The Minister of State, Department for Exiting the European Union (Baroness Anelay of St Johns) (Con)
My Lords, it is indeed a privilege to respond to the debate today on the Select Committee’s report, Brexit: Trade in Goods, and to put on record my appreciation for the work of the External Affairs Sub-Committee. I commend my noble friend Lady Verma on her expert chairing of the committee.
The report provides us with a detailed, instructive and expert analysis of the key opportunities and issues concerning trade in goods which arise from the United Kingdom’s exit from the EU. I am keenly aware of the value which the Select Committee’s experience brings to the work of this Government and we value the rigour of its scrutiny. The committee notes that:
“Minimising disruption to trade between the UK and the EU-27 after Brexit is crucial to the UK’s future prosperity”.
That objective is at the heart of our negotiations to leave the EU.
My predecessor, my noble friend Lord Bridges, appeared before the committee, as did my noble friend Lord Price from the Department for International Trade. As was referred to earlier, the Secretary of State for Exiting the European Union gave evidence to the EU Committee last week, where he restated his commitment for our department to be transparent in our dealings with Parliament. Therefore, I understand the frustrations expressed by some noble Lords today, who said that a response to this report should be before the House. Of course, as a Minister, I would prefer to present that to the House but purdah is a serious matter; it is not an excuse. It goes to the heart of what happens in government and governance as a general election is called. I feel frustrated that I have not been able to present the result of our discussions but they have been ongoing. I have seen a draft response and give a commitment to the House to get that draft into final form as soon as is humanly possible, because that is the right thing to do. I appreciate that it is not only my department that has been in this position—the House heard similar reasons being given yesterday. It is not satisfactory but it is the real world.
We have made it clear that we will pursue a deep and special partnership with the EU which encompasses both economic and security co-operation. That includes caring not only about business and its success but about consumers. If they do not feel secure, businesses do not succeed either. The noble Baroness, Lady Hayter, was absolutely right to draw attention to the importance of consumers.
As part of our partnership, we will pursue a bold and ambitious free trade agreement that is of greater scope and ambition than any such existing agreement. We want the UK to have the greatest possible tariff-free and barrier-free trade in goods and services with our European neighbours and for that cross-border trade to be as frictionless as possible. We realise—and the committee is right to point out—that there are different ways of creating friction, and we are trying to reduce as many of those as possible.
I will now address some of the main issues raised today as they relate to the committee’s excellent report. As the report rightly points out, the EU is an important trading partner in goods for the UK. However, this is a relationship from which both parties benefit. It sometimes seems to have escaped the media’s attention that the EU benefits, as do we. This is not just a one-sided negotiation. The EU is the UK’s largest export market, but the UK is also the largest goods export market for the EU 27 taken as a whole.
The UK is a major export market for important sectors of the EU economy, including in manufactured and other goods, as noble Lords have said, such as automotives, energy, food and drink, chemicals, pharmaceuticals and agriculture. These sectors employ millions of people across Europe. It is therefore in the interests of both the EU and the UK for our deeply integrated trade and economic relationship to be maintained after we leave the EU.
The discussions that started last month have been and continue to be constructive. A little bit of fun has been made in the press about the fact that my right honourable friend the Secretary of State was in Brussels for perhaps less time than usual, and how that may matter—but no: it can be usual in G20 and G7 discussions, where there is the same brief period at the beginning. I will not say that he is the Terminator, but just watch him—he will be back.
My noble friend Lady Verma and other noble Lords were absolutely right to raise the importance of what progress we have made in consulting business. There has been more of a public aspect to this; 10 days ago we held an event at Chevening, when 30 or 35 leaders of a range of businesses, including automotives, were there to give us the benefit of their wisdom—and, my goodness me, they did. It was a superb event, very constructive and very much something from which we have learned, and we can now build on that. In addition, before I got to the department, my colleagues had carried out over 250 engagements with people across business. That is just my department—it is happening in other departments, too. We intend to continue that with round tables and a variety of ways of engaging with people so that their time is well used when we listen and learn from them.
