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Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation - Motion to Regret

– in the House of Lords at 3:49 pm on 1st May 2019.

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Lord Whitty:

Moved by Lord Whitty

That this House regrets that the Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation, while differing significantly from the precursor European Union-Swiss Agreements, does not make adequate provision for trade in services.

Relevant document: 33rd Report from the European Union Committee

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, I tabled this Motion to Regret, effectively on behalf of the EU Select Committee, as the only way available to us to register with the House as a whole our concerns over these so-called rollover treaties—rolling over from EU treaties to UK treaties. There are also implications in the way we are dealing with these for the role of Parliament and of this House in dealing with trade treaties in the future.

First, I emphasise that, contrary to frequently heard claims that these rollover treaties are simply a matter of “delete ‘EU’ and substitute ‘UK’ and all will be fine and relations will continue more or less as before”, in fact this Swiss treaty in particular is decidedly not an equivalent substitute, either in form or in substance, to the arrangements with Switzerland that the UK enjoys as a member of the EU. This is despite the fact that both the UK Government and the Swiss Government genuinely wished for as little change as possible.

Secondly, unlike most of the other treaties with smaller states that our committee has so far reported on, Switzerland is a major trading partner for us in the UK. Indeed, in terms of goods and services, Switzerland is our 10th-largest trading partner. Of course, seven of the first nine are members of the EU; hence, after the US and China, Switzerland is actually the third-largest non-EU global market for the UK. That makes the treaty important in itself, as well as for what it implies for the process.

Thirdly, the House needs to understand the difficulties of having allocated the scrutiny of these rollover treaties to the EU Select Committee and its sub-committees, which have very limited powers. In effect, they are dealing with a fait accompli: a treaty already concluded and signed by the Government.

Lastly, I want to cover the long-run situation, which may be the most important. There is no way in which this Parliament and this House should accept that this extremely limited role for dealing with future trade treaties should apply after this rollover process. I thank the Government for the various publications they have provided as background to this and for continuing to do so for all the treaties we consider. I also thank the Minister for her letter on 20 March, which set out some of the understanding behind this treaty. The House needs to understand, however, that the EU Select Committee’s work in scrutinising this treaty and all the other treaties is a completely new and major task for the committee, and particularly for its staff.

The committee recently published its 10th such report, and those 10 reports cover more than 40 separate treaties. We have gained experience in analysing these agreements, but they have actually raised new issues for this House and for Parliament as a whole. Initially, the draft treaties coming through to us were either to deal with relatively small volumes of trade with small trading partners, or else agreements with larger trading partners but for only one particular sector. The sequence of treaties coming through was a little odd and seemingly random. At one point it appeared that either the Department for Trade or the FCO had a policy of prioritising all such treaties that dealt with the wine trade: perhaps Members of the House would appreciate that sense of priority, but it did seem slightly odd.

Dealing with bitty treaties such as this means that some important, multifaceted agreements that the EU previously had with Japan, South Korea, Canada, and Mercosur in South America have yet to be concluded by the Government, let alone seen by Parliament. Of course, originally all this process was supposed to have finished by 29 March.

Scrutiny of treaties has by necessity been improvised and is limited in two senses: by the limits of Part 2 of the Constitutional Reform and Governance Act 2010 in general, and in particular in relation to this House. That Act constrains the role of this House effectively to comment and advise, the House of Commons having the sole right to reject or send back any treaty. Even then, as I say, the parliamentary scrutiny is limited to the very end of a negotiating process. None the less, I emphasise the importance of this exercise and I hope that as we go forward, and certainly as the larger treaties move centre stage, the House engages with the committee’s report. In addition, it also leads on to the way in which post Brexit we will be dealing with trade around the world.

It is perhaps an unsought benefit for the Government that the extension of the date of the end of the Article 50 process has given us a bit more time to consider these treaties. However, we will need to be quite focused during that time if we are to finish even by the latest putative date of Halloween.

