As the noble Lord, Lord Howell of Guildford, pointed out at the start of our debate, it is odd that we come to the EU so late in our debate, given that it is so central to the country’s position.
I pay tribute to the noble Baroness, Lady Anelay, and welcome her back to her bed of nails. I also pay tribute to her predecessor, who filled the gap between Anelay and Anelay with great distinction—bridged the gap, I should say.
There are many odd features to the situation in which we find ourselves. It is very odd to start a negotiation in which you are demandeur by laying down the things that you will not accept. You are demandeur, but you say from the word go, “We will not have the ECJ. We will not have free movement. We will not have this customs union. We will not have the single market. We will have no EU law and no EU regulation”. That is a very odd way to begin. It is very odd to conclude, without any parliamentary or public consultation because the election was not about Brexit—Brexit was the excuse and not the subject of the debate in the election—that the definition of Brexit which the referendum called for is the one based on all the things with which we will have no truck in future.
It is even odder to do so, when you think of it, given that Mr Johnson in the referendum campaign told us repeatedly that no one was even talking about leaving the single market. Therefore, if the electorate were absolutely clear that we should leave the single market, they must not have believed Mr Johnson. That is unthinkable, surely. It is odd to start a negotiation by alienating the others through insulting them for the concerns they have expressed about President Trump, not going to their meetings and accusing them of intervening in our election. That is resented across the channel, I have to tell noble Lords. It is resented and I cannot remember a time when this country was so isolated and impotent in Brussels as it is now. I say that very seriously.
It is odd, if we want a deep and special relationship, not to have proposed one. A year after the referendum, we have still put forward no plan, suggestion, outline or proposal for how one might in future organise co-operation on foreign affairs, security, anti-terrorism, the environment, energy and a range of subjects such as research and universities where we hope the Prime Minister means what she says. If she means what she says, it would be very good to prove it. Where is our proposal? The treaty requires the divorce lawyers to look, before they finish, at the framework for the future relationship. Where is our draft framework? If we were to put forward, positively, a framework for the future relationship, that would change the atmosphere of the negotiation.
It is also odd to put ideology above pragmatism, and to pay so little attention to people who are directly affected. Business warns that leaving the customs union would seriously damage manufacturing, particularly manufacturing that relies on complex, just-in-time supply chains. Take cars: the motor industry employs about 800,000 people now, directly or indirectly, and it gets 60% of its components from elsewhere in the EU. A hard Brexit, with an exit from the customs union—it is not the tariffs but the customs union’s duties and bureaucracy which really hit just-in-time component supply—would render probably more than 50% of British motor car production unprofitable. That is a very alarming thought, and business is saying this to government. I am not yet convinced that government is listening.
Business and the City warn of the hit to the service industries, particularly finance and the fast-growing digital economy if we leave the single market. Here I say, with great regret, to the noble Lord, Lord Lamont, that for the first time I have detected a hint of naivety in him. There is a difference between selling to the single market and being a member of it. When we can no longer craft the rules, I have to tell the noble Lord, they may over time come to be skewed against us—that is just possible. If we could no longer guarantee free access to our 500 million market, our business and foreign investors will look for a host country which can, and some are already doing that. Of course, the gracious Speech talks of forging new trade relationships around the world, and maybe over time we will. However, the analysis that the Treasury is not allowed to publish shows that the economic benefits of future FTAs with the EU and third countries would be considerable, but considerably less than the cost of quitting the customs union. We lose on the deal. The NIESR estimates that the numbers are 5% on the upside and 22% on the downside.
On farming, I heard the noble Lord, Lord Jopling. I worry about the quadruple whammy for the farmer: less migrant labour, lower subsidy, restrictions on sales to their biggest export market—the European Union—and, possibly, cheaper imports as quotas are abolished. He is right to warn us. Mr Fox’s new friends around the world will be targeting the British food market as they seek reciprocal concessions from us. Remember that trade negotiation—the noble Lord, Lord Mandelson, knows it better than anybody else—is a mercantilist arm-wrestling. It is a rough, tough game. Read the Trump inaugural speech.
But does it all have to be like that? I do not think so. On the single market, it is not that I am convinced by the Norway option, which used to be Mr Farage’s option, and which was so well explained by my noble and learned friend Lord Brown of Eaton-under-Heywood in our debate this afternoon. When we leave the EU, the provisions of the EEA treaty will no longer apply to our territory, so getting into the EEA would require us to go around to the front door, which is EFTA. We would have to apply to join it, and I am not sure that its present membership would be all that keen to see us. One thinks of rowing boats and elephants. However, my noble and learned friend Lord Brown is on to a very good point. I am not sure that membership of the EEA is the answer, but we could be proposing something similar right now—we could be making a proposal. We should be making a positive proposal. As for a customs union with the EU, which is the key to avoiding a hard border in Ireland, Norway does not have one, while Turkey does but it does not extend to agriculture. We could, however, try proposing one that did apply to agriculture, and we could do that right now.
The best way to maintain growth and jobs and to lessen the economic heat is to put our pride in our pocket, stop drawing self-harming red lines, change our tone, try diplomacy and seek to stay in or closely alongside the single market and the customs union, which successive UK Governments, whose members include many in this House, have worked so hard down the years to build. That is why I sympathise with all three amendments but I particularly welcome the one proposed by the noble Lord, Lord Adonis.
I apologise, but I would like to add one 30-second point concerning diplomacy in these islands. In December, the Scottish Government, as the noble Baroness knows well, put forward their White Paper making a strong case for the United Kingdom staying in the single market. On