I was asked about the research and analysis we have been doing. Parliament of course agreed that we should not publish anything that would undermine the Government’s ability to negotiate the best deal for Britain. However, with respect to the fact that we have been looking in detail at more than 50 sectors, as well as areas of cross-cutting regulations and looking at the economy, I can confirm that we will shortly publish that list of the sectors that have been examined.
Thinking of the noble Baroness, Lady Smith of Newnham, I say that we are also carrying out a programme of rigorous and extensive analytical work to inform our understanding of how exiting the EU will affect the UK’s domestic policies and framework. Of course, it is not standard practice to provide an ongoing commentary on internal analytical work. However, as she will see as we publish position papers and carry out negotiations, we will be as transparent as we can be. We have also undertaken—and will fulfil the undertaking—to provide Parliament with information as soon as it reaches the European Parliament. In other words, we will not let the European Parliament get there first while we lag behind.
Of course, noble Lords were right to talk about non-tariff barriers to trade, which was a vital part of this report. I found it particularly practical in the analysis carried out by the committee. Whether on regulatory standards or regulatory co-operation, clearly I agree with the committee’s report, which notes that non-tariff barriers can pose as significant or even greater a barrier as tariffs, to trade in goods. We are therefore clear that we of course want to see zero tariffs on trade in goods as far as is possible and to minimise the regulatory and market access barriers for both goods and services, and we recognise the importance of minimising non-tariff barriers to trade.
There are existing precedents for how this can be done. For example, on non-tariff barriers, many countries have authorised economic operator schemes—I know that the committee took evidence on this—which means that exporters with supply chains that are demonstrably secure are subject to fewer and less stringent checks at the border. That is just one existing precedent. Clearly, as noble Lords will have realised during the debate, the exact form of our customs arrangement with the EU is subject to our negotiation.
My noble friend Lady Verma talked in particular about regulatory co-operation. We are certainly advancing with our plans to put forward our ideas on how we can have a bespoke deal with the EU on regulatory co-operation, which would indeed include mechanisms for dispute resolution.
To go more broadly, there were concerns about timing and about how we could perhaps fail to get on with the work of making agreements with third parties outside the European Union. We will stick absolutely to the rules of membership of the EU. We gave that undertaking—we will keep it. But in complying with our EU law obligations, including the duty of sincere co-operation, we can still do much that is technical and preparatory in discussions with others. That is what the DIT has been doing. It has had a number of trade working groups or discussions, including, for example, with the Gulf Cooperation Council and with Korea.
My noble friend Lady Verma quite rightly asked whether we are convinced that the resources and the expertise are enough at DExEU and the DIT to be able to carry this business forward. My noble friend Lady Sugg answered questions on the DIT at Question Time earlier today. She explained that at the DIT nearly 1,500 highly qualified members of its staff are now overseas. They are based in 109 countries, they deliver on highly ambitious targets for export investment, and they are building up on that expertise.
In considering, too, the impact of leaving the European Union on the UK as a whole, I listened very carefully indeed to the noble Baronesses, Lady Quin and Lady Armstrong of Hill Top, who made the crucial point that we have to focus not only on the devolved Administrations but on the regions. So much has been said that was, rightly, concerned about what role the devolved Administrations will play. However, it is just as crucial that we look at all the manufacturing industries around our country—we have a proud history there and have gone through some difficult challenges. That is being done—it is already taking place—but we will focus more on it this summer. For example, the Minister in the other place, my honourable friend Steve Baker, will in particular be doing that this summer, and his priority is in fact the north-east.
It is right that the industrial strategy we pursue should improve living standards for all, not just for some. On a different issue, although it is important for the living standards of those who work in our industries, my noble friends Lord Leigh of Hurley and Lady Byford both raised the importance of the availability of overseas workers for agriculture. I try to avoid using the term “migrant workers” because I appreciate that it can be offensive to our friends and colleagues across Europe. This morning I had a very helpful conversation with the new Romanian Minister for Europe about this very issue. I reassured him about how seriously we take the contribution by workers from overseas to all our industries here, and I particularly mentioned seasonal workers.