On the Swiss treaty itself, much of its complexity reflects the fact that pre-existing relationships between the EU and Switzerland have been complex and subject, frankly, to some disputes and historic vicissitudes. As a result, there has been no single comprehensive free trade agreement between the EU and Switzerland; instead, there are over 100 bilateral treaties. This treaty itself claims to roll over eight of those existing treaties, which are the most important trade-related treaties. In format, therefore, this treaty is nothing like the pre-existing EU arrangements but the substance is more important, and I will focus on that.

First, and most blatantly, there is the lack of coverage of trade in services and the interrelationship between the trade in services and the movement of people. There are also a number of EU-Swiss provisions which have been disapplied in this rollover agreement or are dependent on further agreements, either between the UK and the EU or Switzerland and the EU, and in some cases feature agreements with third countries. The extent to which any future changes will be subject to an appropriate level of parliamentary scrutiny is also an important issue.

On services, therefore, this agreement almost exclusively covers trade and the procurement process. However, over half the UK’s trade with Switzerland consists of services. Indeed, whereas on goods the UK is in slight deficit with Switzerland, in services the UK has a substantial surplus of £8 billion, including £5.5 billion on business services and £1.5 billion on financial services. My sub-committee, which dealt with this, had highlighted the importance of services trade to the UK economy in one of its early reports on the Brexit process. It is therefore regrettable that the agreement before us fails to account for future UK-Swiss trade in services. The parliamentary report accompanying the agreement and the subsequent letter from the Minister state that there is no comprehensive agreement on trade in services between the EU and Switzerland to replicate. I accept that, but the same can be said of goods, as I have been explaining, in that there are several agreements between Switzerland and the EU on goods, yet the Government have contrived here to present us with a single trade agreement.

This is in sharp contrast to the patchwork approach to services. In addition to this supposedly comprehensive agreement on goods, the Government have so far laid four separate agreements relating to particular aspects of EU-Swiss trade in services, all of which were presented to Parliament in January and February and dealt with by the EU sub-committees last year.

There is the agreement on air services, on international carriage of passengers and goods—although the pre-existing agreement also covered rail, which this one does not—on direct insurance other than life insurance, and on citizens’ rights. This fragmented approach to services makes it very difficult to assess the totality of future UK trade in services and to understand what are the gaps and what the impact will be. I will touch briefly on the substance of the other agreement I just referred to. I note in particular the agreement on citizens’ rights, as it includes citizens’ ability to deliver services—much of services trade depends on the free movement of persons. It includes, for example, the temporary preservation of the current 90-day service provision, but only for five years. Do the Government wish to extend that in subsequent agreements? The agreement was separately scrutinised by the EU Justice Sub-Committee but, because freedom of movement and such issues as mutual recognition of qualifications have such an important implication for trade in services, they also need to be considered in this context.

The agreement with Switzerland on air services was dealt with early on: we sought to retain the existing arrangements and nodded it through. Since then—this is perhaps incidental to the main point of the debate—we were expecting a large number of treaties on air services with various countries around the world to be subject to scrutiny, but those putative treaties have since been reduced to memoranda of understanding, thereby entirely avoiding parliamentary scrutiny. I am not entirely sure of the rationale for that, and perhaps the Minister can explain, because it is on the face of it a way to evade parliamentary scrutiny. I reiterate that this fragmentary process is regrettable, as the absence of proper provision for services does not give us a clear way forward in the development of UK-Swiss trade and is in no way a simple process.

I turn to what is covered by the agreement, the trade in goods. A number of elements of the precursor agreement have been disapplied. Other elements cannot come into force until we have other agreements. One of the somewhat technical but important trade aspects of this is that the issue of cumulation arises. As I have often said to this House, any trade agreement short of a full customs union and single market is inevitably not exactly frictionless. In particular, there are always rules of origin involved. In the world in which we now live, where many products are multi-sourced in their components, rules of origin involve parts of goods being made in several different countries. The issue for a bilateral treaty is when they are regarded as the equivalent of being produced in one of the parties to that agreement.

