Government look forward to further discussion on those.

What is more, regulations under the Clause 2 power will be laid before Parliament under the affirmative resolution procedure. As your Lordships know, affirmative secondary legislation is scrutinised and debated before it can be approved by votes in both Houses. This well-established procedure provides ample opportunity for examination of the regulations.

I thank noble Lords for this really constructive discussion and for the comments of those who tabled this amendment, particularly the words of the noble Lord, Lord Stevenson of Balmacara. I believe we are not far apart from each other, particularly in light of the progress we have made to date. Consequently, as throughout this process, I can confirm that I am happy to have further discussions to see if we can reach a mutually acceptable agreement, and we will return to this at Third Reading. On this basis, I beg noble Lords to withdraw the amendment.

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I have been looking at the continuity agreement reached with the Faroe Islands. I understand that it could potentially result in an implied annual increase in total duties of up to £11 million. It goes on to say that that is unlikely to be true, but I wonder: will there be scope to discuss these continuity agreements—as the noble Lord, Lord Purvis suggested? Perhaps we could do so in an afternoon session and take them all together. This agreement raises issues which will be of interest to the House.

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My Lords, as I tried to explain, the Motions laid by the noble Lord, Lord Purvis, will be dealt with in the usual way. We look forward to those further discussions taking place.

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I may be able to help the noble Baroness. I am grateful for the response from the Government Whips’ Office and its suggestion of tabling time for these to be debated. I will not pre-empt these exciting debates on Faroe Islands fisheries, but they look likely to happen next week.

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My Lords, I thank the Minister for her response and her promise to bring this back at Third Reading, so I will not go through any of the arguments again. The sunset clause, however, is not secure, simply because Clause 2(5)(b) allows Ministers to scrap it by statutory instrument. It is not, therefore, secure, and that is a matter of concern to me.

However, in the interests of even more co-operative working—and I thank the noble Lord, Lord Stevenson, who has worked very hard, along with the Minister—I beg leave to withdraw this amendment, on the assumption that we will return to it at Third Reading.

Amendment 3 withdrawn.

Amendment 3A

Moved by

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3A: Clause 2, page 2, line 47, at end insert—

“( ) Regulations under subsection (1) may not create or extend criminal offences, impose fees, amend primary legislation other than retained EU law, or create new public bodies.”

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My Lords, this amendment has very little to do with trade as such, but it raises a constitutional issue. If you looked at those supporting me on this amendment, you might even think that this is a bit of a geeky constitutional issue. It is not. All three of us are members of the Constitution Committee. We speak on our own behalf but feel it essential to draw the attention of the House to what we believe to be a total misunderstanding of the purposes of Explanatory Notes.

The misunderstanding arises in this way. Under the Bill, Clause 2(5) provides the regulation-making powers that may—forgive me for underlining this—among other things, “make provision”. Then there are paragraphs (a), (b), (c) and (d); paragraph (d) is about the penalties. We also looked at the Explanatory Notes. I wonder how many of your Lordships have recently looked at the front page of Explanatory Notes any Bill. I will read parts of them:

“These Explanatory Notes have been prepared by the Department … in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament”.

I do not suppose that a single Member of the House is surprised by that because, constitutionally, it is impeccable. The Explanatory Notes do not form part of whatever legislation may at some future date be enacted by Parliament.

Faced with the wide-ranging regulation-making power, and that assertion in the Explanatory Notes, can we look at the Explanatory Notes themselves? Paragraph 59 —I will not read the first part—in unequivocal terms says that:

“Subsection (5) does not allow for regulations to make or extend criminal offences, charge fees, amend primary legislation other than retained EU law, or create new public bodies”.

The Constitution Committee produced a report on this that expressed some concerns. Noble Lords may remember that in the EU withdrawal Act there was an absence of safeguards, but eventually—through the efforts of Members of this House—safeguards were put into it that prevented the use of delegated powers to impose or increase taxation and fees, to create a relevant criminal offence, or to establish a public authority. That was the step. The Constitution Committee then looked at the provision in relation to subsection (5), to which I have referred. The committee noted that the Explanatory Notes contained the assertion that the Government were not interested in the worrying provision for creating criminal offences and the like, but that this was not stated in the Bill. The committee then pointed out what subsection (5) extends to and recommended that the Government introduce an amendment to include in the Bill the restrictions on the use of the Clause 2 powers set out in the Explanatory Notes. That is what this amendment is designed to achieve.

There is something rather strange about this. You win some, you lose some. If you lose, you come to the House to ask the House to look at it. In a sense, that is what I should do. However, a more important issue has arisen in relation to the response of the Minister, who in effect is saying, “Look, there is nothing to worry about—what are you getting so concerned about? Just read the Explanatory Notes. That is all you need”. Lest you think that I am exaggerating, let me read the words:

“we believe that the explanatory notes to the Bill, which explain the purpose of the provisions contained in the legislation, is the most suitable document to outline the restrictions to the use of the clause 2 power”.

In other words, the issues which were raised as being of concern to the Constitution Committee, and which were referred to in the Explanatory Notes showing that the Government did not wish to have the powers that would have been troublesome, were simply to be found by looking at the Explanatory Notes. That is a troublesome approach to these issues. As I am aware, it is new: “Look at what the regulations do not contain and you’ll find that in the Explanatory Notes”. It seems a rather strange way of going about legislation.

The letter from the Minister was followed by a reference to an observation by a former Law Lord—who sadly is no longer with us, the highly respected Lord Steyn—based on a decision of the House of Lords called Pepper v Hart in which it is said that he allowed for the possibility of looking at Explanatory Notes in exceptional circumstances. I would argue that that was not as an aid to construction but in effect to say, “If the Executive have said this, you can draw that to our attention while we resolve the issue”.

Pepper v Hart is a troublesome case. Perhaps I may summarise what it is meant to mean in the following way—hopelessly inadequately in view of the presence of some noble and learned Lords here. It means that you can look at what has gone on in the House if the legislation itself is unintelligible. Legislation should not be unintelligible; it should be intelligible. At this stage when we are looking at this legislation, if it is not, we should make it so.

On how far Lord Steyn went about allowing for examination of Explanatory Notes, if it offered a diminution of the principle that Explanatory Notes are not, never were meant to and never should be treated as a legislative provision, I say with great respect to Lord Steyn that I think he got it wrong. I do not believe that that was what he was saying, but if he did it is wrong. We surely must not countenance the arrival of a pernicious new form of legislation, the Explanatory Note. We have enough trouble with guidance. Guidance is a seriously problematic source; it sort of hands over power to the Executive, but at least when we do that we have listened to the debate, have decided that that is the right way to approach the problem and have legislated accordingly. In relation to Explanatory Notes, there has never been a debate; there has never been anything. This comes from the department. The department tells us what the department thinks it wants. It cannot possibly be a guide to what we in this House or in the other place decide that the legislation should be. But we will now look at the department’s own Explanatory Notes to decide whether a provision which is an important safeguard against regulations creating criminal offences, imposing fees, amending primary legislation or creating new public bodies should be found. It is a constitutional absurdity. I beg to move.

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My Lords, if the noble and learned Lord, Lord Judge, thought that his thinking was inadequate compared to that of Lord Steyn, it is the only inadequate thing that he just said. I rise briefly to encourage him in his arguments and to encourage the Government to understand that it is not only on the Cross Benches and on the Liberal Democrat Benches that the concerns that he has expressed can be found.

I want to look at Clause 2 through the lens of Amendment 3A, because it gives both United Kingdom Ministers and devolved Administration Ministers the power to make regulations that make provision among other things to modify primary legislation and impose penalties, as the noble and learned Lord, Lord Judge, pointed out.

There is another problem that concerns me, although perhaps I am misreading the legislation. According to Clause 2(5)(b), the regulations are permitted to make provision,

“conferring functions on the Secretary of State or any other person, including conferring a discretion but not including a power to make subordinate legislation”.

As I said, I might completely misunderstand the legislation, but it has always struck me that regulations are brought into force through secondary or subordinate legislation, so there seems to be a confusion. It might be a confusion only in my own mind, but I invite the Minister to untangle it or tell me that I have got it wrong.

Returning to the remarks of the noble and learned Lord, I could not agree more with him that it is not appropriate for Ministers to create or extend criminal offences. It might in some circumstances be appropriate for them to regulate in relation to the imposition of fees. I can see that there is an argument for some amendments to primary legislation to be made by regulation: for example, if they simply remove the letters “EU” and replace them with the words “United Kingdom”. However, we need to be cautious before permitting a Minister to amend primary legislation without knowing more about what is intended. As regards the creation of new public bodies, again it very much depends on what is implied by that power.

It is often said that repetition never made a good argument better. The noble and learned Lord, Lord Judge, has made a series of very powerful arguments which I hope the Government will have listened to, but I also hope that they will understand that his concerns are not confined only to those who have supported his amendment.

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My Lords, I have added my name to this amendment because I share the concern expressed by the noble and learned Lord, Lord Judge, that it is simply not appropriate for Explanatory Notes to be used as the means by which overbroad powers enjoyed by the Minister are to be confined. I will add one point, however: the Minister gave an answer to the concern that we are all expressing. The answer was given in a letter on 19 February to the noble Baroness, Lady Taylor of Bolton, the much respected chairman of the Constitution Committee. In her response to the Constitution Committee’s report, the Minister suggested that the courts would apply a well- established legal presumption that, if powers were intended to be used for any of the purposes set out in the amendment, there would have to be an express reference to that effect in the legislation. Indeed, the Minister also expressed concern that this amendment, if accepted and written into the Bill, would undermine this legal presumption in relation to other legislation that does not include an express reference to these limitations.

My concern about that argument is that these powers are being conferred in this Bill in a Brexit context. The Minister’s letter emphasises that the Government are going to use the Clause 2 powers only to implement obligations and agreements that seek to provide continuity in respect of those already signed by the EU. My concern is that in this specific legislative context it might be said that when a Brexit Bill of this nature does not contain these express limits on the Minister’s powers—the limits set out in the amendment—it should be contrasted with Section 8 of the main Brexit Act, the European Union (Withdrawal) Act, which expressly contains restrictions that are similar but not identical to these limitations. It is my concern that such a contrast might be drawn in this context.

The noble and learned Lord, Lord Judge, made the important point that the Pepper v Hart principle is a troublesome one but, if the Government are not going to accept this amendment, at the very least it would be helpful for the Minister to give the House the clearest possible response to it, in the terms set out in her letter—that the Government understand that the powers in Clause 2 do not extend to the sensitive issues—so that her comments could if necessary be relied on in court proceedings under the Pepper v Hart principle.

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My Lords, we should be very grateful to the Constitution Committee for drawing our attention to this matter, which might otherwise not have been observed. I shall add just a few short points to those that have been made. The first is to stress the importance of the words in subsection (5), to which the noble and learned Lord, Lord Judge, drew our attention:

“Regulations under subsection (1) may, among other things, make provision—”.

It is the words “among other things” that cause me concern. They appear in the Healthcare (International Arrangements) Bill as well: they seem to be a feature creeping in to this kind of legislation, which is quite disturbing. If we find that phrase, I suggest that we have to be even more exacting in setting out the qualifications to the power, otherwise the words “among other things” may be used to expand the power in a way that we have not foreseen. It is really very important, as the noble and learned Lord, Lord Judge, pointed out, that we take those words into account in what we make of this amendment.

My second point is to reinforce what the noble Lord, Lord Pannick, said about the comparison between Section 8 of the European Union (Withdrawal) Act 2018 and what we have now, in reply to the point that we do not need to be concerned about that, because express provision would be needed for a regulation that sought, for example, to create a criminal offence. These exceptions, or almost exactly the same ones, are expressly set out in Section 8(7) as,

“regulations … may not … impose or increase taxation or fees … create a relevant criminal offence … establish a public authority”.

If it was thought appropriate to put those qualifications in that very important subsection, which does not contain the words “among other things”, I should have thought it was all the more important to have them here.

My last point is made with reference to the point made about Lord Steyn’s use of Explanatory Notes. I had the privilege of sitting with Lord Steyn for a number of years and of discussing with him how Explanatory Notes might be used. I do not think that at any point in our discussion he suggested to me that Explanatory Notes could be regarded as a form of legislation or its equivalent—certainly not. He was referring to them as a means of understanding ambiguities in legislation; he thought that one could look to the Explanatory Notes to understand the legislation one was seeking to explain. That was his point, and it was made in a number of cases where I agreed with him. It would be a mistake to think that he was embarking on something outside the normal use of Explanatory Notes, which is to explain but not to legislate. For these reasons and the others mentioned, I warmly support the amendment that the noble and learned Lord has brought to our attention.

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My Lords, I do not need to add to the masterful laying out of the reasons for the amendment by the noble and learned Lord, Lord Judge, or to what was said by the two Members who have just spoken—particularly the noble and learned Lord, Lord Hope. But I will refer to the consequence of going about the matter in this way. Lord Steyn’s judgment does not place any obligation on the courts to have a habit or practice of referring to Explanatory Notes—it is entirely up to the courts whether they choose to do so—but, if the Government persist in this interpretation, which appeared to us for the first time in a letter from the noble Baroness, it says to parliamentary draftsmen and departments, “Don’t worry about ambiguity; there are the Explanatory Notes and we do not have to get those through either House”. It is an invitation to careless and sloppy drafting; it is an invitation to leaving open a possibility that the Government may not want to specify at this stage, but might be useful at a later date, when the Explanatory Notes would be relied on for a purpose that I do not think Lord Steyn intended. I was quite shocked to find this interpretation of Pepper v Hart coming into the Government’s responses to the Constitution Committee. We need to squash it pretty quickly, before it influences the habits of departments and parliamentary draftsmen any further.

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My Lords, I offer a footnote in support of noble and learned Lords and the points just made. It should be remembered that Explanatory Notes were for many years produced by officials to brief Ministers on what the Bill meant. They were usually classified—because we used to classify things. Occasionally, when Ministers were having real difficulty explaining a clause to either House, in a kind of noble gesture they would hand over their Explanatory Notes as a way of trying to get their opponents on side. That is the history of this. The idea that, with the slow creep of the Executive’s power, they are becoming a form of legislation of their own is appalling. I can only support very strongly what has already been said.

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My Lords, I suppose I ought to take some part in this discussion. I hope to do so briefly, because I was a strong dissenter, on my own, against the decision in Pepper v Hart. I did not believe it was right to allow extraneous matters to be taken into account in construing an Act of Parliament. That Parliament had used the words, and that some Minister had said something in explanation, should not, to my mind, be used to deal with ambiguity. However, I was overruled then, and I am waiting for that judgment to be overruled in due course. Certainly, that judgment does not include statements not made in Parliament by people who are trying to say what they want to happen in the Act of Parliament, and the Explanatory Notes in no sense come within the judgment in Pepper v Hart. I have no doubt at all that the correct way to restrict a power to impose penalties is by putting the restriction into the Bill.

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My Lords, I thank the noble and learned Lord, Lord Judge, and the noble Lords, Lord Pannick and Lord Beith, for tabling this amendment and for highlighting what is clearly an area of genuine concern—not just from them, but from the Constitution Committee.

I start by reassuring the House that the Clause 2 power will be used only to implement non-tariff obligations of our continuity trade agreements. For example, we will have to implement procurement obligations in several of our agreements, including the Chile agreement we signed recently. Without the Clause 2 power, we would not be able fully to implement such obligations under these agreements.

I stand before this House not professing to match in any way the legal brains and experience of noble Lords—and, indeed, noble and learned Lords—but I will give the Government’s position. Explanatory Notes are always admissible aids in the construction of an Act. Exceptional circumstances, as in the Pepper and Hart case, are not required. Indeed, I am asked to refer to the House of Lords case R v Montilla and Others in 2004, in which it was said:

“It has become common practice for their Lordships to ask to be shown explanatory notes when issues are raised about the meaning of words used in an enactment”.

My noble and learned friend Lord Garnier raised the issue of the delegation of power to make legislation, but Clause 2(5)(b) explains that the power does not include the ability to delegate the power to make legislation. Our approach follows common drafting practice. There is a well-established legal presumption that, if a power is to be used for any of those purposes, a court would expect to see an express or an explicit reference in the legislation creating the power. To state in the Bill what the Clause 2 power cannot be used for would call that presumption into question. It would create ambiguities for the interpretation of powers in other statutes which do not contain such express restrictions, as I wrote in my letter to the Constitution Committee.

The noble Lord, Lord Pannick, and the noble and learned Lord, Lord Hope, asked why the Bill differs from the drafting of the European Union (Withdrawal) Act. It is because the withdrawal Act powers have a different starting point. Section 8(5)(5) of that Act, for example, says that a regulation made under it may do anything that an Act of Parliament may do. Given how much an Act of Parliament can do, it was necessary to explicitly limit that power so that it cannot, for example, be used to impose taxes. The power in Clause 2 is instead built from the ground up, so we do not believe that there is a need to list exhaustively what that power cannot do.