I do not have time to go into great detail now but I can say that just last month, on 28 June, the Minister in this House, my noble friend Lord Gardiner, answered questions about foreign workers in agriculture and made it clear that we are having formal discussions on that subject. These matters have been discussed by the Secretary of State and Minister of State in Defra and key stakeholders over recent weeks. My noble friend said that the Government will commission advice from the Migration Advisory Committee and that, working with business and communities, we will develop a future migration system that works for all and meets the labour market in this sector. I am very much reminded that we had agreements with Romania on seasonal working before we entered the European Union. We can make these things work with good will, and we have good will.
I was asked by the noble Baroness, Lady Hayter, in particular, to make the period of implementation a priority when considering how to frame our negotiations. She was right to ask that, as were other noble Lords around the House who raised it. I mention, for example, my noble friends Lady Verma, Lord Livingston and Lord Horam, the noble Lord, Lord Hain, and the noble Baroness, Lady Smith of Newnham. Others also raised it but those noble Lords particularly focused on it. We could talk about semantics and about what we mean by “transition” or “implementation”. When I was at Chevening listening to the business leaders, I realised that they too applied different meanings to the same words. Therefore, as a rather practical person, in my breakout group with them I wanted to find out what it meant for their businesses and how they could best operate. We can learn from that, and certainly we will consider what an implementation agreement might look like.
We have been clear about the timing. We are more optimistic than some in this House, more determined than perhaps some in this House realise, and even more energetic than some might hope we are. We are clear that we want to reach an agreement about our future partnership by the time the two-year Article 50 process has concluded. That is what you should do when going into a negotiation. You should go in with drive and determination, and you do that because it is the right thing to do.
As many noble Lords have said, we start from a unique position—that of close regulatory alignment, trust in the institutions, and a spirit of co-operation that stretches back decades. As I reached a milestone just yesterday, I thought about how much of my life in politics had been taken up in discussing our relationship with the European Union, and much of it has been very positive. I even arranged for a partnership with the CDU in one part of Germany. Therefore, I have seen it from the inside and I know that it can work. However, when I arranged that partnership we were not in the EU, so partnership can work even when you are not in the EU.
We are confident that we can reach an agreement in the period set out in the treaty but we believe that, from that moment on, a phased period of implementation—in which the UK, the EU institutions and member states prepare for the new relationship that will exist between us—will be in our mutual interest. That is what it is about: it is about getting a nexus around that mutual interest. An implementation period will help investors, businesses and citizens in both the UK and the EU to adjust to the new arrangements in a smooth and orderly way, and it will help to minimise any unnecessary disruption. It is in nobody’s interests for there to be disruption in Europe or here. We are all looking for a constructive response.
I know that some think that the implementation period might mean some kind of membership of the EEA. At this stage, I simply say that the reason we fall out of the EEA structurally is that, when we leave the European Union, we have to fall outside the geographic scope of that agreement. The geographic scope of the EEA agreement is the EU and a number of other countries which have joined up separately. We came into scope because it was part of the EU; we did not enter it separately. However, I have listened to what noble Lords have said. We are trying to achieve the same thing: we want to find an implementation period and interim agreements from the negotiations that will help this country to succeed and achieve prosperity for all.
I was specifically asked by my noble friend Lady Verma about progress on the new customs system. We are undertaking an extensive consultation to understand the needs of service users to ensure that the new system and linked processes are built in accordance with users’ needs. I reassure my noble friend that for the migration phase HMRC is planning for the two systems to operate in tandem at the border. That will provide extra contingency, if it is ever needed, to ensure that the UK has a robust border declarations service. HMRC is clear that CDS is on track for delivery by January 2019.
Perhaps I may refer briefly to the point made by the noble Earl, Lord Sandwich, about the impact on the least developed countries. He quoted my right honourable friend Liam Fox at the Department for International Trade, who is supported in his objective across government. Priti Patel, the Secretary of State at DfID, made it clear that building a more prosperous world and supporting our long-term economic security is firmly in our interests. She said:
“Helping developing countries harness the formidable power of trade means we are not only creating trading partners of the future for UK businesses, but supporting jobs at home too”.
It is the right thing to do.
This has been a wide-ranging and important debate. I look forward to others of this nature as we progress through the negotiating period. I am particularly grateful to my noble friend Lord Howell of Guildford for reminding us that in the modern world we have to see interconnectivity not just in business but worldwide. He was right about business: goods and services are intertwined, and we remember that as we plan for our future.