In this case, there are a number of complicated provisions, some of which depend on a future agreement between Switzerland and the EU and the UK and the EU, some of which potentially involve a large number of other countries. For example, the existing treaty refers to all the EU arrangements with PEM countries—the pan-European Mediterranean area—which are treated by the EU as the equivalent of EU production. But that will depend on each one of those countries— 20-odd—reaching a future arrangement with Switzerland and with the EU if they are to be treated the same in future.

The mutual recognition agreement allows goods with attestations of conformity in terms of regulation from one market to be sold in the other without any need for further certification. Twenty or so sectors are covered by the EU-Swiss agreement but only three are covered by this one. Admittedly, they are the largest and most important sectors and, by and large, the sectors covered by international standards because the manufacturers work globally. Nevertheless, the agreement is silent on 17 other sectors. Are the Government trying to agree a more basic MRA for those sectors, some of which are important to particular firms in the UK? It would be helpful if the Minister could indicate whether subsequent revisions are intended to cover them.

Then there is agriculture. The agricultural deal with Switzerland is significant. The Government have been unable to agree a transition for precursor agreements relating to the labelling of organic products, sanitary and phytosanitary measures for plant health, animal feed, seeds and so forth. We have passed SIs to enable the Swiss to export their organic products here, but there is no mutuality at the Swiss end as yet. Of course, our organic sector exports some goods to Switzerland. Trade in other agricultural products could continue although certain facilitations will drop away. However, Switzerland will be able to accept imports of animals and animal products from the UK only once the UK has been listed by the European Commission as having appropriate regulation in this area. It would be useful for the agricultural sector to know whether there is a timescale for that and whether we expect the Commission to follow it graciously.

The customs security agreement is incorporated but then disapplied, again because it requires the UK to have an agreement with the EU on safety and security before it can be applied to us and Switzerland. A rather troubling consequence of that is that each party will no longer recognise the authorised economic operator scheme of the other—a particularly important issue for road haulage.

There is also the procedural question of how the future arrangements will work in terms of revision. As noble Lords will have gathered, I hope for significant revisions to cover these gaps in future. This raises the issue, which the House has raised generally, of the scrutiny of joint committee decisions, which are set out under these and other treaties. It must be stressed that it is not clear whether changes agreed by joint committees will be subjected to the same level of scrutiny, inadequate though it is, that we apply to the treaties. It is clear that any amendments that are subjected to the CRaG procedure will be covered by some degree of scrutiny; the issue is whether all future agreements fall under the context of the CRaG arrangements. It is not clear which class of agreement will invoke CRaG.

This gets us on to the question of the future scrutiny of trade agreements. It has to be said that the present arrangements are not very satisfactory, as I have spelled out. The reality is that we have received from government departments only a fait accompli at the end of the line and in a rather random order. I am particularly concerned about future trade treaties since, in reality, this represents a significant reduction in the parliamentary scrutiny we have enjoyed for nearly 40 years, to a large extent through our membership of the European Union and the role of the European Parliament, and particularly through the more detailed provisions since the Lisbon treaty. If Brexit happens, whoever is in government will need to recognise that provisions which limit the role of Parliament in signing off a fait accompli at the end of a lengthy negotiation do not amount to parliamentary scrutiny in any meaningful sense. The complexity of this Swiss treaty underlines the range of topics and interests that potentially will be affected by the process of treaty-making itself.

At some point we will receive from the Government supposedly rollover treaties with Japan, Korea, Canada and so forth, and we need to get this right by the time we do so. We also need to set the right precedent for dealing with treaties in the future as we move into the new alleged global Britain in a post-Brexit world. My view is that we need a trade committee in this Parliament covering all future free trade agreements or possibly a more general treaties committee. I personally favour the former, as I do a joint trade committee of both Houses which will allow it to have appropriate authority. At the moment, frankly, we have minimal authority even on these effectively rollover arrangements. We are dealing only with a fait accompli. The European Parliament dealt with the negotiating mandate, with the process of negotiations, the final draft and the signing off of the treaty. Very similar arrangements in a slightly different context apply in the United States and, to some degree, in other countries such as Canada and Australia. It would be wrong if this Parliament and this House did not have the same deal and the same appropriate level of scrutiny.