The Government are simply ensuring continuity in trading relationships. It is not an opportunity to change or negotiate the terms of the agreement. This, I hope, is evident in the continuity agreements we have already laid in Parliament, such as those with Chile and Switzerland. I refer noble Lords to the parliamentary reports laid alongside them, which describe any significant difference between these agreements and the original EU third-country agreements. All reports are publicly available on GOV.UK. While it is true that trade agreements are becoming increasingly broad, one must look no further than CETA with Canada, which is known for its breadth and ambition. Even CETA, however, has not required the UK to create or extend criminal offenses, impose fees, amend primary legislation other than retained EU law, or create new bodies.

The noble Lord, Lord Pannick, asked if I would make a statement about our intent. I am happy to say that we have no intention of making changes to the areas of concern to their Lordships as part of our trade agreement implementation under the continuity programme. I have, however, heard the legal weight behind this amendment. I am happy to reflect, and would welcome a meeting with your Lordships, because there are clearly very different points of view here.

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I am very grateful to the noble Baroness. Under the Pepper v Hart principle, what matters is not the Government’s intention but the Government’s understanding of the scope of the provision they are putting before the House. I am asking the noble Baroness to say on the record, in Hansard, that it is the Government’s understanding and intention that the Clause 2 power does not give them a power to create or extend criminal offences, impose fees, amend primary legislation other than retained EU law or create new public bodies. It is not about the intention, but about the Government’s understanding of what they are putting before the House.

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I am happy to confirm that that is the case.

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Can I press my noble friend a little further? Why does she not simply arrange for Amendment 3A to be included in the Bill?

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My Lords, there is a genuine difference of legal opinion here. My proposal is that we reflect on this and have a meeting, if your Lordships are content to do that, because we have to work through this.

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I apologise for interrupting at this stage, but is my noble friend prepared to say on the record that this matter can be referred to at Third Reading, if necessary?

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I am unable to make that commitment.

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May I respectfully ask what, in that case, would be the purpose of the meeting with the Minister to which she referred?

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My understanding is that we have a clear legal position which is strongly believed, and the meeting would be to see whether we can reach a mutual agreement.

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If we can reach a mutual agreement on it, it is at least possible that the Government may decide to amend their Bill.

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There will be other opportunities; perhaps we could have a meeting before the second day on Report.

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Provided it is understood that the resolution of this issue will abide or at least wait for a meeting between those of us who wish to meet the Minister—I would certainly be one of them—and those whom the Minister wishes to meet, that is fine. But I cannot leave the House in the position that we will now leave this for ever, and if the Minister deigns to do us the kindness of giving us what we want, we will have it. We have to know exactly where the Government stand on this. I know the argument, but where do we stand procedurally in the House?

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I have heard a very well-argued case—the first time I have heard the impact of that case. I can commit to writing a detailed letter on our position, having a meeting and bringing this back on the second day on Report, if that is what this House would prefer to do.

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I suggest that this matter cannot be brought back on the second day, because this is an amendment to Clause 2, which we will have passed. Given that the noble Baroness, fairly and properly, has accepted that what she has heard today requires further discussion, and that the Government may wish to consider further this matter after they have met with noble and noble and learned Lords who are concerned about this, surely the way to proceed is for the Government to accept that it is appropriate for this matter to be raised again at Third Reading to see whether any progress can be made.

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My Lords, we are in a very similar situation to where we were in an earlier debate. Clearly there is an issue which needs to be resolved between the Minister and those who feel strongly about it. She is putting the mover of the amendment in a difficult position, because the only right thing to do at this stage is to test the opinion of the House, and I am sure that that is not where we need to go on this. We need to give the Minister time to reflect on the issues and to be convinced, if she has to be convinced, by further points made, and, if necessary, to come back at Third Reading. That is not an onerous consideration.

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I thank the noble Lord, Lord Stevenson, and I agree with that position.

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My Lords, I am grateful to the noble Lord, Lord Stevenson. I think that calling for a Division at 5.24 pm when we have so many other things to deal with might not have been very popular, although I suspect we would have won. I also thank the noble Lord, Lord Wilson, for enlightening me as to where Explanatory Notes come from.

I thank everybody who has spoken in this debate. I will leave it at this: the Executive accept that these powers should not be given. There should be no difficulty whatever in putting them into legislation, rather than leaving them in an Explanatory Note. Although the noble Lord, Lord Pannick has sought—and graciously been given—an assurance of the Minister’s position, I do not think that is enough. For the time being, at any rate, I shall not press this amendment.

Amendment 3A withdrawn.

Amendment 4 not moved.

Clause 3: Report on proposed free trade agreement

Amendment 5

Moved by

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5: Clause 3, page 3, line 43, at end insert—

“(5A) A Minister of the Crown must lay a report before both Houses of Parliament during each session of Parliament reporting on the progress made in all negotiations relating to agreements Her Majesty’s Government intends to ratify under this section. (5B) A report under subsection (5A) must include, at a minimum—(a) a summary of proposed changes against the existing agreement,(b) the estimated date for the completion of the negotiations, and(c) the date when the agreement is expected to be laid before Parliament.”

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My Lords, I hope that my amendment will prove a little more straightforward than the one we have just debated. When the issue of parliamentary scrutiny of trade agreements covered by this Bill was discussed in Committee, the Minister made much of the issue of speed. Speed, she argued, was of the essence in rolling over these agreements. She said that the Government were opposed to any detailed scrutiny arrangements which might slow the negotiations down and delay conclusion of the deals. Since then, it has become increasingly clear that, whatever the Government’s intentions, these deals will not be speedily concluded. Indeed, it could be two or three years before they are all finalised. This being the case, we surely need to put in place some clear scrutiny arrangements. At the very least, these should replicate the information that the EU Commission regularly supplied to us. They should keep parliamentarians and, more importantly, businesses and their customers informed about what is being discussed and the timescales envisaged for the conclusion of deals, so that they can plan effectively for the future.

I am sure I am not alone in having been shocked at the level of secrecy imposed by the Department for International Trade with regard to its progress on trade talks during the last 18 months. In 2017, the Secretary of State for International Trade made his much quoted promise about having up to 40 trade deals,

“ready for one second after midnight”,

at the end of March 2019. Businesses would have assumed with some confidence that all was going well and that, in the course of 2018, progress was being made in rolling over the deals. It was only through a leak in the Financial Times in January of this year that we learned that, in fact, only a handful of deals was going to be finalised by the end of March. Not surprisingly, this has caused great consternation among business leaders and companies, great and small. Now we learn, through a second leak—again in the Financial Times—that the Department for International Trade’s consultations with business representatives have been suspended because information was being passed out of the meeting, allegedly in an unauthorised way.

Where is this obsession with secrecy coming from? Is it from the Department for International Trade or from 10 Downing Street? Whatever the source, this cannot be a recipe for successful trade negotiations, either now or in the future. Both Parliament and businesses have a need and a right to know what is being negotiated, what stage discussions have reached, and when they are likely to be concluded. Successful trade negotiations require consensus—from business groups, sectors of industry and wider stakeholders about the interests that are being pursued and the goals that are going to be set. This requires extensive consultation and collaboration between the Executive, Parliament, businesses and stakeholder groups. The reality is that the secrecy demanded by the Department for International Trade is counterproductive to successful trade negotiations, both in relation to those being rolled over and to future deals.

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I am most grateful to my noble friend for giving way. I know that she is an expert in the subject. Does she agree that when the European Union has been conducting trade negotiations with a view to reaching trade agreements with third parties, it has always set very high standards of consultation and transparency, reporting regularly to the European Parliament as well as consulting business interests that might be at stake, trade associations and other potential stakeholders? Does she further agree that it is a terrible pity that the British Government do not seem to be following that excellent example?

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I absolutely agree. That is precisely my concern: that there is an effective scrutiny process in place to replace what we will lose at European level. In later amendments, we shall discuss future arrangements, but my concern is that in the rollover of the existing deals, we have effective scrutiny so that everybody knows where we are in the negotiations.

Parliament and business leaders should not be seen as the enemy from whom important national secrets must be kept, which seems to have been the way things have been going. Our businesses, exporters and trade bodies need to plan. They need to work in tandem with the Government. Of course we accept the need for confidentiality in trade negotiations. We all understand that, but the level of secrecy we have experienced in the past 18 months has been totally counterproductive.

My amendment would put some basic scrutiny arrangements in place to cover the period for which these deals are being rolled over. It enables Parliament, businesses and the wider community to know what stage they have reached and when they may be completed. Reporting once a Session is hardly an onerous requirement on the Executive. After all, our current Session is now nearly two years old. That seems to me a basic requirement for effective parliamentary scrutiny.

I hope that the Minister will tell me that the amendment is unnecessary, as the Government will bring forward something similar at or before Third Reading, but meanwhile I beg to move.

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My Lords, I thank the noble Baroness, Lady Henig, for tabling Amendment 5. It gives the House an opportunity to revisit the issue of how the Government will update Parliament on the status of negotiations on the continuity agreements. We enjoyed a useful discussion on this in Committee.

First, let me reiterate that Parliament plays a crucial role in scrutiny of free trade agreements, and we intend that to continue. It is right that Parliament should expect to be updated by the Government. That is why the Government have already informed Parliament on progress of our continuity agreements through a Written Ministerial Statement. As your Lordships will be aware, they have already gone through a process of scrutiny in becoming free trade agreements with the EU.

We have also laid our first free trade agreements for scrutiny in Parliament ahead of ratification, which we believe is the right level of scrutiny, along with their accompanying parliamentary reports and explanatory memoranda, in which we have committed to giving explicit information about any significant changes, should any occur, making clear where they are, and any economic impact, should there be any.

Unfortunately, we cannot give a running commentary on the progress towards signature of our other continuity agreements. We believe that doing so would create a handling risk with our partner countries. Some partner countries may not wish to share such information, and a commitment to do so might prejudice the prospect of a successful negotiation. We are trying to get the best possible outcome for the UK.

However, let me assure the noble Baroness that, as we are aiming for continuity, we do not expect there to be significant changes. I therefore argue that the detailed reporting required by the amendment would be unsuitable for the continuity programme. For the future free trade agreements programme, the Government have committed to publish updates on the conclusion of each substantive negotiating round and to publish an annual report on all future trade agreement negotiation programmes under way. In this way, we will ensure that Parliament is kept fully updated on progress as we pursue new FTAs with partner countries.

Although I understand the desire to know what progress we are making towards transitioning continuity agreements, I hope that the noble Baroness, Lady Henig, understands the Government’s position and therefore request that the amendment be withdrawn.

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Before the Minister finishes, I do not think that she answered my noble friend’s question about comparing the Government’s policy on non-disclosure agreements and secrecy with what the European Union has done for many years. That applies not just to these trade agreements, but to most discussions with industry and everyone else to do with the whole Brexit process. People seem to be required to sign NDAs before they get any information at all. Is that now the Government’s policy—that no trade agreements or anything similar can be achieved unless the industry concerned signs NDAs? That seems a pretty draconian change.

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My Lords, the engagement we have with civic society, businesses and trade unions will be critical as we develop our future trade agreements, and we will continue those discussions. We have already talked about creating a strategic trade advisory group, which will contain members from civic society, trade unions and business organisations. We have also agreed to have expert bodies, so I hope that will reassure the noble Lord that we are intent on continuing very active engagement.

The difference here is that these are continuity agreements that have already been negotiated and scrutinised through a process, and we are aiming for continuity here. Therefore, we believe that the appropriate level of scrutiny by Parliament is for the Government to bring forward the reports when they have been signed, alongside a detailed report on the changes, if any, and the economic impact. Of course, ratification will be required, and that will go through scrutiny in the normal way.

There is a very different position on future free trade agreements, on which I wholeheartedly take on board the points made by the noble Lord and the noble Baroness.

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I have listened carefully to what the Minister said. She talked about a “running commentary”, and I do not think that is what my amendment sought. It sought a report once every Session, which, I respectfully suggest, is not quite the same thing. As has been said, these are continuity agreements. What I—and, I am sure, many other Members of this House—seek is continuity: when we are no longer members of the EU, we want the same level of information as we were getting from the EU. We seek a level of information; we do not want a dilution of processes, with more meagre information and more difficulty in finding out what is going on. That is what lies at the heart of this.

I have listened carefully to the Minister, and I do not propose to pursue the matter at this stage—but I am sure that I and many other Members of this House will keep the Government’s feet to the fire on the issue of getting hold of information and making sure that everybody, particularly businesses, commercial organisations and people throughout the country, know where we are and what is going on. They should not have to rely on leaks from newspapers for their information. Having got that off my chest, I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Amendment 6

Moved by

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6: After Clause 5, insert the following new Clause—

“Post-ratification report

(1) This section applies where—(a) the United Kingdom has ratified a free trade agreement, and(b) the other party (or each other party) and the European Union were signatories to a free trade agreement immediately before exit day.(2) Before the end of the period of five years beginning with the date of ratification, a Minister of the Crown must publish a report giving the Minister’s assessment of the impact of the agreement on trade between the United Kingdom and the other party (or each other party) to the agreement.”

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My Lords, this group includes Amendments 6 and 7. With the indulgence of the House, I shall speak now to Amendment 6, and then respond to Amendment 7 when my noble friend Lady Neville-Rolfe, who tabled it, has spoken.

I thank noble Lords for their contributions during the discussion on post-ratification reports during the Committee stage. Once again, the debate demonstrated the value of this House and your Lordships’ expertise and knowledge. In the light of that debate, I can confirm that the Government accept that post-ratification reports are important tools for understanding the real effect trade agreements have on the economy. They are useful not only in informing our discussions in joint committees but in refining our strategies for future trade negotiations.

Having had the benefit of this House’s wisdom in Committee, the Government have tabled an amendment that would require a Minister of the Crown to publish a report on the impact on trade of each of our continuity free trade agreements. These reports will need to be published within five years of ratification of the agreements. The reports will assess whether trade flows between the UK and the other signatory or signatories have changed since the agreement began to be applied. If there has been a change, the reports will then discuss how much of that change can be attributed to the agreement itself.

Given that these reports will consider impacts across the whole of the UK, this will include an assessment of any impacts on the devolved nations. We will of course share these reports with the devolved Administrations. I hope the House will support the amendment.

Amendment 7 (to Amendment 6)

Moved by

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7: After Clause 5, leave out subsection (1)(b)

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My Lords, I thank my noble friend the Minister for a useful meeting, and for responding to my amendment in Committee and to the concern that was expressed on all sides about the need to monitor and review trade agreements. I support this proposed new clause. Good government requires objective review in the light of performance and the priorities of the day. Regulations are reviewed every five years in many areas.

I have tabled the amendment to establish two points. First, I wanted my noble friend to explain why she felt we could not include my simple proposal that the Secretary of State should arrange for the report to be laid before the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. Can she agree that this will be done? Secondly, the review clause applies only to trade agreements ratified before exit day. I am also interested in having such provisions apply in the case of new agreements made after Brexit. Can the Minister outline her intentions on this point? We are entering a period of profound change, where a habit of looking back critically would be both desirable and helpful. I beg to move.

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My Lords, in Committee there were a number of amendments, including one in my name, which sought to make the case that some of the agreements that we are party to by virtue of our membership of the EU are significant for the economy as a whole and certain sectors of the economy. Some have a greater impact on some of the nations and regions of the UK and, therefore, to understand the impact of our trading policy it is necessary to have the report. So I welcome the Government’s position, as outlined by the Minister.

However, there are a couple of areas where I would wish to press for further information. One area relates to comments I made earlier about the status of the vast majority of the agreements to which we are party and have signed prior to exit day but which we are looking to replicate or agree after exit day. These will not necessarily be considered as continuity agreements—a point made by the noble Baroness, Lady Neville-Rolfe.

The agreement with Japan is a good example. It has been in force since 1 February and, given all the powers under this Bill, is a candidate to be considered as a continuity agreement. The Japanese Government have said that they do not wish it to be a continuity agreement but a new trade agreement. Under the Government’s amendment, how would that be reported on? It would not come under its remit. That is one of many examples.

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I declare an interest as the UK co-chair of the UK-Japan 21st Century Group. My understanding of the Japanese Government’s position is that they have made it clear that the procedures that are required by the Japanese Diet for a treaty would make it impossible for them to bring this forward as an agreement between the United Kingdom and Japan in the event of a no-deal exit. They would require it to be considered as a new treaty because we were no longer members of the European Union or covered by the withdrawal agreement. Were we, however, to sign the withdrawal agreement and to have a transition period, the Japanese Government, in their view, could consider it to be a rollover agreement during the transition period.

