European Union (Withdrawal) Bill - Committee (6th Day)

Part of the debate – in the House of Lords at 5:00 pm on 12 March 2018.

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Photo of Lord Callanan Lord Callanan Minister of State (Department for Exiting the European Union) 5:00, 12 March 2018

I do not have the specific clause in front of me, but I am sure that is the case and I will write to the noble Viscount about it. I am not an expert on Erskine May and the precise legal definitions, but I will have a look at the matter towards which the noble Lord, Lord Lisvane, has pointed me.

The argument against a tax restriction on Clause 8, made by the noble Lord, Lord Lisvane, is altogether different. The Clause 8 power is predicated on the fact that when we leave the EU, without further action we may inadvertently end up in breach of certain international obligations which have been affected by our EU membership, as a number of noble Lords have pointed out was said in the other place by my honourable friend Robin Walker. It is possible that some of these obligations may be in the field of tariffs, although it is, of course, impossible to know the full picture until our future relationship with the EU has been negotiated. If Clause 8 had a tax restriction as the other main powers do, we may not have the capability to remedy these breaches in all circumstances. As I hope noble Lords will appreciate, we are committed to international relationships and a key part of that is ensuring that we are fully compliant with our international obligations.

A number of noble Lords have rightly asked me to be more specific, so I will illustrate that point with a concrete example. When we leave the EU, the UK will take up its independent seat at the World Trade Organization. As a WTO member, we will continue to be subject to WTO rules, notably the most-favoured nation principle. That principle is set out in Article 1 of the General Agreement on Tariffs and Trade in respect of the UK’s trade in goods, and Article 2 of the General Agreement on Trade in Services in respect of the UK’s trade in services.

Upon exiting the EU, the UK could find itself in breach of the MFN principle, because, in some cases, the conversion of EU law into UK domestic law could preserve favourable treatment of goods or services from the EU as compared with other WTO members. Under the MFN principle, that sort of favourable treatment is not allowed unless an appropriate regional trade agreement is in place, such as, potentially, the agreement on the UK’s future relationship with the EU. Therefore, the power in Clause 8 of the Bill allows Ministers to deal with any breaches of the MFN principle and other WTO rules. It allows Ministers to take steps to remedy such a breach until two years after exit day. Of course, it is subject to the sunset clause. The Government have said that we are focused on getting a good outcome, one that works for the people and businesses of the UK and for those in the EU. In the light of our successful phase 1 agreement—