Some of that is for a later stage, but most of it arises through looking in detail at this Swiss treaty. I welcome comments from the Minister and from other noble Lords, some of whom may have participated in the scrutiny of these treaties. I beg to move.

Photo of Lord Robathan Lord Robathan Conservative 4:00 pm, 1st May 2019

My Lords, it is a pleasure to follow the noble Lord, Lord Whitty, not least because he chairs the sub-committee of which I and several other noble Lords present are members. He chairs it rather well, which sometimes can be irritating because one would like at least to be able to poke a bit of fun at him. However, I do not entirely agree with him on this issue, although he has raised some good points.

I shall be brief and raise but three points. The first is that what comes through from this agreement is the good will on both sides which led, whatever the defects which have been pointed out, to a relatively easy agreement. I hope that that will be the same when it comes to agreements with the EU as a whole, because I have to say that it has not shown quite as much good will as one might have hoped.

Photo of Lord Robathan Lord Robathan Conservative

I hear the noble Lord, Lord Deben, expressing a bit of irritation from a sedentary position, but I recall that Monsieur Barnier said that he wanted to “educate” the British people, which I think is called “teaching them a lesson”. However, people in this House have different views, which is still allowed as far as I am aware.

My second point is that I hope that, when the Minister comes to reply, she will answer some of the points set out by the noble Lord, Lord Whitty, and in particular that she will give a fuller explanation of why services are not included. It may be that they are covered in some other way. I do not know, but we would wish to hear that explanation and indeed, the explanation that the noble Lord, Lord Whitty, has asked for.

My third and final point is more one about general procedure. It is fair to say that we in Parliament, be it in the Commons or in the Lords, have not undertaken great scrutiny of the trade agreements made between the EU and other partners. That is a fact. They may have been scrutinised by the European Parliament, but they have not been scrutinised particularly well here. I sat in the Commons for 23 years and I do not remember a lot of such scrutiny, although perhaps I was sleeping at the time—you never know. When it comes to parliamentary scrutiny, which as the noble Lord has said is absolutely vital, there is a balance to be struck. Treaties are not actually made by parliaments; they are made between Governments. We are discussing treaties here and, while it is easy for us to sit back and scrutinise, it would be difficult for us to make treaties with Switzerland or wherever it might be because, of course, a parliament, be it the other place or here, does not have the facilities to do so.

While I do not particularly regret the agreement, I support the noble Lord generally because he chairs the committee rather well.

Photo of The Earl of Kinnoull The Earl of Kinnoull Crossbench 4:15 pm, 1st May 2019

My Lords, I congratulate the noble Lord, Lord Whitty, on tabling this Motion and providing a mechanism for the House to discuss these very important issues. I sit on the EU Select Committee and its EU Justice Sub-Committee. The reason for my mentioning the latter committee will become clearer later in my short remarks.

The noble Lord, Lord Whitty, made a good case about the size of the trading relationship between Switzerland and the UK, and a good summary of that is laid out in the Select Committee’s report of 12 MarchHL Paper 315. In that summary, there is evidence of an important thing to remember in trade, and that is that services and goods are now interlinked. When you sell a good, you often have a service alongside it. Evidence of that is immediately visible because so much of the goods traded in Switzerland is precious metals, and of course a lot of that is really evidence of the physical delivery of an underlying metal trading mechanism that is going on. Therefore, any damage one does to the ability to trade services will inevitably impact on the ability to trade goods. It is incredibly important to make sure that those two things are in alignment. It is mutually beneficial to have clear arrangements for the trading of both goods and services.

