My Lords, I congratulate the noble Lord on moving his first amendment to a Bill. It does not get any easier—I do not wish to offer any false reassurance—but I happily concur with his remarks in moving the amendment. I have little to add except to reinforce the point that, for the UK in particular, the majority of our imports from our biggest market and an even larger majority of our exports are intermediary. They include components that are from a number of different countries and not from here.
This issue was raised briefly with the Minister on the cross-border taxation Bill. It is the complexity not just of the components but what is necessary to ensure that many UK exported goods and our imported consumer goods have a seamless transaction process. It is less about the tariffs applied and much more about the regulatory aspects and checks that will be necessary, which I shall turn to in a moment. Therefore, for our key sectors—the noble Lord mentioned automotive, but for wider engineering and overall production and for our exporters— this issue is critical.
I will cite one example from HMRC’s advice to businesses that is close to my heart, living in an area that has a rich tradition of manufacturing in textiles. It shows some of the complexity when rules of origin have to be applied. Each business has in effect to do its own certification. The advice states:
“For example, yarn spun from non-originating man-made fibres in France”,
would not be considered as originating within the EU for preferential purposes when considering whether rules of origin apply.
“However, cloth woven from that yarn in the UK would be an EU originating product, just as if the weaving had been done in France or Germany”.
That is one tiny example of where, if we do not have a customs union with our biggest market, we will have difficulty with rules of origin with our largest market and then, as we move to trade with other countries outside the customs union, we will have difficulty in deciding which are applicable for other preferential or other trade policies.
That is part of the complexity that leads to Amendment 51 in my name, which is in the view of these Benches necessary to align with our biggest market in order for us to exploit trade with other markets. We need to triangulate as little as possible, which seems to be what the Government seek. The best way to do that is through these arrangements. I understand that there is tacit agreement from the Government on this point, because the announcement last week of an in-principle agreement with Israel to roll over our agreement means that it seems that the United Kingdom is in principle considering what is in effect a rules of origin regime with the EU, the EEA, Switzerland, the Faroe Islands, Morocco, Tunisia, Egypt, Jordan, Israel, Montenegro, Bosnia-Herzegovina, Serbia and Turkey—all countries that have in effect a rules of origin regime.
It would be helpful if the Minister could clarify the Government’s intention for rules of origin in the existing rollover agreements and how they consider the future. However, even if we operated under such a regime, necessary checks and certification still have to be done electronically; each exporting company has to apply its four-digit tariff heading and carry out its own checks on whether rules of origin are being complied with. If we are to have a separate anti-dumping and corrective measures system—which, incidentally, the Government promised us for consideration before the final stages of the Bill—and if we are to have a preferential rules of origin system for developing countries, we will have to have some form of check system to ensure that those countries comply with it. It is one thing to say that we will have an electronic system for our closest trading partner—but how will we know that it is not being abused by other countries that wish to circumvent it?
Up to the Lords stage, the Government said that the language as set out in these amendments would necessarily tie their hands and weaken their negotiating flexibility by having them take all necessary steps—but this is no longer the Government’s position because we see that language in Clause 6. This is now government language, where it relates it to the European medicines regulatory network. The Government seemingly do not intend to bring forward any amendments to delete that from the legislation, so if they do not then that is the government language. That means that the Government should not have any problem with accepting this language.
Secondly, the Government said, prior to yesterday, that it would be inappropriate for Parliament to set a mandate for how the Government should take forward negotiations. That is clearly no longer the case because, as the Secretary of State for Exiting the European Union and the Prime Minister herself have said, Parliament has set the Government a mandate with regards to the Northern Ireland protocol. So there is no barrier to the Government accepting the language of these amendments. As to the necessity of them, it is very clear that this is what most of the industrial sectors of this country are seeking.