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That is helpful. However, my question to the Government remains as to what the status of the Bill would be, under the amendment, with regard to the reporting mechanism. Japan is one example among the vast majority of examples also in this category. A degree of clarification on that would be helpful.

The second issue is: why five years? Under the regulations, the agreements have to be renewed by Parliament after three years. One could therefore have a situation whereby an agreement could be renewed twice, lasting nine years, but with only one report. Would it not be better if the Government brought forward their report prior to the conclusion of the three-year life of the agreements? It would be no more burdensome for there to be a reduction from five years to three, and the report would be one of the key documents that Parliament would use when considering whether or not to renew the regulations after the three years; otherwise, they would be significantly out of kilter and either the report would not be helpful to the extension of the regulations or we would be unable to have a meaningful discussion on their extension in the absence of a report on the impact on Britain of the agreement.

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My Lords, I thank my noble friend Lady Neville-Rolfe for Amendment 7, which brings reporting on future FTAs into scope, and her support for Amendment 6. The engagement I have had with my noble friend, as with others in this House, has been invaluable.

My noble friend asked why we are not agreeing in statute to lay the reports before the devolved Administrations. The UK Government, as a point of constitutional principle, are not responsible for laying documents in the devolved Parliaments. However, I recognise the importance of ensuring that the devolved Administrations are appropriately involved. That is why we are proposing that the Minister will make a commitment in the House that the Government will send the reports to the relevant Ministers in each of the devolved Administrations. We hope that that solution addresses the objective and the constitutional agreement.

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From my experience of the Scottish Parliament, there is nothing to prevent any UK Government submitting to the Library of the Scottish Parliament or Welsh Assembly documents similar to those laid in the Library of this House, so that MSPs and AMs can be informed and do not have to rely on their Governments submitting them.

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That is a helpful interruption, but we would probably like to have a more formal process for handing the reports to Ministers and devolved Administrations.

As my noble friend may be aware, the Government published a Command Paper on 28 February on our processes for making free trade agreements after the UK has left the EU. In that paper, we outline our plans for transparent scrutiny of future FTAs, including publishing a scoping assessment prior to launching negotiations. We will also publish full impact assessments of new FTAs once negotiations are concluded. It is important to note that we have not yet begun negotiations on new FTAs, but the Government would be willing to consider publishing similar reports for future FTAs to those required by the amendment or continuity free trade agreements.

As regards our helpful discussion on the agreement between Prime Ministers Abe and May, the UK undertook to make an enhanced agreement with Japan. My noble friend Lord Lansley was correct in saying that the Japanese Government have agreed that, subject to there being an agreement, the EU-Japan agreement will continue during the implementation period, as with all our other continuity agreements. The Command Paper on scrutiny and transparency sets out our overall approach to scrutiny and consultation in relation to trade agreements. The UK and Japan have agreed to deliver a bilateral trade agreement based on the EU-Japan EPA, enhanced in areas of mutual interest, as I said. In scenarios such as this, the exact approach that we take on scrutiny and consultation will obviously depend on the nature and potential impact of the agreement that we seek.

The noble Lord, Lord Purvis of Tweed, asked whether the reporting requirements referred to in the proposed new clause would apply to Japan. The answer is that they would. The reporting requirements apply to all agreements with third countries that sign an FTA with the EU before exit day.

I hope that with that assurance my noble friend Lady Neville-Rolfe will feel able to withdraw her amendment.

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I thank my noble friend for her very helpful assurances and have pleasure in withdrawing my amendment.

Amendment 7 (to Amendment 6) withdrawn.

Amendment 6 agreed.

Amendment 8

Moved by

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8: After Clause 5, insert the following new Clause—

“Trade in legal services in the EU

It shall be an objective of the Government to ensure that any future trade agreement between the United Kingdom and the European Union contains reciprocal rights for UK qualified lawyers to practise law in the European Union after exit day.”

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My Lords, as I mentioned earlier, since Committee the Government have published the very helpful Implications for Business and Trade of a No Deal Exit on 29 March 2019. Paragraphs 39 and 40 set out the importance of the services sector, which overall accounts for 80% of the UK’s GDP. The last available figures—from 2016—show that the legal services sector generates £31.5 billion in UK revenue. The UK has signed an agreement with Switzerland, and this is an example of a rolled-over agreement that will potentially bring direct benefits to UK lawyers. The Government say at paragraph 40 of their paper that in a no-deal scenario,

“the EU has said that UK nationals would be treated in the same way as third country nationals with regards to recognition of their professional qualifications. This would mean the loss of the automatic right to provide short term ‘fly in fly out’ services, as the type of work lawyers can do in each individual member state may vary, and the loss of rights of audience in EU courts. UK lawyers and businesses would be responsible for ensuring they can operate in each Member State they want to work in”.

I have a couple of questions for the Minister, my noble friend Lord Bates, whom I am delighted to welcome. What provision has been set out in the rolled over agreement with Switzerland, particularly regarding the insurance and banking sectors, for rights of audience, rights to establish and rights to continue to provide legal services in Switzerland for this purpose? I would be very grateful if my noble friend would take the opportunity to update the House on the provision that the Government are making, in a potential no-deal scenario, to ensure continued rights of audience, continued rights to “fly in, fly out” services, continued rights to establish themselves and continued rights to provide services in the interim between no deal and a future deal being signed. When the regulations went through this House, it was pointed out by my noble and learned friend Lord Keen that EU lawyers would have the right to enjoy those privileges in the UK. It would complete the circle if my noble friend could update the House with an assurance that mutual recognition is being sought with other member states and in the agreement signed with Switzerland.

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I emphasise how important this issue is. From my experience, the UK has arguably the finest legal services in the world. As the founding chair of the UK India Business Council, I am aware that foreign lawyers are not allowed to practise in India. That makes it very difficult for our lawyers to provide advice not just to British companies in India but to Indian companies, and that is a huge loss for India and our British legal services. The ability of our lawyers to practise abroad is crucial. The EU is another area where we have taken mutual recognition for granted. All sorts of situations could arise in a no-deal scenario—situations involving not just advice to companies but disputes. What about consumer rights, for example? British consumers will no longer be able to sue in relation to a European product here in the UK. It will have to be done in the country of origin in the EU and, if our lawyers cannot help out, that will be to the detriment of our consumers. Therefore, this is a very important point that cannot be taken for granted and should be included.

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My Lords, I thank my noble friend Lady McIntosh for presenting this amendment and for giving us the opportunity to put on the record further remarks on where we are with regard to legal services. As she reminded us, legal services contribute around £25 billion to the UK economy, with a trade surplus of around £4 billion. They directly employ well over 300,000 people in the UK, two-thirds of whom are outside London. The UK is a world leader in the provision of legal services, as the noble Lord, Lord Bilimoria, also pointed out, and English law has a reputation for excellence across the world. We are determined to continue to build on this success.

We acknowledge that leaving the single market might have implications for market access and that some UK and EU service suppliers will not enjoy the same rights as they do today. That point was made by my noble friend Lady McIntosh when referring to Implications for Business and Trade of a No Deal Exit on 29 March 2019, published by the Government on 26 February—specifically paragraph 40, which sets out a case study on legal services. In a sense, that underscores that the Government see this as a key priority in the future economic framework negotiations.

That is why, in the political declaration on the future relationship between the EU and the UK, there will be comprehensive arrangements on the trade in services, covering a wide range of sectors, including legal services. The political declaration includes a commitment to conclude arrangements for services and investment that go well beyond WTO commitments and build on recent EU free trade agreements, as well as a commitment to make appropriate arrangements for professional qualifications.

The Government want to secure positive outcomes for the professional business services sector, including legal services. However, as my noble friend will be aware, our future trade relationship with the EU is subject to negotiation with the EU. A trade deal must be negotiated before its terms can be set out in law. I am aware that this is perhaps a probing amendment that seeks to get some points on the record, but clearly the Government’s view is that what my noble friend proposes is not the correct vehicle.

I am aware that in previous debates on this Bill and on some no-deal secondary legislation my noble friend has raised concerns about the impact of a no-deal outcome for lawyers. We do not want a no-deal scenario but, as a responsible Government, we have to prepare for it.

The no-deal SI relating to the practising rights of European lawyers in England and Wales and Northern Ireland, which this House debated in January, and was made on 13 February, provides transitional arrangements for EU-EFTA lawyers. The purpose of this no-deal SI is to clarify the position of EU qualified lawyers who are practising in England, Wales and Northern Ireland immediately before exit day, so that they can be secure in the knowledge of what their position will be in the event that we exit without a withdrawal agreement.

The Scottish Government are also making the necessary preparations for a no-deal outcome and laid a separate but similar SI before the Scottish Parliament on 20 February. However, we cannot address the question of how the EU 27 will treat our lawyers going forward in our domestic legislation. We continue to be in discussion with EU member states on their no-deal arrangements.

The noble Baroness, Lady McIntosh, specifically asked what provision for rights has been set out in Switzerland. Individuals who have transferred into the UK legal profession would retain their rights. The UK-Swiss agreement goes further, providing rights for lawyers within the scope of the agreement to continue to provide services on a permanent basis under home title, while they remain registered with a relevant regulator in their host state. It also provides for continued service provisions under home title for 90 days in any given calendar year.

I hope that those responses offer my noble friend some reassurance and she will withdraw her amendment.

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My Lords, I am most grateful to my noble friend for such a comprehensive response. I am sure some in this House will agree that English law has a reputation for excellence, but speaking as a non-practising Scottish advocate, perhaps Scottish law is pre-eminent. I am grateful to my noble friend for updating the House on transitional arrangements for EU-EFTA lawyers and the position in Scotland. I was particularly pleased to hear of the arrangements in the UK-Swiss agreement.

I wish to return to this subject in the next trade Bill on our future relations—I do not know whether we have a date for that. For the moment, I beg leave to withdraw the amendment.

Amendment 8 withdrawn.

Amendment 9

Moved by

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9: After Clause 5, insert the following new Clause—

“Preferential trade schemes: parliamentary approval

(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) In section 32 (regulations etc)—(a) after subsection (3)(a) insert—“(aa) the first regulations under section 10 (preferential rates given unilaterally),”,(b) in subsection (3)(b) omit “that section” and insert “section 8”.”

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I am glad to have the opportunity to speak to Amendment 9 in my name and that of the noble Lord, Lord Stevenson. Amendment 9 follows our constructive discussions in Committee and outside the Chamber with the noble Lord, Lord Bates, and his colleagues on the question of the trade preference scheme, typically referred to as the generalised scheme of preferences in the European Union context.

A generalised scheme of preferences or the trade preference scheme established by this country would be one intended to give unilateral access to our markets for the products of some of the least and less-developed economies, assisting in their economic progress.

In so far as we have been discussing continuity, the intention is for the United Kingdom to maintain some continuity between the European Union preference scheme and a future preference scheme in the United Kingdom. However, I want to talk about where there may be scope for differences. If noble Lords want to look at the measure, it can be found in Schedule 3 to the Taxation (Cross-border Trade) Act 2018. That is why the amendment amends that Act, not to interfere with its revenue-raising functions but in relation to the scrutiny to be applied to regulations to establish a trade preference scheme.

Under that Act, when the Government bring in a trade preference scheme, the first such regulations will be subject to an affirmative procedure. As I understand it, the scheme may be established in line with the existing European Union preference scheme. However, it will be helpful for me to raise a number of issues with the Minister to give him a chance to put the Government’s intentions on record—as he helpfully did on the last group—about the character of the regulations and the extent of detail to be provided.

First, when we looked at Schedule 3 to the Taxation (Cross-border Trade) Act, we found it very difficult to relate that directly to what is in the EU’s preference scheme. That is mostly because the EU’s preference scheme does not include those countries with which it has association agreements that effectively supersede and replace the unilateral preferences. They have entered into bilateral or multilateral arrangements.

Whereas “least-developed countries” corresponds directly and derives from a UN classification, the list of “other eligible developing countries” is referenced to a World Bank classification, “among other things”. It is not the same as the classification by the World Bank. In particular, it would be helpful if my noble friend would confirm whether it is the Government’s intention to follow the EU practice and to identify in that category a sub-category of “vulnerable developing countries”. I think the intention of the unilateral scheme of preferences is to support economic development in circumstances where they are not the poorest countries of the world but none the less have significant issues—often they are structural or governance issues—that require additional preferential support.

Secondly, can access to preferences be suspended or withdrawn, as Section 10 of the Taxation (Cross-border Trade) Act makes clear, in recognition of or in consequence of human rights abuses in those countries or in relation to United Nations sanctions? Will the regulations make that clear?

Thirdly, what is the situation where the availability of this unilateral system of preferences none the less gives rise to dumping? I remember way back in 1981 that I was responsible in the Department of Trade and Industry for the generalised scheme of preferences as it applied to chemical products. The dumping of petrochemicals produced in Middle Eastern countries illustrated this point: the fact that one is a developing country does not necessarily mean that one does not have the ability to have serious competitive issues with producers in this country.

Where preferences might lead to dumping, or to subsidy, or to an increase in imports that could give rise to injury to markets and producers in this country, will the Secretary of State under the regulations be required to ask the Trade Remedies Authority to investigate any such complaint? As is the case elsewhere in the Act, will the Secretary of State be required only to act and to implement remedies in so far as the Trade Remedies Authority itself determines that there is a need to act and in line with its recommended remedy? It is not clear in the 2018 Act that the Trade Remedies Authority is required to be used by the Secretary of State in relation to the preference scheme.

Will the first set of regulations make clear the overall structure of the preferences scheme? Will it also make clear the structure in relation to specific products from developing countries, which are not to have the unilateral nil duty of tariff but are to be treated as graduated products? This sometimes happens for reasons of relative competitiveness or due to the need to protect industries in this country—as might, for example, be the case with textile imports from India or Bangladesh. Will the availability of the preferences for those graduated products be specified in the regulations, so that the two Houses can look in detail at the way in which the preference scheme is to vary in relation to certain sectors and certain countries, which might give rise to differences between the EU scheme and our scheme? Clearly there are graduated products, particularly in the agricultural sphere, where the protection afforded is to southern European producers for certain agricultural products that have no relevance in the United Kingdom. This could be true for industrial products as well.

As was said in the previous group of amendments, that is my list. I hope the regulations will include—but not necessarily be limited to—those details. There may be other issues that noble Lords will want to make sure are set out by the first regulations. It will be helpful for us to have an idea because, depending on circumstances, it may not be long before the shape of the trade preference scheme becomes clear in detail, not just in its overall application, as was set out in the 2018 Act.

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I rise briefly to support the amendment in the name of the noble Lord, Lord Lansley, which I have signed up to. The meeting that he referred to was extremely helpful in drawing out some of the confusion that emerged during our first debate in Committee. The issues of how countries get on to the lists, how the lists get managed and shaped, and how the changes might come forward were all explored carefully; we now have a much better understanding. In these lists, there are bound to be curious decisions which do not seem to match up to one’s perspectives. I was in Tanzania on holiday recently and it certainly did not come across as one of the least-developed countries, although clearly there are issues around how it will progress and develop its own trading arrangements.

The point behind the amendment is to get on record some further points that have emerged. The noble Lord was kind enough to suggest that we might have further questions, but his all-encompassing knowledge and brilliant, incisive questions are quite enough for me.

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I thank the noble Lords, Lord Lansley and Lord Stevenson, for moving the amendment standing in their names and giving us another opportunity to discuss this important area. We are moving to a stage where we can consider how having an independent trade policy could provide opportunities, particularly to the least developed countries in the world.

I also thank the noble Lords, Lord Lansley and Lord Stevenson, as well as the noble Lord, Lord Fox, and the noble Baroness, Lady Neville-Rolfe, for the debate we had in Committee and for then participating in what I was glad to hear reported as a helpful meeting. I join noble Lords in saying that I found it an incredibly helpful meeting, which improved my own understanding not only of the barriers and hurdles but of the opportunities that are there.

I should perhaps deal directly with my noble friend Lord Lansley’s questions, rather than outlining issues that have been previously discussed in Committee and on which the House is already aware of our position. The noble Lord asked whether it is the Government’s intention to identify a sub-category of vulnerable countries. The answer is yes: we will be replicating the GSP+ tier of economically vulnerable countries.

The noble Lord asked whether these trade preferences would undermine human and labour rights. The UK has a longstanding commitment to universal human rights, and this will be reflected in our trade preferences schemes. As part of transitioning the EU preferences scheme, we will be maintaining a similar approach to human rights commitments.

On the question of who will investigate accusations of subsidies, dumping, surges of imports et cetera, the Trade Remedies Authority will be able to investigate cases against any country, including preference-receiving countries. In doing so, it will consider allegations of dumping, subsidies and unforeseen surges in imports which cause injury to UK industry. Where the TRA determines that a trade remedy measure should be applied, it can make a recommendation to the Secretary of State, who can accept or reject that recommendation. Such measures usually take the form of an additional amount of import duty above the most favoured nation rate.