I shall make only two points. My first point concerns complexity. The Swiss ambassador told us in mid-November that he had had a hand in handling more than 100 bilateral agreements that Switzerland has with the European Union, and he explained to us the sheer complexity of that beast. There is one piece of good news about that beast—I am looking at the Minister—and that is that, although the tentacles on the top of the beast are complicated, underneath the surface of the beast is a joint committee which has access to various processes and remedies which are common among the 100 or so agreements. So there is complexity on the top and simplicity on the bottom, but it is very important to marry up the goods and the services.

The complexity that we are already developing has been listed. We have the scheduled air services agreement, the carriage of passengers and goods agreement, the non-life direct insurance agreement, the trade agreement and the citizens’ rights agreement, which I shall come to in a second because the EU Justice Sub-Committee examined it. The complexities were acknowledged to us in a generous and helpful letter from the Minister to the Select Committee on 20 March. Perhaps I may take a brief loop here and say how helpful the officials in the department have been to our colleagues in the European Union Committee and how much we value the quality of that relationship. We are drinking from a firehose in learning how to scrutinise these things, and the officials are being most helpful.

Turning to the citizens’ rights agreement, as the noble Lord, Lord Whitty, has pointed out, the trade agreement contains nothing on services—there are no services provisions at all—and so far we have had two of the five agreements which contain a bit on services. We have my own home territory—non-life insurance—and I can confirm that that agreement, although I was not a scrutineer of it but it did come through the main Select Committee, is word for word the same as the successful agreement that exists between Switzerland and the EU. It is an important piece of the interconnectivity and mutualisation of insurance across Europe that has gone on for many years.

The fifth of the agreements to appear was the citizens’ rights agreement, which includes a big hunk of the freedom of movement agreement within it. Unlike the other four agreements, it is not a rollover, as the noble Lord, Lord Whitty, pointed out; in fact, it is a sort of orderly winding down of the various rights. There is a protection of the rights of the 14,000 Swiss citizens living in this country and the 14,000 British citizens living in Switzerland, and the protection of the rights of about 2,500 border officials. One of its key benefits, as was mentioned by the noble Lord, Lord Whitty, is the 90-day services provision rules, which allow me to go to Switzerland lawfully and talk about insurance with a view to selling a service and to do so for 90 days in a year. It is enormously helpful, both for Swiss people to come here and for us to go there. Suddenly to find that, in this thing that is working so well, there is a sunset clause five years out—a cliff edge—is very disappointing. It would be interesting to hear the logic for having inserted that because, if it was not needed by the EU, I do not see why we need to have one now.

We discussed with officials how Parliament might scrutinise what will be a very important decision of the joint committee to extend that five-year period. It will be an extremely important decision both for Switzerland and for the United Kingdom. They said—I shall quote from our report:

“In response, officials advised that no decisions had yet been taken on scrutiny arrangements for such a decision, given that it would not take place until five years after the specified date”.

It would be very helpful if the Minister could commit to the House that at least there will be a scrutiny mechanism, albeit that I realise that she cannot say at the moment what it would be.

Finally, I feel I must come back to the point on complexity. My mind goes back to the very interesting hour and a half we had with the Swiss ambassador who talked about complexity. It would be enormously helpful if the Minister could commit to provide consolidated guidance on the eventual list of agreements between the UK and Switzerland and to place that on the GOV.UK website. Then British businesses—and, indeed, Swiss businesses—that want to know what the deal really is will not have to look at a lot of different bits of guidance but can look in one consolidated place. That single thing would help trade between our two old and very friendly countries a lot.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

My Lords, we are indebted to the noble Lord, Lord Whitty, and to the other committees that have done such forensic scrutiny on this agreement for highlighting so many constructive areas for questioning by the noble Earl and the noble Lord, Lord Whitty. I have two or three questions to add and I shall emphasise a couple of points.

What we are debating today is a clear example of how it was never going to be simply a “cut and paste” or “merely technical” exercise to roll over existing agreements. Their breadth and complexity are now clear to see, especially in the context that our trading relationship and wider relationship over people, goods and services is included in 140 agreements between the EU and Switzerland, while this agreement covers only eight of them.

