Trade Bill - Second Reading

Part of the debate – in the House of Lords at 7:41 pm on 11th September 2018.

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Photo of Viscount Trenchard Viscount Trenchard Conservative 7:41 pm, 11th September 2018

My Lords, I thank the Minister for her clear and well-presented introduction to this debate. I also add my congratulations to my noble friend Lady Meyer on her most interesting and moving maiden speech. Like her, I have also lived and worked in Brussels and, like her, my feelings about the European Union were affected by my experience. I also strongly support what my noble friends Lord Risby and Lord Tugendhat said about the crucial need to protect and restore as far as possible the Foreign Office budget.

Last week, we had an opportunity to debate the customs Bill, which, as a money Bill, did not provide your Lordships with an opportunity to try to improve it. Your Lordships strongly rejected the regret Motion moved by the noble Baroness, Lady Kramer, on behalf of the Liberal Democrats, which sought to ensure that the UK would remain a member of the customs union and the single market. As the House is well aware, to remain in either would effectively prevent the country regaining the authority to make its own laws in this Parliament and would leave it powerless to negotiate new trade deals and resume our natural role and destiny as a free trading nation with an influential voice in the WTO and other international institutions.

The Trade Bill is absolutely necessary, whether we reach agreement with the EU on something like the Chequers proposals, negotiate a Canada-plus-type free trade agreement with the EU, or leave the EU without agreement and trade under WTO rules. Its purpose is to provide continuity in our current trading relationships with some 40 agreements with around 70 countries. If an implementation period with the EU is agreed, this should not be too difficult, but in the event that we leave without a deal, the Government will be under serious time pressure to roll over all those agreements in the time available.

Still, it should be remembered that our trade under these agreements covers only 12% of our total trade, and I imagine that a small number of those agreements account for a large majority of this. Can the Minister say how many of these agreements need to be rolled over in order to protect, say, 80% of our total trade under those agreements, and is she confident that we can achieve this in the event of leaving without a deal—in other words, move to trading with the EU under WTO rules as we do at present for all our non-EU trade? My noble friend Lord Lilley has mostly answered that by saying that over half of this trade is covered by Switzerland, Norway and a couple of other countries.

Those who seek to ensure that we remain as closely tied as possible to EU regulation in order to protect our existing trade, even to the extent of making us very unattractive as a new potential trade partner, are wrong, because they seek to protect the status quo, good and bad bits alike, and do not recognise the upside potential of being free once more as an independent nation to enter into new bilateral and multilateral trade agreements. They are also wrong because they seriously overestimate the threat to our existing trade.

I was encouraged to read in the Chequers proposals that the Government seek “potentially” to accede to the Comprehensive and Progressive Trans-Pacific Partnership, although the inclusion of the word “potentially” sounds alarm bells. Does the Minister agree that the degree of continued alignment with EU rules and regulations, especially the proposed subordination to a common rulebook, makes it questionable that we would be acceptable to the other members of the CPTPP as a partner? If under Chequers we are unable to take advantage of opportunities such as this, it negates the benefits of leaving the EU.

I doubt that the CPTPP countries would be willing to contemplate a restricted form of membership covering services but not goods. As Policy Exchange’s excellent paper Trading Tigers explains,

“comprehensive liberalisation across goods as well as services and investment”,

is,

“one of the core unifying principles”,

on which the partnership is founded. The CPTPP is not a customs union, and members are free to set their own external tariffs. Neither does it have,

“a common set of regulatory standards but seeks to harmonize regulations for those standards members have agreed to”,

harmonise. It therefore does not involve integration at the depth of the EU single market. Six of its members are Commonwealth countries, including Australia, New Zealand and Canada. It also includes Japan, whose Government have already expressed support for the UK’s accession. When fully implemented, it will eliminate 98% of tariffs among its members. It achieves more than most bilateral FTAs and much more than what the WTO has been able to achieve.

I am not sure whether the Government are planning to novate or enter into bilateral FTAs with countries such as Australia and Japan first and then later consider entering into multilateral partnerships such as CPTPP. Would it not be much easier and quicker just to apply to accede to CPTPP at a stroke? That would give 11 for the price of one, as it is not necessary also to have separate bilateral FTAs with each member. Besides, it might be 15 for the price of one, as four other countries have indicated that they wish to join soon. It is important to push ahead now with exploratory discussions with CPTPP member countries, and the fact that we were doing so would encourage the EU to be more reasonable in its approach to the UK. The UK’s accession to CPTPP might also encourage the United States to reconsider its decision not to join. It is also notable that Canada’s trade agreement with the EU, CETA, does not prevent its accession to CPTPP, which gives confidence that the UK’s accession would not be incompatible with a Canada-style deal with the EU.

As a result of an amendment to the Bill supported by another place, the Bill somewhat strangely deals specifically with the UK’s future relationship with the EU solely in the medicines sector. If full participation in the European medicines regulatory network is achieved as part of our withdrawal agreement, it will mean that the UK will be bound to follow evolving EU rules in this sector without any direct control over the formulation of those rules. As I mentioned during the debate on the customs Bill, I think this may well act as a disincentive to investment in the UK by international pharmaceutical companies.

I lived and worked in Japan for 11 years and continue to visit regularly. During my visit to that country in July, I met the CEO of a major pharmaceutical company which has made significant investments in research and development in this country. I have known him for over 40 years. He told me that, while he did not initially welcome Brexit, he was now looking for the upside of the UK’s escaping from the very bureaucratic EU regulation covering the sector. His company has invested a considerable amount in its “Plan B”, by changing its corporate structure and framework to ensure that it can continue to supply medicines in the UK and EU after Brexit, as it does now. He told me he believes that, whatever happens, the UK will continue to be the best country in the world in which to conduct pharmaceutical R&D and to innovate new treatments.

He expects that a future UK regulatory framework, while appropriately protecting patients from exposure to potentially harmful new products, could provide a more supportive regulatory regime, which will not give excessive weight to the precautionary principle when this is not supported by facts. It seems to me that he and others who think the same way will be disappointed if the UK does not institute its own independent medicines approvals mechanisms. Obviously, products developed for export to the EU will have to continue to comply with the letter of EU rules, but that need not unnecessarily impede our adopting a less restrictive, more innovation-supportive regime to develop products for the domestic market and for the wider world.

The noble Lord, Lord Grantchester, said that a trade bloc, in its ability to negotiate trade deals, is more powerful than an individual nation state. I cannot agree with the noble Lord. Rather, I wholly agree with my noble friend Lord Lilley, who clearly explained why it is so much easier as a single country to negotiate an FTA. I add that, in most EU trade agreements, the benefit accruing to the UK is proportionately much lower than for all other EU countries. I support the Bill and trust that your Lordships will not seek to obstruct it.