My Lords, it is a pleasure to follow the noble Baroness. I refer to my interests in the register and to one that is not in it: I am immensely proud to be half-Danish, and that colours my approach to the whole debate on our membership and how we leave the European Union.
I welcome the White Paper and the direction of travel on which it embarks. In considering how we are to leave the European Union, I would like the House to reflect on the importance of the food and farming sectors to the UK economy. The value of the food and drink industry to the UK economy is £112 billion, and it employs about 4 million people. Food and drink exports are worth about £22 billion per annum, and it is in fact the main manufacturing sector. Our main exports are whisky, salmon and chocolate. Some 70% of the UK’s agri-food imports came from the EU in 2017.
In the scenario of a free trade agreement with the EU post Brexit, the implications for the food and drink sector are potentially extremely severe. It could lead to a potential drop of 26% in exports and 29% in imports, with a 3% projected increase in prices. In the scenario of our continued membership or rejoining of the European Economic Area, this could see a 7% drop in exports and a 7% drop in imports, with only a 1% increase in prices. If we were to crash out on World Trade Organization rules, this would necessitate the agreeing of rules of origin, nomenclatures and descriptions of products for every item, which would impose huge regulatory burdens on the businesses concerned. All those advocating that we leave on World Trade Organization rules and most-favoured-nation clauses must be aware that rules of origin checks may be needed to check precisely third-country imports into our exports to ensure that the UK would not be taking advantage of preferential tariffs. So, potentially, the consequences of leaving for the food, farming and drink sector are higher prices and less consumer choice.
Why would we prefer, and why have the Government set out, a facilitated customs arrangement with access to a single market? Goods between the UK and the EU would avoid a hard border in Northern Ireland, and it would protect integrated supply chains and “just in time” processes. It would include the facilitated customs arrangement, which would remove customs checks and controls between both partners. However, I will press the Government and the Minister further this evening for what is not currently in the White Paper.
The food industry is asking for labelling: we need consistent food labelling so that we can continue to maintain the same stock-keeping units in the UK and Ireland rather than separate parallel listings. We need to have safeguards for EU staff, protecting the rights of EU citizens who currently live and work in Britain. We need to have access to priority markets: we must be aware that if there is no deal on the day we leave the EU, the UK will become a third country and will lose access to all country markets—even those with whom we currently trade—through the EU free trade deals, which includes our Commonwealth partners. There is currently no mention of a continuing role within the UK for the European Food Safety Authority, yet we must have consistent food laws so that EU products can remain on sale in the UK and vice versa. Will the Minister confirm this evening that we intend to maintain a relationship with the European Food Safety Authority?
We must be aware of the length of time needed to negotiate new trade deals. The deal between the EU and Canada took seven years, and it included a partial agreement on services, which obviously was welcome. We must also be aware that the Irish border issue is now agreed. It is not just in the Belfast agreement but has been written into the European Union (Withdrawal) Act by way of a government amendment. Many noble Lords speaking in the House this evening seem to be in denial of that. We must also be mindful of the fact that movement of animals and food products across the Irish border cannot be monitored by technology.
There has been criticism of the common rulebook, but why is it important? We always need rules. In the terms of the White Paper, the common rulebook would allow equivalence in certain specified areas and the maintenance of food standards, and would protect against substandard food imports. In other areas it will be possible to diverge and divert from agreed regulatory standards. In the past, rules at EU level were always criticised, which is probably why many farmers in North Yorkshire voted to leave the European Union. But most of the gold-plating—making the rules more demanding—was done through statutory instruments under the implementing legislation in this country, piling obligations on our farmers and food producers that were never demanded in other EU countries.
As other noble Lords have said this evening, we need to spell out what is happening with services.
I will conclude on the impact of currency. Today, sterling has recovered slightly from a four-month low reached last Thursday. The day after the referendum, the pound fell about 14% and recovered by 4%. The additional cost of these sterling fluctuations to one food manufacturer alone has been £300 million in the last three years, and at the same time, food inflation has swung from a low almost 10 years ago to an historic high of 5.1% in December 2017.
My conclusion is that realistically, to avoid a huge shock to the economy, the Government should seek continued membership of the EEA or should apply to join EFTA. To crash out of the EU without the deal would have lasting and damaging consequences for the UK and the EU. It simply cannot be allowed to happen.