It is also worth noting that we have an opportunity to debate this significant measure because of the Motion tabled by the noble Lord. Before the Recess, I tabled similar amendments in relation to the three previous agreements. It surely cannot be the way forward for the only way for us to have parliamentary debate on these agreements and treaties in this House to be for Members from opposition parties to move regret Motions and amendments. There has to be a more constructive way for the Government to bring forward proposals for Parliament to have an opportunity to debate them. We made this case during the Trade Bill, and we are waiting to see whether it comes back to this House after consideration of Lords’ amendments by the other place. Some of those amendments were to try to ensure a greater degree of parliamentary scrutiny throughout the process, from the start of negotiations right through to the end and the approval of the negotiations. We took in good faith the intention expressed in the Government’s Statement about an enhanced parliamentary role in scrutiny, but that will be tested when the Government have an opportunity to consider the amendments that this House made to the Trade Bill. We are waiting to see what they will do.

As the committee indicted, this agreement raises constitutional implications about scrutiny, not only of the merits of the agreement itself but of the mechanism for amending it, about how the joint committee will operate and the noble Lord’s significant point about MoUs. There is quite a lot of leeway for the Government to have trade agreements through memoranda of understanding if domestic legislation does not need to be amended, but it could be very broad leeway when it comes to trading policy, and if it were a means of bypassing Parliament, that would be very regrettable. The single aviation market and the open skies agreement between the EU and the US are very good examples of where proper scrutiny rather than simply an executive-to-executive arrangement is required.

However, we are where we are. This agreement was perhaps started in a very false political context and through a rather unseemly political process to try to get agreements in place before what would have been Brexit day. I hope that this slight window of opportunity allows us to take some deep breaths. What had seemed to be rollover agreements could well now be seen in their proper context of an ongoing permanent trading relationship with those countries, should we leave the European Union. However, as with the earlier rather tortuous Private Notice Question about ferry contracts, it begs the question of what will happen in six months’ time if we are in the same situation as we were before 29 March. The clock is ticking towards another situation—there are about six months to go—and there seems little clarity about our preparedness for it.

I turn to the agreement itself. The noble Lord, Lord Whitty, and the noble Lord Earl talked about the scale of our trading relationship with Switzerland, which is very large. I noted a comment online from a professor at Geneva University which summed up that this is not simply about the UK’s trading relationship with Switzerland; it is also about the UK, Swiss and EU relationship. Going forward we simply cannot separate out those three, as I think is recognised by both Houses. The professor said of the Swiss relationship with the European Union:

“It’s like the moon around the Earth: The force of attraction of the European Union is such that you can’t have all the autonomy that you want”.

Therefore, even in the context of Brexit, we will still have a bilateral relationship which, in many respects, will be dominated by the relationship with the European Union. Brexit will not mean that we are immune from the laws of trading gravity.

The Government’s report on the agreement clearly shows that some of the most crucial elements of the trading relationship, such as customs facilitation and security, or animal and plant health requirements, will still depend on the positon that the EU takes and then the position that we take in our relationship with the EU. Many noble Lords have been aware of this. Some countries were simply not in a position to sign a rollover agreement before Brexit because, justifiably, they were waiting to see what the future relationship would be. Therefore, it is little surprise that, of the 140 agreements with the EU, only eight have been able to be rolled over in this agreement. Even within some of those eight, as the noble Lord, Lord Whitty, said, some key components have had to be disapplied as we wait to see what our future relationship and agreement with the EU is. By definition, in a no-deal scenario much of our relationship would be at risk in six months’ time.

With regard to the agreement itself, I have a number of questions arising from the very thorough contribution of the noble Lord, Lord Whitty. As he indicated, only three of the 20 sectors of the EU-Swiss mutual recognition agreement are covered by this treaty. Of those, as the agreement states, we are waiting on the recognition of equivalence of rules between Switzerland and the EU. When do the Government estimate that we will reach a position of clarity on that? Elsewhere, it is indicated that the Government are looking for “simplified arrangements”. What is being considered as far as mutual recognition agreements and simplified arrangements are concerned, and when are they likely to be brought forward?