On whether the SI will set out rules on graduated products, the regulations will set out detailed tariff lines, indicating which products will receive reduced tariffs or have tariffs removed altogether. It will also set out the rules for graduated products that are internationally competitive.

The UK currently trades extensively with developing countries under the EU’s GSP, which reduces tariffs on imports. Imports of goods from unilateral preferences accounted for 4% of all imports into the UK in 2017. Our first priority for the UK’s trade with developing countries is to deliver continuity in our trading relationships. In fact, the Government’s intention is to replicate all the EU’s tiers of preferences. This includes the Everything But Arms tier, which provides a nil rate of import duty on everything but arms and ammunition, and the standard GSP tier, which provides tariff reductions of two-thirds on tariff lines for low-income and lower-middle-income countries.

There will be an opportunity to look at how we should respond to and reform the generalised scheme of preferences going forward, but this will be a matter for future negotiations. In the trade White Paper, we invited people to make representations, and a number of representations were received on areas in which the GSP could be improved and these included areas such as rules of origin, which could be considered. As I have said, we believe that there are opportunities to look at ways in which the scheme of preferences could work better for the world’s poorest countries going forward, but our first priority is to ensure that the preferences which exist already—helping approximately 70 developing countries to export to the UK—are maintained; that is the objective of this Bill.

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I am grateful to my noble friend the Minister and indeed to the noble Lord, Lord Stevenson, for their contributions to this short debate, and for the discussions that we had, which were not so short but were extremely helpful in clarifying many of the issues; they have enabled us to be brief today. I am grateful to my noble friend for his responses to my questions, which were very satisfactory.

I have two things to say. First, what he described as the role of the Trade Remedies Authority seems an appropriate one and mirrors what would be the case with other countries who are not part of the GSP scheme. I hope he implied that the Secretary of State would follow the TRA’s recommendations on the extent to which the preferential access is suspended or withdrawn; this can lead to a rate of duty that lies between nil and the standard rate—the most favoured nation rate. It is not necessarily in excess of the most favoured nation rate, as my noble friend said, but might fall somewhere between the nil rate and the MFN rate.

On the second point, I completely understand that noble Lords might expect us to start with a preference scheme that mirrors the European Union scheme and then consider the extent to which we can, or need to, change it in order to improve it—to address both the different circumstances of EU industries relative to those of developing countries and some characteristics of the scheme itself. Given that the legislation is structured so that the first regulations get affirmative processes and subsequent regulations do not, I hope that that will not inhibit Ministers from trying to consult proactively, as they have done through the White Paper and otherwise, on how the preference scheme could be improved if and when—there is definitely an “if” as well as a “when”—we come to establish a trade preference scheme that is the UK’s own scheme, rather than one which simply reflects the EU scheme. However, on the basis of the very helpful response from my noble friend, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Amendment 10

Moved by

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10: After Clause 5, insert the following new Clause—

“The customs tariff: parliamentary approval

(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) In section 32(3)(b) (regulations etc)—(a) leave out “an increase in” and insert “to vary”, and(b) after “section)” insert “from that which is in the United Kingdom’s Schedule notified to the WTO”.”

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Amendment 10 stands in my name and that of the noble Lord, Lord Stevenson. In Committee, we did not discuss what tariffs the United Kingdom would apply if we were to leave without a deal with the European Union. Since Committee, although Ministers have not published a proposal—notwithstanding some hints that they would—we are told something about it by virtue of reporting by Sky News. I do not know whether that is true or not; I tend not to rely on media reports for these purposes. As it happens, I tabled Amendment 10 before Sky News started reporting anything of this kind, because it seemed that noble Lords would want to talk about what such a tariff structure might look like.

This amendment relates to the implementation of import duty under Section 8 of the Taxation (Cross-border Trade) Act 2018. There are regulation-making provisions in Clause 32 of that Act, which specify that the first regulations under the Act require an affirmative procedure in this case, and that the affirmative procedure should also be used when there is an increase in duty in the standard case. For these purposes, “standard case” means when there is not a preferential rate or a tariff-rate quota, or when something is not subject to trade remedies. In that sense, it is what my noble friend referred to in the last group as an “MFN rate”. That is the standard case for these purposes.

The provision currently says it would be an affirmative procedure when there is “an increase in” that duty. The effect of Amendment 10 is to change that, so that it would be an affirmative procedure for any regulation that sought “to vary” the rate from the rate set in the schedule notified to the WTO. One of the points I hope to make is that this enables us to say something about the shape of how we might approach the situation if there is no deal. If we remain in the transition or implementation period, we will clearly abide by the EU external tariff. Depending on the nature of the future relationship with the EU, we may continue to be within a single customs territory and, by implication, within a single EU external tariff. That does not necessarily reflect the Government’s point of view, because they appear to want to be able to reduce tariffs below the EU rate, even though we remain in a single customs territory. This is a debatable proposition, which we will perhaps debate later but not on this group.

In this amendment, there is an expectation that, if we leave without a deal, we will start with our schedules to the WTO being those that we have notified—as I said right at the beginning of our proceedings today, in response to the noble Lord, Lord Kerr. They are essentially in line with the EU external tariff. My proposition is that there is no need for this; indeed, there would be significant detriment if we did not maintain those schedules. Under the WTO rules, we should have what is known as a bound rate, which is in line with the EU external tariff. The bound rate is the one that we are, in this sense, bound not to exceed. However, that does not mean that that is the rate that is applied. It is not widespread, but it is entirely normal practice under the WTO rules to have not only free trade agreements of the kind which are contemplated under Article XXIV, which lead to preferential arrangements, or the kind of preference scheme that we were just talking about for the less developed countries, but also to apply a rate of duty that is lower than the rate which one is bound to under the schedules for the WTO.

The proposition I put to your Lordships is that we should be thinking constructively about how to use the flexibility under the WTO rules to vary the applied rate of tariff from the bound rate, if we were in the unhappy circumstances of leaving without a deal. We would leave the bound rate, the WTO schedule and the EU external tariff where they are, in the expectation that, even if we leave without a deal, we may enter into a relationship with the European Union with a customs relationship which might require us not to vary from the EU’s external tariff—we would just leave that alone for the time being. In the short term, this would enable us to reduce tariffs on products from around the world which are presently subject to a higher tariff or to tariff-rate quotas. It would enable us to offset what is otherwise a significant risk of overall price increases for UK consumers.

The reasoning of course is that the EU will not change its external tariff. If we leave without a deal, we will be subject to the EU’s external tariff. Roughly half of our imports come from the European Union; a significant proportion of those—for example, cars—will have a 10% tariff applied. To turn it the other way round, UK producers would be in the unhappy position of being subject to increased costs when they try to sell. What we do not want to happen is that, simply by virtue of leaving, we impose high tariffs, leading to higher costs for UK consumers.

When people have speculated about what the tariff on a no-deal basis might look like, in some quarters they have tended to say, “We cannot lower our tariffs because the consequence of that is that we will have given something away unilaterally, which would prejudice our ability to enter into bilateral trade deals with other countries”. This is not the case. If we proceed by having an applied rate that is lower than the bound rate, first, it will become apparent to us and other countries to what extent liberalised, lower rates of duty stimulate imports from those countries, in some cases in competition with the EU at a level of duty which it has not been able to match in the past. It will begin to tell countries, and us, what the impact of lower rates of duty might be on trade between those countries.

Secondly, those countries would know that, if no bilateral deal was brought to a successful conclusion which then gave a preferential rate of duty to the United Kingdom under a free trade agreement, we could restore our applied rate back to the bound rate. They would then lose the benefit we had given them in the short run. In a nutshell, the short-run benefit of lowering tariffs not only potentially offsets what might otherwise be price increases but enables us to demonstrate to other countries what the benefits of a bilateral deal in the long-run might look like.

My expectation, and the expectation of most developed economies, is that the bound rate and the applied rate will converge in the long run. They are generally the same thing, but we are not required to have them as the same thing. It gives us an opportunity to vary rates and see what the future might look like. In the short run, it also gives us the opportunity to vary the rates of duty from those in the EU tariff to give specific benefits on things such as agricultural products or some industrial products where the protection that is required for European producers does not apply to UK producers. In that way, we can start to benefit from lower rates of duty where the European Union does not currently offer that option to us.

I am not necessarily looking for the amendment to be adopted by Ministers, but I hope that they will see the benefit—even if they cannot tell us what is planned—of saying that, structurally, we should start with the EU external tariff and the WTO schedules as they are but be prepared, in a no-deal situation, to look at how we can liberalise trade through lower rates of duty across many products. We could then have specific protections for, for example, farmers and the ceramics industry—those were referred to in our Committee debates—which may require particular protection against non-EU countries that bring in products at a lower rate of duty. On that basis, I beg to move.

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I have a private joke with the former Minister, the noble Baroness, Lady Neville-Rolfe, that there is a small and declining number of people in this House with an interest in intellectual property, and that we used to gather to discuss arcane issues using incomprehensible language to our hearts’ content. The noble Lord, Lord Clement-Jones, is clearly a member of that group, and there are one or two others. The noble Baroness, Lady McIntosh, who is unfortunately not in her place, has joined the group recently. I say that because the discussion of the WTO tariff rate is coming down to that rather narrow group of people who have a deep knowledge of and fascination for the issues and are interested in exploring them, but are frustrated by the fact that the Taxation (Cross-border Trade) Bill, on which we should have had the chance to discuss the points so ably made by the noble Lord, Lord Lansley, was held back from us by procedural rules and went through without much debate. We are therefore having to invent a way of getting into that discussion.

The noble Lord, Lord Lansley, has done a great service to the House by going through some of the very intricate and complicated issues around setting tariffs and rates and how you play the game against the very complicated rules of the WTO. He does it, however, from a position of knowledge and experience that, I am afraid, will be frustrated again tonight, because there is not the will in the House to go through it in detail. Indeed, I tabled an amendment a week or two ago—when I thought there would be more time to discuss these things—on the prospect of the GSP tariff rates, setting and mechanisms. He is right that there are broader issues around those that we should discuss. However, this is not the time—and we do not have the time—to go into the detail, so I will not press my Amendment 14, which comes later, because the noble Lord, Lord Lansley, has raised the same points in a broader context. I hope that the Minister will respond briefly to the points raised, so that some of the issues that need to be on the record are on the record, but perhaps we should save some of the more detailed issues for another day.

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I thank my noble friend for moving the amendment. The noble Lord is right: my noble friend has raised, effectively, three issues that need to be examined. One is the level of tariffs. In that regard I will probably disappoint my noble friend by referring back to my noble friend Lady Fairhead’s response from the Ministers’ Bench to the invitation of the noble Lord, Lord Kerr, to set out a timetable for when those tariffs might become known. She made her points and they stand on the record; I probably do not need to repeat them. I also draw to the attention of the House The Implications for Business and Trade of a No Deal Exit on 29 March 2019, which was published on 26 February. On this occasion I draw my noble friend Lord Lansley’s attention to the section on tariffs, beginning at paragraph 31 and continuing into paragraph 32, which explores some aspects of the setting of tariffs.

Those are two aspects on the level of tariffs, but I now turn to some of the specifics to which my noble friend referred. He asked about the status of the common external tariff applied by the WTO. The noble Lord is correct that we have notified our bound tariff schedule to the WTO. Our bound schedule represents the upper limits of what tariffs the UK could apply on imports. If, for example, our bound schedule says 10% for product X, we could choose to apply 9%. The Government have yet to announce their applied tariffs for a no-deal scenario, but the noble Lord, Lord Lansley, is correct to say that on leaving the EU we will be free to set out tariffs within the parameters of the bound schedule that we lodged last year.

The EU’s common external tariff—as referred to by the noble Lord, Lord Lansley—is the EU’s version of its applied tariff schedule. These are the tariffs that will apply to UK exports to the EU in a no-deal scenario. My noble friend also referenced the Taxation (Cross-border Trade) Act, which states that the first time a tariff is set, and whenever an import duty rate increases, the made affirmative procedure will apply; otherwise the negative procedure will apply.

These amendments would make the made affirmative procedure apply in different circumstances. In the case of Amendment 10, that would be any time the rate of import duty diverged from the bound commitment made by the UK to the WTO; in the case of Amendment 14 the made affirmative procedure would apply in all circumstances. However, under both amendments it is currently stipulated that the setting of the tariff would remain a matter for the other place. The Act ensures that the scrutiny procedures applied to the exercise of each power are appropriate and proportionate, taking into account the extremely detailed nature of the tariff and the frequency with which it may be changed. The tariff is long and complex; it currently contains 17,000 types of goods and is more than 1,000 pages long. The EU tariff is subject to regular, almost daily, amendment, so the current balance of the chosen procedure reflects that understanding.

Once again, I express the Government’s appreciation to my noble friend Lord Lansley for moving this amendment, giving us the opportunity to expand on our positions and put those additional remarks on the record. I hope that is helpful and reassuring to him, and that he feels able to withdraw his amendment at this stage.

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I am grateful to my noble friend, and to the noble Lord, Lord Stevenson of Balmacara. This debate has been very helpful, and the takeaway from this—one I am grateful to my noble friend for confirming—is that the bound schedule has already been notified to the WTO. People need to be very clear about the fact that if we leave without a deal and the Government come forward and say, “These are the tariffs that we intend to apply”, they are not varying the WTO bound rate but saying that, on a most favoured nation basis, they will apply these rates. That provides a basis for negotiations on preferential schemes that could emerge over time. I read the document about the implications of no deal for tariffs, and it is correct: the Government must balance the desirability of supporting liberalised trade, with benefits for consumers through price and choice, with protection for producers in this country. That will be a delicate balance to strike. If people are aware that we can behave in this way with an applied rate that varies from the bound rate, it removes the argument that by applying a lower rate in the short run we have prejudiced our ability to conduct trade negotiations with other countries in the future—we have not done that. If we get rid of that argument, it helps to shift the balance in many cases in favour of lower rates in the short run, rather than higher rates. I am most grateful to my noble friend for his response. On that basis, I beg leave to withdraw the amendment.

Amendment 10 withdrawn.

Amendment 11

Moved by

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11: After Clause 5, insert the following new Clause—

“UK membership of the European Free Trade Association and the European Economic Area

It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement.”

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My Lords, last summer the House supported a proposition along the lines of retaining our membership of the EEA. Given that all other ideas seem to be falling by the wayside one after the other like dominoes, it now has even more steam behind it. I expect this will be demonstrated in the other place quite soon, with the proposition supported by cross-party groups in the Commons and in this House.

Before I come to the main issue, I want to make a point about all the bad news from the car industry, with BMW and Toyota adding to it. This is another demonstration of the need to stay in the customs union, which will be debated later.

We are talking in this Bill against a background of leaving the EU—not about whether it is a good idea, which it certainly is not—and moving from Pillar 1 of the twin-pillar European Economic Area, which is the European Union, to Pillar 2, which is EFTA. Given where we are now, I think that it is the only way we can still be part of a family of agreed rules and justiciable arrangements, with the emphasis shifting on the latter point from the European Court of Justice to the EFTA Court.

I wish to get out of the way a rather unnecessary obstacle. I refer to the publication by this Government on 20 December of the EEA EFTA separation agreement with the UK. Although this is a treaty provision whereby we will leave the EEA on 29 March, will the departure requirement in Article 71 of the draft agreement be automatically frozen in the hypothetical situation of our reaching agreement with the EU to extend the Article 50 period, which is becoming more likely, so that it does not happen on 29 March? If we crash out, would we not have the right to apply to rejoin EFTA? Would not Parliament have the right to vote on such a treaty change if it were no longer logically derivative of the wider constitutional Act? Many lawyers think that there should be such a vote.

Jeremy Corbyn paid tribute in the Commons recently to the cross-party Norway-plus group, echoing its view that we need full access not only to the single market but to a customs union. This policy is supported by the TUC under the distinguished leadership of Frances O’Grady. As I have said previously, I prefer to say “the” customs union, because I am agnostic about whether there is a cigarette paper of difference in this context between the definite and the indefinite article. The EU customs union and the single market between them—they are intertwined—cover a wide range of electronic data, driving licences and product standards, as well as labour standards. Given what has been said in the newspapers today, membership of them would be the only way to guarantee that workers’ rights in this country kept pace with further improvements in the EU. As we have seen from today’s reports, the Prime Minister restricts her commitment to consultation, which past experience suggests gives a veto to the CBI, even though I suspect that it, like the TUC, will remain part of the employers’ negotiating team in Brussels. In other words, it could have its cake and two bites at the cherry, given its reluctance to be part of this arrangement.

