Trade Bill

Debate between Baroness Kramer and Baroness McIntosh of Pickering

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 30th January 2019 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I add my congratulations to the noble Lord, Lord McNicol, on taking his place and on his performance today. Given his history, I am sure that negotiating procedures in your Lordships’ House will be less turbulent than in other places where he has worked. I thank both him and the noble Lord, Lord Purvis, for giving us the opportunity to, in my case, put questions to the Minister and probe the issue.

In particular, what will be the position in the interim period of our leaving the European Union? My noble friend the Minister pointed out in our debate— on Monday, I think—that there would be a period for these agreements, having been initialled, to be signed and approved by the relevant Parliaments. My understanding is that if we leave under World Trade Organization rules, agreements in this interim period will be on the basis of non-discrimination. So, if we, as a third country—my noble friend Lord Lansley correctly identified that we would be—chose to extend agreements to current European Union members and said, as many noble Lords have suggested, that we wished to impose zero tariffs, those agreements would have to be extended on a reciprocal, non-discriminatory basis. Is my understanding correct? In an interim period of what might be one or two years before such agreements are rolled over, whatever our preference, whatever we offered to our existing European partners would have to be offered to every other country with which we wished to trade, on the basis of non-discrimination. I do not think we have grasped that point. Obviously, it would be helpful to understand the implications for our trading arrangements.

There is deep concern among the farming community that tariffs imposed could be as high as 40% for certain products and 60% for lamb, at a time when we are exporting more meat than we ever have, historically. That would hit our producers particularly hard. It is causing real hardship in the hills because many of our farmers do not know whether to produce lamb; the supply of lamb to the home market could dry up. We would therefore import more lamb, beef and pork at a time when we should be increasing our exports there. I simply want to take this opportunity to seek answers to those queries from my noble friend.

[Baroness Kramer (LD)]

My Lords, I have questions that arise from the previous speeches which I hope the Minister will be able to help me with. Perhaps I may say to the noble Baroness, Lady McIntosh, that I am sure she recognises that, while in a no-deal scenario, for example, we could make the decision that we would reduce our tariffs to zero, she is absolutely right that we could not make them zero only for the European Union; that would also have to be done for everyone else under WTO rules, but there is no requirement for us to be treated in a reciprocal way. In fact, we would be very unlikely to be treated in a reciprocal way, because if the European Union was to look at us and say, “We will be reciprocal and offer zero tariffs to the UK”, it would then be required under its various trade agreements to offer a whole raft of countries across the globe zero tariffs, thus convoluting its entire trading system. There is an imbalance in that argument which sometimes does not quite get heard.

I cannot think of a worse situation for our farmers than finding that they have high tariffs on their exports but no tariffs to protect them from imports flowing in. Some people have said that that is ideal because it means that food costs would fall, but they would do so at the cost of wrecking, frankly, a swathe of one of our much-loved industries.

I want to pick up on rules of origin in a slightly different way, and I will refer to the point that the noble Lord, Lord Lansley, has been making. When the Minister was kind enough to invite us around the table to ask questions ahead of Second Reading, I did try to press on some issues around rules of origin. As I understand it, for these rollover agreements, the UK would turn to the country with which it wishes to keep the trade agreement and say, “We would like you to treat goods made in the European Union as British content in the way you do now, in order for us to have zero tariffs when we export the goods”. I shall take a simple example, “When we export this car, we would like you to treat the European content in it basically as local content for the purposes of a zero tariff”. The officials were quite clear that the UK could do that unilaterally and that we would not need the permission of the European Union.

I then raised this with a number of people outside this environment who said, “You must be joking. Which country is going to infuriate the European Union by allowing its goods to be treated as local content for the UK unless there is some form of balancing agreement with the European Union on this issue?” In other words, the thought that you can cut the European Union out of this discussion and simply do it on a bilateral basis is incredibly fanciful. For most countries, keeping a good trading relationship with the European Union is, frankly, far more significant than having a trading relationship and rolling over the existing deals with the UK. The European Union is going to have to be engaged in some way or allow itself tacitly to be used in this way.

The Government are currently negotiating these deals, and we understand that they are currently in the process of establishing the rollover agreements. Can they tell us whether they have an understanding with the European Union that will indeed permit EU content to be treated as local content for the purposes of these trade deals, or will they be having some stern discussions with the various countries with whom we wish to have these ongoing continuity bilateral arrangements? It would be very interesting to know.

My understanding is that when South Korea was first approached about treating EU content as local content for goods whose final point of export is the UK, its answer was, “That is interesting and we think that it would be a fair thing to do, but of course we would expect goods originating in China and forming part of the content of South Korean goods to be given the same kind of benefit. We think that there is an opportunity to make sure that there is an equal playing field in this area, because negotiating with the UK is not the same as negotiating with the EU. We are now in different circumstances”. I wonder how many countries aside from South Korea which are involved in these rollover agreements have come back to the UK—I can see that Israel would not because it is not particularly in that situation—saying that they wish to have the new flexibility that we are requesting reflected in a change in the flexibility that they are being offered. It would be helpful if the Government could let us know if that is happening.