On agricultural products and those significant areas that have been disapplied, including sanitary and phytosanitary measures for plant health, animal feed, seeds and the trade in animal products, the Government indicated in their report that there were,

“requirements for equivalence or harmonisation with EU law and systems”.

What is the Government’s intention with regard to those in a no-deal scenario, when there would be no move towards agreement on equivalence or harmonisation? What is the Government’s intention with regard to how those harmonisation elements would be brought about?

On the applicability of the certified-for-organic products, it is interesting that we have been able to secure continued recognition of organic products only from Switzerland; there is as yet no equivalence or reciprocity for that. When do the Government expect this to happen, or is that, again, to be dependent on the long-term relationship with the EU?

Perhaps the most concerning element in the Government’s report is on customs security. The agreement made with Switzerland on customs security is not only about trade facilitation. The ease of trading with or transiting through Switzerland, certainly by road transport, has depended on there being no necessity for paperwork, advance notification or other processes. These will have to be put back. There will be a direct burden on British businesses because the authorised economic operator status of British businesses will not be recognised by Switzerland. What is the estimate of the impact of this? How many British businesses already have authorised economic operator status and what is the likely impact on these businesses?

My final point on the committee’s excellent report concerns consultation. During the Trade Bill, we debated consultation, particularly with the devolved Administrations, considerably. We regret to see a lack of information on the consultation carried out on this issue. I hope the Government can indicate what consultation was carried out and what responses were given by the devolved Administrations—if indeed they were asked.

Given that so many aspects of this agreement will depend on future relationships, both between Switzerland the EU and between the UK and the EU, I hope the Government can take an opportunity to pause. This is no longer of urgent necessity with regard to a looming Brexit deadline; that has now passed and there should be an opportunity, with a little sense, to look at a more comprehensive long-term agreement. The Swiss have stated categorically that key parts of this agreement will depend on decisions made at an EU level. While UK-Swiss trade is very important to the Swiss, EU-Swiss trade is of a massively higher order. Their consideration of a pending framework agreement with the EU is critical to them.

Ivan Rogers, our former ambassador to the EU, is quoted as saying that he spoke at length to Swiss officials about their experience of negotiating with the EU. They told him that their message was:

“Everything, in every sector of your economy”,

will need to be discussed,

“with the European Union, for evermore”.

We are going to be in that position, and we need the parliamentary mechanisms of scrutiny to ensure we get the best deal that we possibly can.

Photo of Lord Kerr of Kinlochard Lord Kerr of Kinlochard Crossbench 4:30 pm, 1st May 2019

My Lords, I congratulate the noble Lord, Lord Whitty, on his authoritative introduction to his Motion. I am not competent to comment on the detail, but I agree very much with the general points on which he ended, about how we should be scrutinising trade agreements. I should like to strongly support that.

When Speaker Pelosi was in London and issued her warning about the effect on the American body politic if we were to mess up the Irish frontier, and the effect on the possibility of getting Congress to agree to any trade agreement with the UK, she was not threatening us. She was telling us a plain fact: that is the case. The power of the US Congress in matters of trade does not mean that it negotiates the agreement, but it strengthens the hand of US negotiators no end. They are able to say, “You have a point and I understand your point, but I have to tell you that I could never get that through on the Hill”. Probably, they are sometimes telling the truth, and sometimes they are not. It would strengthen the Government’s hand in trade negotiations if there was a kind of powerful joint committee of the two Houses, as the noble Lord, Lord Whitty, recommends. I must say that I very much agree with him.

I shall make two other points. One follows on precisely from where the noble Lord, Lord Purvis of Tweed, ended and is a point of detail. The second is a sad, bittersweet point.