Membership of the customs union and the single market would determine that we had no problem on the Irish border—to which my noble friend will return later—and no problem on Dover-Calais. However, I recognise that the scenario I am spelling out is not problem-free. EFTA has free trade agreements with third countries which are not the same as the EU’s; the UK as a member of EFTA and in a customs union with the EU could not join those. Indeed, the UK must fully respect the fact that EFTA states need to protect the integrity of their agreements. But on the basic premise of staying in both the customs union and the single market, this is a policy on which, as I understand it—there have been many quotes saying this much—the leaders of Norway and Iceland have in different ways stated that they would be open to negotiation.

I turn to the principal objection raised by some to the EEA option, which has been rather rhetorically posed in the phrase that we would be a “rule-taker rather than a rule-maker”. Membership of the EEA is not unique in being open to that characterisation. Even if the penny has not yet dropped for Mr Boris Johnson and such circles, we cannot leave the EU table and then complain that we do not have a vote there. How is that idea still running? Moreover, as Jacques Delors foresaw in 1990, the EEA has scope for devolution. EFTA with the UK again a member would probably evolve into a more influential and substantial body than is currently the case. There would no doubt be further strengthening of the pre-legislative consultation protocols within the EEA and the EU.

In referring in the second half of his speech on 4 February to,

“control of our borders or our laws”,—[Official Report, 4/2/19; col. 1368.]

the Minister sounded, perhaps unintentionally, as if he was quoting straight from the Rees-Mogg/Boris Johnson playbook. We could have every expectation that there would then be reciprocal controls over freedom of movement, which would be cutting off our nose to spite our face. It is said that we would be free to act unilaterally, but this does not apply to GATT or lots of everyday things, from railway signalling to air traffic control. If we want to live in splendid isolation, I guess we ought to have our own rules on penalty shoot-outs, having left FIFA, and restrict ourselves to playing against a team from the planet Mars. So I ask the Minister to modify that sort of rhetoric.

My key proposal is to urge discussion among the 27 and the 3+1, which is Switzerland—that means representatives of the whole EEA—to enable a wider group of member states to be involved in finding pragmatic solutions to the single market and the customs union, involving cross-over between the two pillars if we are outside the EU. That is why I am advocating that the EEA Council be in a position to take initiatives to call meetings between the pillars in such circumstances. That prospectively involves the UK’s affiliations. I beg to move.

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My Lords, the House has carried an amendment such as this before and has done so overwhelmingly. It crops up in the context of this Trade Bill and will do so again whatever the Government do. If they achieve their withdrawal agreement, the direction of travel of what happens next will have to take account of the Norway-plus option. If they fall flat on their face next week, we will see that the options which the country needs to consider urgently are likely to include this one.

It is the only option that combines reconciling the referendum result with single market membership and the customs union arrangement as well. I know that time is tight, but I ask the House to keep this option in mind; the fact that it is being treated briefly tonight does not mean that it will not be very important in the future. I hope people will reflect on the points made by my noble friend in moving this amendment.

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My Lords, to follow what the noble Lord, Lord Monks, said, I was one of the noble Lords who led on the amendment—along with the noble Lord, Lord Alli, and others—suggesting that the EEA was the least worst option. That amendment to the withdrawal Bill was passed overwhelmingly. That decision, therefore, has been made by this House; it was overturned by the other place, but it could quite probably—as the noble Lord, Lord Monks, has said—come up again as the least worst option.

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My Lords, although the key point was made by the noble Lord, Lord Monks, that this might seem a little out of keeping with the rest of today’s discussions, points were made here that will be resonant as we move on with the Bill. I commend them to the House.

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My Lords, I am conscious of the time, but I also want to ensure that noble Lords have an opportunity to reflect on the serious issues raised by the noble Lord, Lord Lea. We may deal with them briefly this evening but we did not deal briefly with them when they came up in Committee. There was quite some debate on them on 4 February, and for those noble Lords who are interested, they can read it in glorious technicolour between columns 1360 and 1370 in the Official Report of those proceedings. Perhaps if the noble Lord, Lord Lea, will permit me to summarise what the key arguments were at that point, I will try to answer two of the points that he raised.

EFTA membership would not be acceptable because it would mean accepting the free movement of people between its four existing members. To gain access to the 29 existing free trade agreements negotiated by EFTA, the UK would have to negotiate its way into each and every one of them with the relevant third countries. There is no guarantee that that would be successful: EFTA’s trade agreements were not negotiated with the size and type of Britain’s economy in mind. Were the UK to join EFTA, it would constitute 71% of the enlarged area.

If we rejoined the European Economic Area to stay in the single market, we would not have control over our borders. It would mean having to accept all four freedoms of the single market, including free movement of people across the 30 EEA states. On laws, it would mean having to implement new EU legislation covering the majority of the sectors of our economy. In contrast, we are making an up-front sovereign choice to commit to ongoing harmonisation with EU rules on goods, covering only those necessary to provide frictionless trade in the context of our agreement.

The noble Lord, Lord Lea, said that if we crash out, we need to keep the right to rejoin EFTA. If we leave the European Union without a deal, we fall out of the EEA and EFTA. We would be able to apply to rejoin, but this is contrary to government policy for the reasons that I have explained. He asked what the impact on the EEA Agreement would be if we extended Article 50. If we were to extend Article 50, the UK would, of course, stay within the EEA under the EU pillar until we left the EU. With regard to citizens’ rights agreements made with the EEA and EFTA states, these would enter into force only when we leave the EU or at the end of an implementation period.

I hope that, with that brief summary, the noble Lord—whose contributions I always enjoy and listen to attentively—will not feel that I have not responded to him, but in the context of the wider consideration of this issue in the debate, the Government’s position remains as it was in Committee. I therefore ask him to consider withdrawing his amendment at this stage.

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My Lords, I thank the Minister for that reply. In fact, he did not answer all the questions on 4 February. I could draw attention to some of them, but I will not. This could have been an opportunity today. Free movement of persons is, of course, an issue of which we have experience within the European Union. We would be cutting off our nose to spite our face on areas of the economy, such as the whole entertainment, theatre and ballet industry, as the noble Baroness, Lady Bull, referred to on one occasion. There are many, many others, so these sweeping statements about control of our borders are really over the top and not a sensible way to address this issue.

I am not going to say more at this stage. Suffice it to say that the initiative is now with the House of Commons. I have some confidence that in the next few days and weeks this will become, as my noble friend Lord Monks said, a strong policy in the Commons. I rest on the fact that it is still the policy of the House of Lords, as has been said by my noble friends. On that basis on this occasion, I will not seek to test the opinion of the House.

Amendment 11 withdrawn.

Amendment 12

Moved by

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12: After Clause 5, insert the following new Clause—

“Parliamentary approval of trade agreements

(1) Negotiations towards a free trade agreement may not commence until the Secretary of State has laid a draft negotiating mandate before the appropriately constituted Committee and it has been approved by—(a) resolution of that Committee, and(b) a resolution of both Houses of Parliament.(2) Prior to the draft negotiating mandate being laid, the Secretary of State must have consulted with each devolved administration on the content of the draft negotiating mandate.(3) Prior to considering a resolution approving a mandate relating to the negotiation of a free trade agreement, the Committee must produce a sustainability impact assessment.(4) Before either House of Parliament may approve by resolution the text of a proposed free trade agreement, the Secretary of State must lay the text of the proposed agreement before the Committee and that text must be approved by a resolution of that Committee.(5) Prior to the laying of the text of the proposed agreement, the Secretary of State must have consulted with each devolved administration on the text of the proposed agreement.(6) Prior to considering a resolution approving the text of a free trade agreement under subsection (4), the Committee must produce a report setting out a recommendation in relation to the ratification of the agreement.(7) The Secretary of State must lay the report produced under subsection (6) before both Houses of Parliament.(8) Schedule (Committee on Trade Agreements) contains further provision about the reports under subsection (6).(9) A free trade agreement may not be ratified unless the agreement has been laid before, and approved by an amendable resolution of, both Houses of Parliament.(10) The Constitutional Reform and Governance Act 2010 is amended as follows.(11) At the end of section 25(2) insert “, or a treaty containing a free trade agreement as defined in section (Parliamentary approval of trade agreements) of the Trade Act 2019.”(12) In this section, “free trade agreement” refers to any agreement between the United Kingdom and one or more partners that includes components that facilitate the trade of goods, services or intellectual property including but not limited to— (a) Free Trade Agreements (FTA) as defined by section 8;(b) Interim Association Agreements, Association Agreements (AA);(c) Economic Partnership Agreements (EPA);(d) Interim Partnership Agreements;(e) Stabilisation and Association Agreements (SAA);(f) Global Agreements (GA);(g) Economic Area Agreements (EAA);(h) Cooperation Agreements (CA);(i) Comprehensive Economic and Trade Agreements (CETA);(j) Association Agreements with strong trade component;(k) Transatlantic Trade and Investment Partnerships (TTIP);(l) Investment Protection Agreements.”

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My Lords, after that brief pause for dramatic effect, we move on quickly. We have already begun to discuss this issue because it was the subject of the Motion before the House before we began to consider Report, so I can be relatively brief. I thank the noble Lords, Lord Hannay and Lord Purvis of Tweed, for joining me on Amendment 12. I will speak also to Amendment 35, which would be a new schedule dependent on Amendment 12 and which I consider to be consequential.

The background is the White Paper on future trade deals that was referred to. It is very good to read in that paper that,

“the Government is clear that we must have a transparent and inclusive future trade policy that delivers for all parts of the United Kingdom … that there must be a strong and effective role for Parliament in scrutinising our trade policy and free trade agreements … We recognise that the best free trade agreements will be those that draw on the extensive expertise and experience of both the House of Commons and House of Lords and have its full support”.

Unfortunately, those good recommendations in the White Paper do not follow on from the analysis. The problem that we have come across is that the stumbling block seems to be the rather startling assertion:

“The making amending and withdrawing from treaties are functions of the executive which are carried out in exercise of the Royal Prerogative”.

I thought that we decided some time ago that the royal prerogative had had its day. It is a bit odd to see it prayed in aid in this case.

Trade negotiations are no longer just a matter of the import and export of physical goods. They are about societal rights, environmental rights, the provision of healthcare, and investment protection. There are trade-offs between services and tariffs, which was exactly the point that we were discussing earlier today. The public are entitled to know what the Government are doing. We in Parliament are duty-bound to have a role in scrutinising what the Government intend to do. Surely our country needs a modern approach to the approval of trade agreements, with proper roles identified for the Executive and for Parliament, which can operate a sensible scheme rooted in reality, not fantasy, and which is appropriate for our representative democratic system.

The Government say that this proposal,

“should draw on the expertise of Parliament … via a close relationship with a specific parliamentary committee in each House”.

They suggest that these committees,

“would have the power to produce a detailed report … to assist parliamentarians and the public in understanding the agreement and its potential implications”.

Moreover:

“Where the Committee(s) indicated that the agreement should be subject to a debate prior to the commencement of parliamentary scrutiny under CRaG, the Government would consider and seek to meet such requests where those requests are made within a reasonable timeframe and subject to parliamentary timetables”.

These are a pale imitation of what we already have in the EU, where the relevant committee follows trade negotiations extremely closely and a plenary vote in the Parliament is required before the conclusion of an agreement.

In our view, the arrangements proposed in the White Paper do not provide a solid role for Parliament that meets the expectations of those who are interested in trade and which is required for modern trade negotiations, particularly during the scoping and negotiating phases; n or do they accord Parliament the role it should have in ratifying the final agreement, with positive votes being required in each House. I hope the Government will engage with us on this issue and I would be very happy to meet them again to explore the way forward. In the interim, I beg to move.

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My Lords, this amendment is in the names of the noble Lords, Lord Stevenson and Lord Purvis, and my own. I do not wish to appear disobliging towards the Command Paper the Government tabled last week and to which the Minister referred this afternoon before we started Report. It contains some useful material but unfortunately it falls short of providing a proper role for Parliament in three important respects, and thus fails to bring this Parliament anywhere close to the degree of mandating, oversight and approval that will prevail in some of the main trade partners with whom we will, in the future, be negotiating if and when we become responsible for a new, independent trade policy—most significantly, of course, the European Union and the United States.

The first defect is the Government’s refusal to put any of these provisions that they referred to in the Command Paper into the Bill. The degree of mandating and oversight will remain entirely in the Government’s gift on every occasion in which we set out to negotiate a major free trade agreement. Their willingness to give Parliament a say is clearly absent when one considers the consultation the Government have been holding on proposed agreements with the United States, Australia and New Zealand. No doubt having a public consultation, which they are engaged in at the moment, is entirely valuable and appropriate, but there has been no involvement at all by either House of Parliament in that consultation. That, surely, is a sad defect.

A second defect is that there is no provision at all in the Command Paper for mandating ahead of, and oversight during, the negotiations for parliamentary bodies—the word “mandate” never appears at all. The EU will be seeking a mandate from the European Parliament before negotiating with us and the European Parliament will no doubt have oversight throughout the negotiations. In the US, the Administration have just tabled their proposals for an agreement with us and these will undoubtedly be subject to detailed scrutiny and consideration by both Houses of Congress. Why should this Parliament not receive the same provisions and opportunities?

The third defect lies in the process of parliamentary approval for any agreement once the negotiations have been successfully concluded. The CRaG procedure, which is the Government’s preference, provides only for a negative procedure, which I suggest is inadequate for the very complex and sensitive issues that free trade agreements now entail. It is a much weaker instrument than the affirmative procedure proposed in this amendment. I hope that the Government will reflect carefully on how to remedy those three major defects. Without such remedies, the Bill clearly falls short of what is required in a period when trade negotiations have, quite rightly, become the object of careful parliamentary scrutiny and approval all across the world at every stage. Why should this Parliament be left on the sidelines?

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My Lords, I am very grateful to the noble Lords, Lord Hannay and Lord Stevenson, for working collectively to condense a number of amendments in Committee into one composite amendment. It captures the two broad areas that were left outstanding in the Government’s Command Paper, the presentation of which I and others welcomed. The first area explores how the Government see the prerogative power of the Executive taken forward in a new, more complex world. The second concerns the devolved Administrations. Both areas are deficient in the Command Paper, as has been said already.

To illustrate the first point, I was born in 1974, when there were four regional trade agreements in the world. In 1992, there were 24 and in 2019 there are 471. That shows the massive growth in breadth and complexity of trade agreements that have been notified with the WTO. Nine been notified to the WTO during the tortuous process of our consideration of this Bill, which shows how trade moves fast but also widely and with growing complexity. Therefore, reverting, in effect, back to a consideration of the prerogative power before our membership of the EU is not really sufficient. It is why the International Chamber of Commerce, in a meeting I chaired, was so disappointed with the British Government seeking,

“to address the issue of 21st-century trade with 19th-century constitutional practices”.

This amendment seeks to address this fundamentally.

There is no direct replication of the relationship between the Commission, the Council and the European Parliament. The European Parliament has formally notified and engaged from the start of a trade negotiation 12 times. We are seeking to maintain this as the same form of platform of relationship, and if there is no direct read-across from what we have at the moment we will seek to use that as an opportunity to enhance the role of Parliament, rather than enhance the role of the Executive. That is why the first element seeks a role for Parliament in supporting the mandate or the negotiating objectives. The Government may say they have an issue with the word “mandate”: we are just taking the word of the Prime Minister when she sought and secured, “the mandate I need” when it came to negotiations with the European Union recently. When that passed the House of Commons she said she was,

“armed with a fresh mandate”.

This is the Prime Minister’s language and if the Government are opposed to it, they need to explain why the Prime Minister’s language is wrong.

On the second area, we have changed the use of the prerogative power over recent years. Canada still deploys troops without parliamentary approval—we do not. We have moved to fixed-term Parliaments. We have changed, adopted and modernised the prerogative power and that is why it is appropriate that Parliament has a role in setting the negotiating objectives and mandate and also has a vote on the final ratification.

My final point concerns consultation with the devolved Administrations. This formal statutory underpinning of consultation was sorely lacking in the Command Paper. It is welcome that there will be a process through the concordat, that there will be a forum and that there will be ongoing discussions with Ministers, but just to give the current example of the Faroe Islands trade agreement, the draft text was not shared and the level of consultation with devolved Ministers was not appropriate. We seek to address those two areas in this amendment, with consultation with the devolved Administrations, an updating and a more appropriate role for Parliament. I hope that the Government will see this in the spirit in which it was tabled—that we wish to build on the Command Paper and improve it—and that they will accept it.

