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Trade Bill - Committee (4th Day)

Part of the debate – in the House of Lords at 9:30 pm on 4th February 2019.

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Photo of Lord Hain Lord Hain Labour 9:30 pm, 4th February 2019

My Lords, I realise that the hour is late, but I rise to support Amendment 98, which would make it much more difficult for the Government to preside over a default no-deal Brexit, and to encourage the development of alternative strategies.

Due to the failure of the Government to develop a credible Brexit strategy, there is now a grave danger of the UK crashing out of the European Union on 29 March—in just over 50 days’ time—as the default option. This would have truly devastating consequences. However, because of the Brexit-related legislation already on the statute book defining exit day as 29 March 2019, it is possible that Parliament will not have the powers to stop it happening.

The amendment would therefore put a limitation on the commencement of the Trade Bill and provide that Clause 2(1), which gives the Government powers to implement international free trade agreements, can be implemented only on the condition that either: Parliament has approved a negotiated deal; the Government have requested an extension of Article 50; Parliament has approved a no-deal departure; or Parliament has voted for a second referendum. It would also offer your Lordships’ House a chance firmly to reject the possibility of the UK crashing out of the EU in a no-deal scenario.

The hard Brexiteers of the European Research Group, who assert that no deal would be an acceptable option, argue that Britain’s trade outside the EU is increasing at a much faster rate than trade with EU countries. However, this ignores the fact that measuring growth starting from a much lower base is always higher in percentage terms. They also fail to mention that trade with non-EU countries is not a binary choice and has been boosted by the EU’s own trade agreements with those countries, from which the UK benefits as an EU member—witness Germany’s spectacular trade increases with China, for instance. If noble Lords have any doubt about this, they should look at the website of the Department for International Trade. In the case of the recent trade agreement between the European Union and Canada, we read:

“UK trade with Canada up 14% since new free trade agreement introduced”.

This is a reference to CETA, the Comprehensive Economic and Trade Agreement between the EU and Canada, which was signed in 2017 after seven years of negotiations. EU free trade agreements with non-EU countries such as Canada, South Korea and Japan were negotiated with the leverage and weight of the 500 million-strong market of the whole EU, which the UK will lose after Brexit. Brexiteer fantasies about WTO rules ignore the complexity of the necessary reallocation of the UK’s share of EU tariffs and quota schedules, which will require difficult negotiations. They also disregard the application of rules of origin to UK goods trying to enter the EU market, which the Government have previously estimated could cost firms between 4% and 15%.

The dire consequences of a no-deal Brexit were summarised by the Financial Times:

“Trade with the EU would switch to World Trade Organization terms, raising customs checks and tariffs overnight. Capital could flee the City of London, followed by a run on the pound. Food supplies would be at risk because of the uncertainty over certification and standards. The UK’s ports and airports would be thrown into disarray. The list is endless, and no amount of wishful thinking can overcome this reality”.

Otherwise, why have the Government announced that they are spending £4.2 billion on mobilising the Army and chartering additional ferry capacity to bring in vital supplies of medicine, food and fuel in the event of no deal? Why have they set out contingency measures in more than 100 technical notices, which set out nightmarish scenarios in numerous sectors? Such preparations show that the Brexiteers who have talked about a “managed no deal” and who have claimed that “falling back” on WTO terms would be no problem, are living in a fantasy world. Their assertions, including by the noble Lord, Lord Lilley, among others, have been described as “nonsense” by Professor Alan Winters of the UK Trade Policy Observatory. Of the 164 member countries of the WTO, none trades on WTO terms alone; all have at least one bilateral or regional trade agreement with other countries, especially their nearest neighbours.

The reality is that trading on WTO terms would risk border delays, which would hit just-in-time cross-border supply chains, affecting areas of the UK dependent on advanced manufacturing in particular. The Environment Secretary, himself a leave supporter, recently told farmers that WTO tariffs on beef and sheepmeat will increase by over 40%. The British Food Importers & Distributors Association has warned that WTO rules would mean food prices going up by over 20%. If, because of tariffs, there is a big hike in prices in April as a result of no deal, that will have consequences for our manufacturers, businesses and consumers across the country. It is therefore hardly surprising that, following the Prime Minister’s defeat on 15 January, more than 170 of the UK’s most significant business leaders, who together represent more than £100 billion in annual contributions to the UK economy, confirmed that the priority now was to prevent what they describe as,

“a chaotic crash-out from the EU”,

by backing a second referendum.

This cataclysmic predicament has arisen because the Prime Minister has chosen to placate the deluded hard Brexiteers, who blissfully ignore that the UK is now part of a deeply integrated European economy and hanker after some imperial golden age. Yet the UK exports nearly five times as much to the EU than to the Commonwealth, which does not function in the same way as an integrated trading area. It is important to note that, two and a half years after the Brexit referendum, the International Trade Secretary, Liam Fox, had to admit recently that not one new trade agreement will be ready to be implemented by 29 March in the event of no deal. Tragically, therefore, the opportunity for the UK to maintain global influence as a leading member of the EU, with an ability to shape the future and continue to benefit from the global network of trading relationships being created by the EU, is being thrown away. As a medium-sized economy, if we turn our back on the world’s largest, richest single market right on our doorstep, we will become a rule-taker.

If Brexit is postponed or rescinded, the treaties of the European Union, including its trade deals with other non-EU countries, will still apply to the UK. However, with a no-deal Brexit, they will all cease to apply on 30 March. That is why it is imperative for Parliament to put safeguards in place now, including passing this amendment. Surely we cannot just watch the country drift rudderless towards the rocks of no-deal isolation while the Government allow the clock to wind down.