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My Lords, I rise briefly simply to explain why I do not feel I can support the proposed new clause, although generally speaking I agree with the views that have been expressed in its support. I shall indicate what I could support with some changes to the new clause. I shall deal first with proposed new subsection (9), which makes the ratification of the agreement subject to approval by resolution of both Houses. This provision, in fact, goes much further, as the noble Lord will appreciate, than the procedure set out in the 2010 Act with regard to the approval of treaties, but I welcome the principle and I have no difficulty with it. However, I have a question which I hope the sponsors of the proposed new clause will address. I may have overlooked the answer—it may be staring me plain in the face. What happens if the Lords decline approval but the Commons approve the trade agreement?

There is no provision in the Bill to deal with that situation, and it would be profoundly unattractive if the House of Commons were to approve the trade agreement and the House of Lords were to refuse it, the result being that the trade agreement could not pass. This is actually dealt with specifically by Sections 20(7) and 20(8) of the CRaG Act of 2010, but there is no similar provision in the new clause. Because the procedures between the new clause and CRaG are fundamentally different, I do not think you could simply import the procedures in CRaG to the new clause. Perhaps I might seek guidance from the mover of the amendment on how to resolve a difference of opinion between the two Houses.

To move very quickly to proposed new subsections and (1) and (4), so far as the former is concerned it is very good idea that the negotiating mandate should be placed before an appropriate committee and discussed in both Houses of Parliament. It is a splendid idea, and I also agree with the supporting procedure set out in the proposed new clause. The one thing I do not agree with is that the negotiating mandate should be made subject to approval of the committee or the House. That is an undue restriction on the ability of the Executive to negotiate. I would say yes to consideration and discussion, but no to express approval.

The same point relates to proposed new subsection (4). I see no reason why the agreement of the appropriate committee should be obtained before the matter is put to a vote under subsection (9), because that subsection is already a parliamentary lock on the agreement. Why, therefore, should there be a pre-agreement by the appropriate committee before it goes to both Houses of Parliament? It seems to me that that restricts the ability of Parliament to do that which it thinks is right, and it is unnecessary because the parliamentary lock already exists.

To summarise, I cannot agree with this new clause, but I could agree with it if the principle of consideration and discussion were substituted for that of express approval in subsections (1) and (4).

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I thoroughly agree with my noble friend Lord Hailsham in his argument. I will add one thing. The Commonwealth Parliamentary Association just a few weeks ago brought together people from across the Commonwealth to discuss a number of issues. The meeting I attended was a discussion on the ratification of treaties. It was clear that Australia and New Zealand—which of course have a long continuing history of negotiating their own trade agreements—still use the prerogative power as the basis on which the Executive enter into a trade agreement, but they do it in the context of continuing scrutiny, oversight and an approval process following implementation of legislation.

What I read in the White Paper last week went a long way towards replicating that in a very satisfactory way—that is, we would do those things in a similar way to Australia and New Zealand such as the outline approach being presented, reports on rounds and negotiations being reported back to Parliament and of course an approval process. It is perfectly reasonable to wait on the two Houses of Parliament to tell the Government what they think should be the committee processes by which these are considered. Australia, for example, has a joint standing committee on treaties, which looks at the way treaties are ratified. I do not think it is the case that mandates are being taken all over the world; some of the countries that have the greatest constitutional consistency with us do not have a mandate. The noble Lord, Lord Hannay, was right about scrutiny and oversight, but he elided them with the necessity for Parliament to issue a mandate. Under our constitutional processes we should not be issuing a mandate, and the proposed new clause falls on that count.

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My Lords, at the heart of this is Parliament taking control. What has been a problem for the past two and two-third years is that the Executive have continually tried to bypass and bully Parliament, whether with Article 50 or the statutory instruments that are going through now. This is really frightening. I am sorry to say to the noble Lords, Lord Lansley and Lord Hannay, and the noble Viscount, Lord Hailsham, but there is a big difference between Australia and New Zealand, and, for example, the United States of America. Not only does that country undertake a meaningful public consultation before negotiating, but it releases all the negotiating text to a large representative panel and subjects the deals to an affirmative vote by Congress, which is also entitled to amend deals unless it waives its right. That is Parliament having a say. That is transparency. The European Union, with its mostly mixed agreements, needs ratification by member states. It is crucial that we accept these amendments, to make sure, in the words of the Brexiteers, that we take back control.

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My Lords, my perspective is that of a former negotiator. I do not think that a serious parliamentary procedure of the kind set out in the amendment for the approval of a mandate and the approval of the outcome of a negotiation damages one’s negotiating stance or limits one’s flexibility. I do not believe that at all. Having negotiated against Americans, I know that it greatly strengthens their hand to be able to say, “Here is the proof that I cannot give you what you want, because Congress would turn it down”. At the end of the day, when Congress turns one down—and it does—that is a very serious and effective deterrent to those disagreeing with the Americans in a negotiation. Speaking against unilateral disarmament in 1957, Aneurin Bevan talked of the dangers of sending the Foreign Secretary naked into the conference room. If we do not accept the amendment in the name of the noble Lord, Lord Stevenson of Balmacara, we will weaken the hand of British negotiators in the future.

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My Lords, I will intervene very briefly. The proposers of this amendment put forward their arguments so admirably that there is little more to say, particularly the noble Lord, Lord Hannay, who compared the role envisaged for this Parliament with the roles of other parliaments. As we all know, one of the key arguments in the referendum campaign was about taking back control. Here is an absolute instance of where Parliament ought to take on greater powers if it is to take back control over an important area of British policy. The other thing is that a great deal has been made by the Government, the Secretary of State for International Trade and the Prime Minister about the centrality of being able to do trade deals. The argument is put forward that one of the great reasons for being outside the EU is that it gives us the ability to do trade deals. They are going to be a central part of government activity once we have left the European Union. For those two reasons, it seems to me that the Minister will have to put forward some very strong arguments indeed if she is to convince me and perhaps some others that it is right for the Government to ignore the principle inherent in this amendment.

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My Lords, I thank the noble Lords, Lord Stevenson of Balmacara, Lord Purvis of Tweed and Lord Hannay of Chiswick, for tabling Amendments 12 and 35. They seek to ensure that Parliament has a significant role in free trade agreements and impose obligations on the Government and a scrutiny committee in relation to mandate-setting, transparency and approval of free trade agreements.

I fully understand the desire of noble Lords right across the House to ensure that there is strong and effective scrutiny of future trade agreements. It is an objective that the Government share. We have listened carefully to the views put forward in both Houses on this topic and last week published comprehensive proposals for enhanced scrutiny of future trade agreements in a Command Paper. This included confirmation that we would publish our outline approach to negotiations, including our objectives, accompanied by detailed economic analysis.

We further committed to publishing progress reports after each negotiating round and an annual trade report across all live negotiations. This draws on best practice internationally and will ensure a high degree of public transparency around our negotiations. In terms of Parliament’s role, we committed that we would work closely with a committee, or one in each House, to ensure that it could effectively scrutinise negotiations from start to finish, as well as setting out opportunities for scrutiny of FTAs throughout negotiations.

It is to this role that Amendments 12 and 35 apply. I will address these amendments and our proposal in this area in more detail. Amendment 12 would disapply CRaG to trade agreements and instead require that the agreement secured the approval of both Houses prior to being ratified, as well as requiring the approval of both Houses for negotiating mandates. Without wishing to revisit ground that was covered during Committee, it is worth reiterating that such a proposal goes to fundamental constitutional principles that underline the negotiation of international treaties. The negotiation and making of treaties, including international trade agreements, is a function of the Executive. This rule is not only the result of centuries of constitutional practice but also serves an important function. It enables the UK to speak clearly, with a single voice, as a unitary actor under international law. It ensures that partners know our views and are able to have faith that our position, as presented formally in negotiations, is the position of the United Kingdom.

Regarding the setting of mandates, we have considered international practice, and it is telling that there was none among those we considered in which the legislature had this role. That includes the EU, Canada, Australia and New Zealand. The noble Lord, Lord Bilimoria, referred to the United States. It is true that the United States legislature is different from ours. Congress does not vote on a mandate for each agreement but delegates authority for brokering trade agreements through a trade promotion authority. This includes setting out overall objectives for trade negotiations and legislation but not specifically for individual deals. The trade promotion authority then enables an expedited process for the consideration of trade deals whereby Congress has 30 days to consider the mandate for an individual country negotiation and can call hearings on them with the United States representative. They are therefore consulted in relation to the specific mandate for each country and during negotiations, as we plan to consult Parliament.

The noble Lord, Lord Hannay, said that there had been no consultation with Parliament, but there was a debate on 21 February to consult the Commons on four new free trade agreements we are considering. As he will understand, we are unable to negotiate right now while we are members of the EU. We will ensure that Parliament has the opportunity to scrutinise the outline approach to negotiations, and those would usually go to general debate in each House.

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I am most grateful to the Minister for that clarification. I think I heard her say that there will now be an opportunity to consider the objectives the Government are pursuing in their negotiations—when they are able to conduct them—with Australia, New Zealand and the United States. That is very helpful, but she seems to be making rather heavy weather about the word “mandate”. She gave us a very lengthy exposition of the royal prerogative, which is something that is behind us but is now exercised, of course, by the Government. Could she not possibly think a little more carefully about ways in which this objective could be achieved? She has said already, I think, that the Government intend to set out their objectives in the negotiation. Why can they not say that they would seek the view of both Houses of Parliament on their objectives, which would be a mandate for the negotiations? That is all that is being suggested.

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My Lords, the chosen words of the Government are “outline approach”. On the noble Lord’s point, the ability to have objectives in that outline approach and the ability for both Houses to debate and scrutinise those objectives is the key part of what we are discussing here. I agree with my noble friends Lord Hailsham and Lord Lansley, who talked about the critical issue here, which is consideration and discussion. That is absolutely what this Command Paper proposes—in the initial stage of the outline approach, to particularly scrutinise those objectives.

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The noble Lord, Lord Kerr, said very clearly that the power of having Parliament behind the Government enhances our negotiating position with the mandate that that gives. The exact example is: why have we been outgunned by the EU in the negotiations over the past two and two-thirds years? It is because it has had a clear mandate from 27 countries, whereas we have a divided country and a divided Parliament. That does not give a clear mandate whatsoever, which is all the more reason we need the amendment.

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My Lords, I do not want to go into the world of semantics, but the preferred term is “outline approach”. The objectives will be the objectives set, which will be scrutinised in the way in which we are proposing in both Houses. I agree totally with the noble Lord, Lord Kerr, that you want the ability to go back and say, “I do not think that will get through my executive board” or whoever because we want a clear set of objectives. This is what we intend to have, and an ability to say, “I do not think that will rub”. I also note that the International Trade Committee in the other place did not call for the power to approve the mandate.

We recognise the legitimate desire of this House to ensure that Parliament is able to shape our approach to negotiations. That is why we are committed to publishing the approach to negotiations. It will include those objectives. We will ensure that Parliament can scrutinise these. My noble friend Lord Tugendhat asked whether it is sufficient. We are trying to ensure enhanced scrutiny, so that is exactly what the Command Paper proposes. As I said, we expect that this would usually be through a general debate in each House.

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Does the Minister not accept that a Command Paper does not give the assurance to Parliament that provision in legislation does?

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My Lords, I will come to that point later, which relates to the question that the noble Lord, Lord Hannay of Chiswick, raised on whether these matters should be on the face of the Bill.

The essential point is this: this is the first time in 40 years that we have been negotiating a free trade agreement. We are keen to make sure that we do not lock ourselves into a process by having detailed elements on the face of the Bill which would then be difficult to change. What we want to do is to ensure that, through this Command Paper, the process of an enhanced scrutiny is clear, that there is an ability for Parliament to scrutinise at every stage and, furthermore, that there is a committee which will meet in confidence, which I think was something that was raised in this House as critically important. The noble Lord, Lord Hannay of Chiswick, raised this with reference to the ISC, pointing to the fact that sometimes confidential discussions need to be held in a room with a committee of experts. That is what we are proposing. We would also expect these outline approaches and objectives to be the subject of close dialogue with the relevant committee.

Once an agreement had been negotiated, the amendment would seek to disapply CRaG to FTAs, replacing it with approval by an amendable resolution of each House. The Government continue to believe that CRaG is the right process for Parliament to scrutinise FTAs. It provides Parliament with the opportunity to consider a treaty in detail and, where it has concerns, delay ratification and require the Government to put forward further arguments as to why the agreement should be ratified.

Alongside the CRAG process, we have said that we will ensure there was sufficient time for the committee to produce a detailed report—with input from experts, as appropriate—prior to beginning ratification procedures under CRaG. This would ensure that Parliament would have detailed independent information, in the form of that report, to inform and support that process. We have said that, if the committee felt that the agreement should be debated prior to ratification procedures commencing, the Government would seek to meet such requests subject to the constraints of parliamentary time.

I remind the House that we have also committed to giving regular updates to the committee, including ensuring, as I stated, that it has access to sensitive information that was not suitable for wider publication and that it can receive private briefings from negotiating teams. This would not only ensure the committee was well prepared to produce a detailed report on the agreement but would also give it the opportunity to provide feedback to the negotiating teams throughout negotiations.

Taking these measures as a whole, we have sought to maintain the balance between the Government’s role in negotiating FTAs and the important principle that Parliament should have the opportunity to scrutinise, in an enhanced way, those treaties effectively. In 2010, CRaG confirmed these respective roles after a process of consultation. I do not believe that it would be appropriate for this House to seek to undo these long-held constitutional principles, nor to remove the flexibility of either House to undertake scrutiny in the way it best sees fit.

These amendments would also impose a number of further requirements on both the Government and the scrutiny committee. They would require the Government to consult the devolved Administrations on the negotiating mandate and the final agreement. There is no question that the devolved Administrations must have a real and meaningful role in the development of our trade policy, and that is why, after discussions with the devolved Administrations, we will be putting in place a new ministerial forum for international trade. This will ensure that there is meaningful engagement with the devolved Administrations at all stages of a negotiation, including prior to developing the mandate and finalising the agreement.

We are also currently in discussions with the devolved Administrations on their role in future agreements, with a view to agreeing a new concordat on international trade. This would complement the existing memorandum of understanding on devolution that was agreed by the UK Government and the devolved Governments in 2012. The MoU, with its associated concordats, is the established and respected means of setting out the underlying principles that govern relations between the UK Government and the devolved Administrations. It is entirely appropriate that we use this mechanism to ensure there is strong and ongoing engagement with the devolved Governments.

The noble Lord, Lord Purvis, raised criticism of the level of involvement of the devolved Administrations, specifically regarding the Faroe Islands. I would like to give the noble Lord two assurances on this point. First, we acknowledge that we did not get this entirely right. We have reflected on the process for agreeing continuity agreements, and I can now confirm that it is our intention to share treaty texts with the DAs prior to their being signed. Secondly, our approach to the technical rollover of continuity agreements does not set a precedent for future trade agreements. These are fundamentally different things, and it is our clear intention to ensure that the DAs are engaged throughout the process of negotiations and are able to provide input at all stages, including prior to an agreement being signed.

The amendments would also require the committee to produce a sustainability impact assessment during the mandate-setting stage and a report on the final agreement, and to set the terms of the committee’s report and analysis in some detail. We agree that Parliament should have detailed analysis available to it when considering our negotiating objectives and the final agreement. That is why last week we published further details on the economic analysis that we will produce to accompany our outline approach and objectives. This analysis will cover many of the areas that this House has sought assurances on: for example, the impact on the environment, on individuals with protected characteristics and on countries not party to the agreement, including developing countries. That analysis will be subject to parliamentary scrutiny, usually in the form of a debate in both Houses.

That does not preclude a committee from undertaking its own impact assessments, but it would not be appropriate to dictate how that committee should undertake its work. Nor would it be appropriate to dictate how and when the committee should report on a proposed trade agreement, or what that report should contain. In bringing forward our proposals last week, we were clear that Parliament itself must shape the final scrutiny arrangements, including which committee or committees would be most appropriate to take on this scrutiny role. Once that committee is in place, it must have the flexibility and freedom to undertake its important scrutiny work in the way it sees fit, and to shape the processes by which Parliament plays a role in FTAs, including being able to respond to its experiences of scrutinising the first FTAs the UK will pursue after Brexit.

It would be highly unusual for a committee’s obligations to be set out in statute in the way this amendment would bring about. The Intelligence and Security Committee is a statutory committee but is unique by virtue of the material it handles. It would not be appropriate or, we feel, respectful of parliamentarians’ immense expertise and experience in the field of scrutiny to dictate the terms by which a committee will conduct its scrutiny.

I therefore hope the noble Lord will see that, although we share much common ground here, we cannot support these amendments. The proposals we brought forward last week strike the right balance between ensuring a strong and effective scrutiny role for Parliament and respecting our existing constitutional framework with regards to the making of international treaties. They set out clear commitments on the part of the Government to ensure effective scrutiny, while leaving sufficient flexibility for Parliament itself to shape the final arrangements. I hope that, in light of this, the noble Lord will feel able to withdraw his amendment.

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I will keep the Minister in suspense about what I am going to do, but not for long. I am grateful to all noble Lords who have contributed to this debate, which has been high level, and interesting in that some of the issues which perhaps have been a bit confused have been allowed to emerge in it.

I make it absolutely clear at the start that I do not believe that the amendment in my name and those of the other noble Lords who have joined me is a perfect solution to the problem we are facing. The noble Viscount, Lord Hailsham, is quite right to pick up a number of inconsistencies in that—noble Lords do not have to laugh that loud. But in my mitigation, may I say that it is not the job of the Opposition to draft for the Government the sort of detailed legislative framework which is being talked about here? This needs a lot of time, effort and attention which we are not able to bring to it.

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Does the noble Lord then accept that it is necessary to have some provision to deal with the situation that would arise under proposed new subsections (1) and (4), where the two Houses disagree?

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Yes—but I do not have it. I challenge the Minister: if she is asserting that we are as close as she says we are, would she agree to have further discussions and bring forward an amendment we could both support at Third Reading? I will give her time to seek inspiration. I am not confident that it will come in any palatable form but I make this offer genuinely. It is so important and the principles so germane to what we are doing that we should try to go the extra mile if we can.

Having said that, I think the Government are hiding behind a completely fantasised world in which everything is rolled back, as someone said, to the 19th century with the royal prerogative secure in its place. Somehow, Parliament would be consulted; it would be able to scrutinise and look at the outline approach. The clue is in the language: why outline an approach except to mandate? Why scrutinise, when what we are talking about is post hoc discussion in Committee, reports that will gather dust in libraries but not have any effect, and no chance to influence at a parliamentary level what is being decided.

There are issues of principle at stake—about who has the right to make the decisions that will literally affect the people of this country in a very material way. This is because of the way in which trade has moved away from being simply about goods. It now involves services and a whole range of socioeconomic issues that need to be addressed in the round, at the highest level, by those elected by the people they serve. We have a role, though not as an elected House. I say to the noble Viscount, Lord Hailsham, that, in any discussion about priority, of course it has to be the Commons that takes the final decision.

These proposals need to be worked through properly. I will pause for a second to allow the Minister to respond on whether she is prepared to take this up at Third Reading. I will talk until I have to sit down, but I will give way to her if she wishes to make a comment.

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While my noble friend is proposing to make a comment, it is highly important that the question of whether something should be discussed at Third Reading is a matter for this House. We have become rather accustomed to attempts on the part of Ministers to decline the opportunity of a Third Reading, but it is for this House to decide. I have no doubt that this particular, very important problem, which involves a delicate balance between the Executive on the one hand and Parliament’s two Houses on the other, should be handled with the utmost care. As the noble Lord, Lord Stevenson of Balmacara, noted, this is an issue about which there is already a bit of difficulty with the detail. We must try to get this right. I have no doubt that, if it is agreed at this stage, the House will allow it to be raised at Third Reading.

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My Lords, we have had very fruitful discussions and come quite a long way on this point. All I can say is that I would be happy to discuss it further but I cannot guarantee to come back at Third Reading with any changes. On that basis, the noble Lord will have to decide how he chooses to treat his amendment.

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The Minister is certainly very brave to take on a former Lord Chancellor in his pomp. I agree with the noble and learned Lord. The House has a very strong view about this and would like to see it back, but I am stuck with the procedural arrangements, as far as I understand them. I cannot amend the amendment before the House at the moment. I assume that the only way to do this would be to vote it through—if the House will agree to its view being tested—and hope that we can bring it back either through ping-pong or in some other way. I give way to the noble and learned Lord to see if he has inspiration of his own.

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Inspiration is not my line but there is no doubt at all that it is for the House to decide. The mere fact that the Minister has not been able to agree that the matter should come back does not seem to be a bar to the House deciding whether or not it is right. If the noble Lord tables a new amendment for Third Reading, the clerks will have a view but, ultimately, whether it should be considered is a decision for the House.

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I am grateful to the noble and learned Lord. I am getting inspiration in the form of a book from my noble friend.

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My noble friend could retable the amendment. He should, really.

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In short, the advice is confused, but I am going to think about it.

The noble Lord, Lord Tugendhat, set a very high test for the response today. He wanted a detailed response that would assure him that the Government had in mind significant changes that would meet some of the questions raised. I think the view of the House is that the response was not up to that level; therefore, I wish to test the opinion of the House.

Division 1

6 March 2019

Division on Amendment 12

Content: 215
Not Content: 168

Amendment 12 agreed.

View Details

Amendment 13

Moved by

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13: After Clause 5, insert the following new Clause—

“Customs union

It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union with the European Union.”

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My Lords, the purpose of the amendment is to give the other place a chance to consider whether the UK should seek to remain in a customs union with the EU. It is an option that we know is realistic and negotiable, as signalled by senior EU figures over recent weeks and months. It has demonstrable support among communities throughout the United Kingdom, this House and the Commons, as well as business and trade unions, and would go a very long way to providing a permanent solution for Northern Ireland.

A customs union with the EU would guarantee continued UK access to existing EU trade agreements without having to roll over after 29 March, although that does not seem to be going terribly well. It would enable the UK to have a say on the direction of future European trade negotiations, allowing us to push forward our principles of development and strong standards, and our values in tackling issues such as climate change. It would offer certainty and stability to British industry, thereby protecting jobs and allowing businesses to secure new trading opportunities. When coupled with a close single market relationship, it would create the conditions for our vital services economy—80% of our GDP—to flourish and grow. The other place narrowly rejected a customs union when it considered the Bill, in part because the Prime Minister promised to replicate the benefits in her deal. However, they are for negotiation and certainly not yet agreed.

If this House supports the amendment, we are doing our duty in allowing the Commons to think again about a really important issue. I beg to move.

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My Lords, there is no doubt that we on these Benches support the free economic movement of goods and people, which benefits all parts of the British economy and of our United Kingdom. The news today from the motor manufacturing industry is no surprise to those who have been following the assets leaving the United Kingdom and seen the people leaving the United Kingdom. There is a growing and depressing trend of businesses making a choice to move away, or at least to move some elements away, from the United Kingdom.

One of the principal reasons for that is the uncertainty about our trading relationship with our biggest market. The amendment, to which I have put my name, is better than the Government’s current position, or any position they are likely to take. That is why I support it. It is becoming a cliché that business needs certainty, but for many businesses it is now too late. The least this House can do, through the Bill, is to offer a higher level of certainty to businesses that there is some support for the UK remaining a member of a customs union.

I shall give one small example, of the many that could be offered, of why it is important to avoid the kind of disruption that leaving a customs union would bring about. This was highlighted in the Government’s recently published paper, Implications for Business and Trade of a No Deal Exit on 29 March 2019, and it illustrates what leaving a customs union would mean. There is a requirement for all businesses trading with the European Union to have an economic operator registration and identification number, in order to,

“complete the necessary customs documentation for goods they are importing”.

It is not simply desirable; it is necessary. As the Government themselves say,

“an EORI number registration is one of the most basic and straightforward parts of the process most businesses would need to undertake to prepare for no deal”.

Businesses will need that number on exit day. The government document goes on:

“As of February 2019 there had only been around 40,000 registrations for an EORI number, against an estimate of around 240,000 EU-only trading businesses”.

So we are one-sixth ready to leave.

The document highlights the fact that on an issue for which government communications have been strong, and the information to businesses about the fact that they needed to prepare has been clear, they have not done so—for a number of reasons. This illustrates the complexities required of the business community if we are outside a customs arrangement that would amount to a union. That is one reason, among many others, why we support the amendment.

We on these Benches reserve our right to campaign strongly for the UK to retain membership of the single market, as well as the customs union, of the European Union, and to say that if there is to be a withdrawal agreement it should be ratified by the people in a referendum. I hope that those on the Labour Benches are also moving faster in that direction. That debate is for another time. The debate on the movement of people is for the next day on Report, but for the moment we can give a signal to businesses across the country that the House of Lords, at least, is focused on providing a degree of certainty, even if the Government are not.

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My Lords, for this House it is déjà vu all over again. We voted for a customs union in the withdrawal Bill on 18 April, by an enormous majority of 223. The amendment then was in my name, and I made a speech of coruscating brilliance taking up several columns of Hansard, advancing five very strong arguments for the customs union. I refer the House to my speech on that occasion.

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My Lords, I shall try to be as brief as the noble Lord, Lord Kerr. I too tabled an amendment early in the Committee stage—the predecessor to the amendment that he so ably moved at that time. My feeling is that we have lost an opportunity to find a satisfactory compromise in the negotiations. The red lines laid down by the Prime Minister have stopped the possibility of getting a deal, including a customs union and possibly a single market—that would have avoided the difficulties with Northern Ireland and safeguarded the position of Gibraltar. More than anything, it would have looked after the manufacturing industries for which we in Wales worked so hard, with different parties in government, to secure over the past 30 years. I think that it was 52 Japanese companies that came to Wales, to sell to the European Union: they came for that reason. We now see the danger of Japanese companies and others being lost. Let us also look at the situation of the agricultural industry, and the need to ensure that we have that export market. For all those reasons, I hope that the amendment will be carried—by the same majority as last time.

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My Lords, I know I am in a small minority in your Lordships’ House on this one, but I would like briefly to put the other argument. According to the trade data published by the ONS in September 2018 the customs union, of which noble Lords would like us to remain a member, has not actually achieved any benefits for the UK during the 20 years for which we have been a member. The UK’s slowest-growing export trade since 1998 was goods exports to the EU.

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I just want to correct the noble Viscount. We have been a member of the customs union with the European Community since 1972—rather more than 20 years.

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I do not disagree with the noble Lord—but the point I was making is that in the period since 1998 goods exports to the EU have grown by only 0.2% per year, or 3.7% over those 20 years, reaching £164 billion in 2017. However, the UK’s goods exports to countries outside the EU customs union have grown in the same period by 3.3% a year—over 60% in total—to £175 billion. So the customs union has not been quite as marvellous for this country as noble Lords opposite suggest. I very much hope that the Government will stick to their policy of leaving on a basis whereby we will have our own independent trade policy, which will enable us to do more trade and enter into trade agreements with the economically faster-growing parts of the world.

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My Lords, I support the amendment. I hope we will send back a clear message to the other place that it needs to reconsider the importance of having a customs union—for our integrated supply chains, for the success of our manufacturing industry and, indeed, for peace in Northern Ireland and security on the Northern Ireland border. I am afraid that a number of colleagues in the other place do not seem to understand how international trade deals work. The idea that we would have rolled over all 40 trade deals that we had through the EU by now has been shown to be fanciful. I do not believe that it is safe, in the 21st century, to assume that operating as a medium-sized country outside a customs union will deliver us more and better trade than remaining within it.

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My Lords, I would like clarification from those who tabled this amendment: they refer to “a” customs union but other speakers have used the expression “the” customs union, as the noble Baroness, Lady Altmann, has. For the purposes of what I am going to say. I will assume that they mean remaining in the EU’s customs union and common commercial policy.

If that is the case, I understand the motivation for seeking a halfway house between leaving and remaining, which is what this implies. However, being in a customs union and being entirely subject to the EU’s common commercial policy, which is the overarching umbrella under which the customs union sits, is the worst of all options. That is why Switzerland and Norway—two countries with different arrangements in the EU—have chosen not to be part of the customs union. So while the idea may be attractive to protect trade in goods—and I admit that is important—given that we have an economy where trade in goods is a relatively small part of our exports, the sting of the common commercial policy, although it is encroaching into services, is primarily about trade in goods, not trade in services.

Being under the umbrella of the CCP without membership of the EU will mean that we will not be present in the European Council, which has the ultimate say over trade deals; we will not be present in the European Parliament or in regional parliaments. Noble Lords may remember the Canada-CETA story and the Parliament of Wallonia. We would not even have the status of the Parliament of Wallonia in future trade deals were we stay in the customs union. We would be a rule taker without a seat at any table. It would also render the previous amendment, which the House overwhelmingly passed, entirely redundant.

Turkey feels so disadvantaged by its current arrangement in the customs union—which, incidentally, was only agreed as a stepping stone towards full membership—that it is seeking to change those terms. However, I suspect that by now it is not seeking to change the terms because it accepts that it is not going into membership of the European Union.

The CCP is designed to serve the interests of member states—and so it should—but it is not designed to serve the interests of the fifth biggest economy in the world. Even those who feel that the United Kingdom will be much diminished if it leaves the EU must surely recognise that we are a more significant economic power than Turkey. So when the EU rightly seeks to advance its own interests, who will speak for UK interests? When the EU moves to use trade remedy laws—we have had a great deal of discussion during the passage of this Bill about trade remedies—to protect its own industries, and when that does not cohere with the United Kingdom’s interests, while we remain a member we can say something about it; we can indicate our preferences. If we are out of the EU but within the customs union, we would have no say over our interests being disadvantaged in the interests of any of the 27 member states which would be at the table.

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The situation the noble Baroness is describing will obtain if the Prime Minister’s deal goes through and we go into an interim transition period. It is certainly the situation that would obtain if we go into the backstop. We would be a rule taker. We would have no say in the making of the tariffs but we would have to apply them. We would not be consulted; we would be notified.

The amendment refers to “a” customs union. We have never attempted to work out what kind of customs union the EU would be prepared to agree with us. We have never done that because the Prime Minister’s rash red line ruled it out. We are now going into the worst possible case, if the deal goes through, of being absolutely a rule taker and absolutely not in the European Council, as correctly described by the noble Baroness. However, that is not what the amendment is asking for. It is asking for the negotiation of a real customs union between the United Kingdom and the European Union.

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The noble Lord has expressed sentiments that I have heard many times over the past three years from Mr Corbyn. In our various EU Select Committee meetings with the EU’s chief negotiator Mr Barnier, some of us raised the issue of whether there would be a possibility of negotiating a different sui generis, unique, bespoke customs union. We have been told in terms that that is not possible. I fear that concealing one’s intentions behind “a” customs union in the hope that if all else fails the EU will come around to providing us with a customs union presents the EU with a situation where it would have to consider how it could give each country it does any negotiation with in the future a bespoke customs union.

Anyone who knows anything about EU law—I accept that the noble Lord does, but I do too—will tell you that it will not uniformly make such an enormous exception in a law that has been there from the 1950s to accommodate the United Kingdom, particularly not at this late stage.

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I think what the noble Baroness is doing for the House is eruditely explaining the trade-offs that the country is facing as a result of the decision that was taken and the red lines that were imposed. What this House is talking about—and what the amendment seeks to achieve—is to protect the manufacturing success, jobs and the integrated supply chains that we have built up in this country on which so many people’s livelihoods depend, as well as protecting the border in Northern Ireland. That is entirely accepted. Indeed the House has already passed the amendment which would also require us to have some kind of regulatory alignment in order to better achieve the aims we are trying to set out. However, that does not mean that we should not have and do not need a customs union.

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The noble Baroness has just told your Lordships that the House was trying to protect manufacturing through being in “the” customs union. So we have on one side “the” customs union, which is the EU customs union, and on the other side we have a bespoke customs union. That in itself illustrates the problem with those who want to reverse where we are today.

I urge the House to look at the common commercial policy carefully, not only in the light of Articles 206 and 207 of the TFU, and to look at the jurisprudence. The jurisprudence on the part of the CJEU expounds the EU’s common commercial policy into foreign direct investment rules way beyond common commercial policy and into the EU’s external action policy. Some of us may have no problem with that, but the jurisprudence will continue while we are outside the room and not at the table. The jurisprudence will reflect the EU’s priorities, not ours. It would leave us in a vulnerable position going forward whether we were in “a” customs union or the bespoke customs union, which would potentially give us bargaining rights and some say in jurisprudence. Certainly that customs union would give us no rights at all.

I am not used to evoking Mr Blair in support of any cause—I suppose it will have the same impact here as it does elsewhere in the country—but even he has gone public to say that the worst of all worlds would be for us to stay in the customs union. If noble Lords want to support trade in goods they need to move either towards the withdrawal agreement and the FTA that is likely to come with it, or to move to simply remain in the EU. This amendment is an ambush to try to achieve that latter aim. I am pro that latter aim—I am pro remaining in the EU—but I can see, with 20-something days to go, that either we have to agree with the withdrawal agreement, as I voted the last time, or we have to go the other way, as I said in my previous speech, and ask the Prime Minister reconsider our position. A customs union is not going to do that and, on that basis, I will be voting with the Government.

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My Lords, at this hour, and given the debate, there will probably not be many Members of your Lordships’ House who are carefully weighing the arguments on either side, wanting to know what the Minister is going to say from the Dispatch Box that could just persuade them another way. We have been around this course many times and the arguments have not changed. The House knows the Government’s position on this: they have set it out many times. The people of the United Kingdom voted to leave the European Union and to take back control of their laws, borders and money, and have an independent trade policy. If we had a customs union, we would not get that. That is the central point against the amendment. On the other hand, we have a withdrawal agreement that allows us to have many of the benefits of our membership of the European Union without being members of it, and honours the referendum result.

I shall come to two points. The noble Lord, Lord Stevenson, when moving the amendment—which is worthy of further examination as to what it is seeking the Government to do—said that he wanted to give the other House an opportunity to think again on this issue. The noble Lord, Lord Kerr, in a brilliant, brief contribution—perhaps because we had heard his eloquence on this point in Committee—reminded the House that it voted in favour of his amendment. What they did not mention was that when it went to the other House, giving it an opportunity to think again, it rejected not only your Lordships’ amendment but the concept of a customs union put forward by Stephen Hammond when the Bill was at this stage in the other place. If the purpose is to give that House another opportunity to think again, perhaps it could shout down the Corridor, “We have already said it; did you not hear us the first time?”

Some noble Lords have pointed out that the uncertainty is damaging for business. I accept that. Uncertainty is always damaging for business. What business needs is certainty. However, right at the 11th hour, when we are within sight of and have an agreement, with an exit day that meets the criteria, the amendment proposes to require Her Majesty’s Government to reopen the whole negotiation process that has taken place over the past two years. Somehow that is supposed to help business. Not many businesses would sign up to that level of reopening negotiations and uncertainty. The presentation of the amendment presupposes that the outcome and benefits of a customs union are known. No—they would have to be negotiated. That would be the case unless, as the noble Baroness, Lady Falkner, rightly said, it actually related not to “a” but “the” customs union. In that case, the noble Lords’ option would be there immediately. That is the position of those who want to stay in the European Union, and we understand it.

The amendment therefore plunges us further back into uncertainty and more years of negotiation. The House has already given its view, not once but twice, on this issue. The other place does not need the chance to think again and I therefore urge noble Lords to vote against the amendment if it is pushed to a Division. Most importantly, I urge all Members in the other place not to listen to the amendment but to look at the withdrawal agreement before them next week and make sure that they vote for it, so that we leave the European Union on 29 March, as the British people wanted, but with a deal.

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Follow that wonderful peroration! The Minister has been practising, I am sure. I congratulate him on his brilliance in getting out of the Tugendhat trap. He obviously thought that he would be judged on whether he met the very high standards required of an answer in this place before going down to an ignominious defeat—as I hope will be the case. He did it by setting his own bar and then deciding whether he had passed it by inventing, as often happens in these debates, the things that I did not say and then arguing against them effectively. He ended up by appealing to the green Benches down the Corridor, where I think he will probably find a slightly better response than he will get today.

I am sorry that the Minister has to defend the indefensible. As he said, all the arguments have been exhausted. In response to two of the charges, yes, the other place has considered this matter before, but somebody once said, “When the facts change, I change my opinion. What do you do, sir?” On the question of uncertainty, surely it is better to have a certain target, even if it takes time, than the continuing uncertainty of whether there will be a target, and that is what this amendment tries to do.

Customs unions are not very widely found in the world. They are a very special thing, particularly when they involve equality of partners trading with each other. The majority of customs unions in the world involve single dominant economies forcing terms on others. This customs union is a particularly good example of the way in which mature democracies coming together can create good for all and we should be very chary of moving out of it.

The Minister challenged the wording of the amendment but it is incredibly inclusive and was drafted to make sure that it stood the test of time. It simply states:

“It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union”.

It does not imply staying in the EU. I think that we have had the debate. I wish to test the opinion of the House.

Division 2

6 March 2019

Division on Amendment 13

Content: 207
Not Content: 141

Amendment 13 agreed.

View Details

Amendment 14 not moved.

Amendment 15

Moved by

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15: After Clause 5, insert the following new Clause—

“Involvement of judicial systems in trade disputes

(1) A trade agreement is not eligible for signature or ratification by the United Kingdom unless the agreement includes the provision in subsection (2).(2) Subject to section (3), legal proceedings brought against the United Kingdom under investment protection provisions included in a trade agreement will be heard by the courts and tribunals system of the United Kingdom.(3) If in the view of the Secretary of State there is a substantive case for including an investor state dispute settlement chapter in a future free trade agreement, regulations to that effect must be laid before both Houses of Parliament in advance of the approval of the mandate for that free trade agreement; and such regulations must be approved by a resolution of each House of Parliament before the mandate may be approved.”

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My Lords, Amendment 15 deals with whether future trade agreements should have a chapter or separate part relating to investor-state dispute settlement systems. These complicated issues have a long history and have been a feature of trade agreements for many years. I think the UK has some 90 in place. As a country, we have not found much difficulty with them. Their main purpose was to ensure that in the case of arrangements for financing and operating the agreements set up under various free trade agreements and similar arrangements, those who put money at risk had a secure route to ensure that when issues outside their control or the control of one of the partners concerned caused difficulties, there was a chance to recoup the monies involved.

In that sense, these ISDS chapters and separate agreements have a place, but they have some downsides, which have not yet had as much discussion as they should have had. The arrangements have been used in the past to prevent social change in countries which have been subject to a free trade agreement where investors have thought that their investment was at risk. They have sued in courts which have been set up specifically for the purpose and which are not transparent or available for wider scrutiny, in order to recoup the investment involved or to change the policies that have been brought about.

For example, in a recent case in a western European country, an investor sued a town authority which had introduced a national minimum wage on the basis that the deal under which they had been brought in to support the scheme did not make provision for additional wages to be paid out and, as a result, the company was losing funds. That case was not a question of cash transfer, it was the cancellation of a policy, which I think many people would find a rather strange outcome.

These schemes have been the subject of recent debate and discussion, particularly around TTIP, but in particular about the fact that they were included in the agreement with Canada signed by the EU only a few years ago and now in the process of being ratified. However, it is being ratified at the expense of the ISDS chapter. In order to ameliorate that in some ways, the EU has set up a special judicial system under which these schemes can be considered. It may be that the future of ISDS measures, if they are included in schemes, lies in that sort of approach. As will be argued, I am sure, that is a very intensive system in terms of salaries, structures and procedures and it may not be worth the candle.

This is a probing amendment to get a better understanding of where the Government stand on these issues. In moving the amendment today, we are also reaching out to the Government to suggest that it is time we got more organised. It seems strange that, at quite a high level, a mature democracy such as the UK, with tried and trusted judicial systems, has to go to the trouble of setting up a parallel system to deal with this class of activity. Surely our existing legal systems should be capable of drawing these in and working with them. Even it were necessary to set up a separate arrangement, does it need to be a permanent system or could there be an alternative route? If the Government were interested in further discussion on that, we would make an offer to see if we could find an amendment that would work. I beg to move.

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I thank the noble Lord, Lord Stevenson of Balmacara, for tabling this amendment. I will make some statements about why we are much more supportive of ISDSs and these dispute resolutions. I draw noble Lords’ attention to the fact that, as this House is aware, the Trade Bill is not intended to cover future free trade agreements or the investment policies associated with them. As a result, Clause 2 allows the Government to change domestic law where necessary to ensure that these continuity agreements can operate in a UK context. To be clear, no powers in the Trade Bill will be used to implement investment protection provisions, because such provisions in trade agreements do not require legislation.

I want to comment about investment protection provisions more generally because I believe they have a place. According to UNCTAD, foreign direct investment in 2017 was around $30.8 trillion. There are around 3,000 international investment agreements, most of which include these sorts of provisions. They have been going for over 40 years and, to date, only 855 claims have ever been completed. This means that, for the vast majority of investment agreements, no claims have been made. Furthermore, states have won more claims than investors—37% to 28%—with the rest either settled or discontinued. This does not suggest a bias in favour of investors and, I hope, offers a bit of comfort.

I understand the concerns that have been raised in the past, but our assertion is that many have been overstated. Often, ISDS mechanisms are attacked because they seem able to force a Government to regulate in a particular way in the public interest. However, they do not infringe on that right to regulate. The right of Governments to regulate is protected in international law. I reassure the noble Lord that the threat of potential claims has never affected the UK Government’s legislative programmes. We have more than 90 agreements with these clauses, as the noble Lord said. We have never had a successful claim made against us.

The amendment would require investment disputes to be heard by UK courts or tribunals in all instances, which has the potential to undermine what we think has been quite an effective process—an internationally accepted framework which has successfully supported our investors worldwide. The noble Lord, Lord Stevenson, mentioned new concepts, including the multilateral trading court. I agree with him that that is just one of a number of concepts. Work is at an early stage internationally. Future negotiations should take place in a forum where states will be fully involved to ensure that the system delivers. I fully agree with the noble Lord on that. We support the objectives of ensuring fair outcomes of claims, high ethical standards for arbitrators and increased transparency, which is another of the points that have been held against the previous systems. We have pushed hard for greater transparency.

As the noble Lord is aware, we in the UK expect other countries to treat our businesses operating abroad as we treat their investors in the UK. Our concern is that if the amendment were passed, it would be likely that any future partners would also insist on reciprocal provisions. That would mean that any disputes brought by UK investors against a host state would be required to be heard in its national court. This has the potential to be to the disadvantage of our investors.

The amendment could also create a precedent by encouraging some existing bilateral investment treaty partners to seek amendments with the UK to ensure consistency. UK investors—I am sure we all agree—can make incredible contributions to the countries in which they invest, including in hospitals, schools and other infrastructure. Potentially, this amendment could lead to decisions by UK investors to not invest. These countries would therefore not benefit; indeed, our assertion is that countries could be damaged in investment terms. I also ask noble Lords to note that, while international arbitration has been a valuable tool for our investors—who, in some cases, have been subject to egregious treatment by local Governments—we have never been successfully sued.

Most of our future negotiating partners who favour the inclusion of investment protection and ISDS would expect this to include some form of dispute resolution through a means that the international community is trying to work out. Securing agreement on an alternative domestic process could lead to the UK having to accept an unwelcome trade-off.

Additionally, as I highlighted at the start of my comments, the Trade Bill is not intended to deal with future free trade agreements. Therefore, we do not propose coming back with any changes on this at Third Reading. I am very happy to have discussions with the noble Lord outside the Chamber, but in respect of the true aims of this Bill and the systems already in place to resolve those disputes, I ask him to withdraw the amendment.

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I am very grateful to the Minister for her full response. I look forward to reading it in Hansard. I will take her up on her offer of further discussions, but at this stage, I think the best thing is to withdraw the amendment.

Amendment 15 withdrawn.

Amendments 16 and 17 not moved.

Amendment 18

Moved by

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18: After Clause 5, insert the following new Clause—

“Geographical Indications

It shall be an objective of an appropriate authority to take all necessary steps to implement an international trade agreement which ensures mutual recognition of Geographical Indications in the United Kingdom and the European Union.”

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My Lords, I am a co-signatory to this amendment. I will be exceedingly brief because of the late hour, and also because I am extremely optimistic about the response I will get from the Minister. On 23 January, the Committee heard an extremely helpful response from her and since then she and I have exchanged correspondence, which has underlined the commitment of the Government to try to support the objectives that we were seeking on that occasion, and which are included in the proposed new clause here. It is purely declaratory; it strengthens rather than undermines the Bill, so I hope I can expect a very positive response.

Much as I am tempted, even at this late hour, to wax eloquent on the merits of Cornish clotted cream, pasties and sparkling wine—particularly as, this week, the people of Cornwall celebrate their great patron saint, St Piran—it is more appropriate that we move smartly on and get a very enthusiastic response from the Minister. I am sure that the Government will recognise that what we have sought to do here is to give form to the precise reassurances that she gave in Committee, and which she has subsequently repeated in her correspondence. I beg to move.

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My Lords, I wish to make a confession: when I was a Minister responsible for this area, I disobeyed the Government’s policy. Then, it was that we should be opposed to all these appellations and very determined in insisting that they were a restraint on trade and a disgrace. I thought that was nonsense. We have done great damage to our food industry by not defending so many of the things we have. Cheddar cheese, for example, can be manufactured almost anywhere in the world, but it is a Great British invention. The noble Lord, Lord Tyler, referred to what Cornwall has produced; in Suffolk, we now have a kind of local food industry which is really important. The fact that the food is made locally matters hugely, even if it is sold a long distance away.

This is much closer to what people want; it is much closer to what food ought to be like. It is much further from the kind of industrialised agriculture and food industry which, we must understand, is the “museum”—if I may use the expression of the ambassador from the United States. It is a museum of the kind of food we have produced, which has not had this very important distinction. Part of that distinction is the geographical identification. I know that my noble friend will be hugely supportive of this, but I thought I ought not to leave the opportunity to admit my past transgressions.

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My Lords, I thank the noble Lord, Lord Tyler, for tabling this amendment. I fear, however, that I may not be able to give it the wholehearted support that he wants, because it seeks to bind the UK into a negotiating position of agreeing reciprocal protection of all EU and UK geographical indications—GIs—as part of the future economic partnership agreement. I can, however, reassure this House, the noble Lord, Lord Tyler, and my confessional noble friend Lord Deben, that the Government fully recognise the importance of continuity in the protection of UK GIs. We have heard, loud and clear from all parts of the UK, the concerns of our producers. It remains a priority for us to secure this protection; we agree that it is very important to maintain it.

While we share the objective of continuing the protection of UK GIs, we do not support the amendment because its effect would be to restrict our negotiating position on the detail of the future agreement. It is important for the Government to retain options that give us the flexibility to conclude negotiations successfully, with both the EU and potential future partners, in line with UK interests. These negotiations will be to the great benefit of UK industry, not least the UK’s superb food and drink industry, by opening markets to our products.

As I hope I explained in the House on the last occasion, the protection of UK GIs in the EU has been confirmed as continuing in both negotiated-deal and no-deal scenarios. This has been confirmed by the European Commission and is consistent with our understanding. These GIs should continue to have the same level of protection.

For the future protection in the UK of both UK and other countries’ GIs through the withdrawal Act, we have agreed to establish our own GI scheme, which will be very similar to the EU scheme—a good scheme, to echo the point of my noble friend Lord Deben. This was confirmed in the White Paper. The scheme will provide a simple set of rules giving all 87 of our GIs continued protection in the UK when we leave the EU. The independent scheme will be established in both a no-deal and a negotiated-deal scenario. It will be open to new applications from both UK and non-UK applicants from day one, and it will fulfil our obligations under the WTO agreement on trade-related aspects of intellectual property.

In the rest of the world—again, as I confirmed last time—we are working with our global trading partners to transition the EU trade agreements, including ongoing obligations towards, and recognition of, our GIs.

While existing UK GIs will automatically remain protected whether we reach an agreement or not, existing EU GIs in the UK do not automatically benefit. As the House is aware, the withdrawal agreement with the EU means that all existing EU GIs will get the same level of protection as now until a future economic partnership agreement between the UK and the EU comes into force. The potential long-term protection of existing EU GIs would, therefore, not be determined then but as a result of the future economic partnership. This amendment, which proposes a reciprocal agreement, would, therefore, prejudice the negotiation. Furthermore, by requiring a reciprocal system of mutual recognition, it would tie the UK into accepting EU GIs created in the future. That would mean that the UK would be forced to protect successful EU GI applications without the ability to assess them ourselves.

As I emphasised earlier, not agreeing to a reciprocal arrangement would have no consequences for the protection in the EU of existing UK GIs, which should enjoy continued protection after exit regardless. In summary, therefore, we believe fundamentally in the importance of GIs, particularly for the agricultural community, but if this amendment passes it will remove the flexibility necessary for the UK to successfully negotiate new trade relationships outside the EU.

Additionally, I have assured noble Lords that the desire of UK GI producers for continuity of recognition and protection is fully acknowledged and is a key priority for us. In that context, the comments of the European Union grant us additional assurance that they will continue to be protected. On that basis and in the light of the negotiation of the future economic partnership, but with the absolute conviction that we are committed to UK GIs, I ask the noble Lord to withdraw this amendment.

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My Lords, I have listened with great interest to what the Minister has said. There is a simple trade-off here. She said that if we were to pursue the declaratory proposed new clause, it would reduce flexibility. The more flexibility there is in a case such as this, the less one can be sure and confident that the situation is going to continue to protect in the way that my noble friend Lord Stevenson—I think that I can call him that on this occasion—and I would like. Various producers in the UK want that continuity as a certain guarantee for the future. However, we will read with care in the Official Report what the Minister has said and see whether further action may be needed. In the meantime, I beg leave to withdraw the amendment.

Amendment 18 withdrawn.

Amendments 19 to 21 not moved.

Consideration on Report adjourned.