The last document in the edition of the treaty that we have been shown is the Joint Declaration Concerning a Trilateral Approach to Rules of Origin. In this joint declaration, the British and the Swiss agree that the preferred outcome on cumulation would be a trilateral approach with the European Union. That is clearly the case; I understand that. The excellent report from the EU Select Committee says that, after three years, the cumulation arrangements set out in the treaty will be up for review. To quote the report:

DIT officials did not foresee difficulties in securing basic cooperation arrangements with the EU in a ‘no deal’ scenario”.

The committee then comments,

“this does not seem unrealistic, as the rules on cumulation also benefit European suppliers”.

Everything there is true, except the word “unrealistic”. The European Union has told us what would happen in the event of no deal. In that event, there will be no deals on anything until we have addressed the questions of finance, citizens’ rights and the Irish frontier. It has been quite open on that. If we were to be landed with a Prime Minister who was happy with no deal, or perhaps even a Prime Minister who thought that we should not pay what we owe, there is no possibility of European business and industry overruling their Governments and ensuring that their interest in trilateral cumulation wins. Politics will win.

Think of the history of the City of London’s rather clever ideas on mutual recognition and dynamic equivalence in financial services. These were very impressive, with complex architecture being worked out in and with the Bank of England. These ideas are dead. The political declaration attached to the withdrawal treaty makes it clear that they are all dead; there will not be mutual recognition or dynamic equivalence. That is in a situation in which the European Union expects a deal. In the event of no deal, I am afraid it is unrealistic to think that trilateral cumulation on rules of origin would happen. Therefore, although this is an extremely helpful report, and I agree with nearly everything in it, I disagree with two letters: the “un” in “unrealistic”.

My third point is the bittersweet point. On this date 15 years ago, 10 countries joined the European Union: Poland, Hungary, the Czech Republic, Slovenia, Slovakia, the three Baltic states, Cyprus and Malta. Many joined feeling very grateful to the United Kingdom, going back to the inspiration of Mrs Thatcher’s Bruges speech—the bit that none of us remembers, about how the great cities of central and eastern Europe should also be brought into the comity and community of the European Union. That was inspirational to many behind the Iron Curtain at the time. John Major’s Edinburgh European Council text, which produced the Copenhagen criteria, which produced the drive, strongly supported and led by the United Kingdom with the Danes and the Dutch to bring in the countries of eastern Europe as soon as possible, is remembered in eastern Europe. Tony Blair’s generosity, with the pre-accession aid being unrebated by our choice, is remembered in eastern Europe. We might have forgotten all that; they do not forget it and they wish we still felt now as we did then. So do I.

Photo of Baroness Donaghy Baroness Donaghy Labour

My Lords, I agree with my noble friend Lord Whitty. This is not so much an umbrella agreement as a safety vehicle—an ambulance, if you like—designed to ensure that at least eight existing trade-related treaties between the UK through the EU and Switzerland can continue. Any matter that does not require EU consent, approval or agreement in future is simply rolled over. Where EU authority would still apply, those matters are disapplied from this agreement, with a promise of future discussions.

As many noble Lords will know, my trade is as a negotiator. I would have loved to have been a fly on the wall with these particular sets of negotiations. I do not know whether there is an off-the-shelf negotiating skills kit in existence, but the basics should include: agree where you can agree; identify where third-party agreement is required and the timetable for achieving it; set out a plan for future consultations on the remaining issues, no matter how vague; and then sell the deal to one’s constituents.

Plans for future consultations will be a priority, in the form of enhanced mutual recognition agreements, as set out in this deal, memorandums of understanding or exploratory discussions, with the aim of modernising and developing existing provisions. That is the sweetener. This trade agreement breaks no new ground, so I would like to ask the Minister whether this is a holding operation just to keep the show on the road, or whether there are elements that take it above an administrative exercise.

I appreciate that, until we achieve a deal or no deal—if we can call that an achievement—there will be areas that require EU involvement, so I accept that little progress can be made at the moment. Equally—I agree with the noble Lord, Lord Robathan, who is not in his place—this exercise shows considerable good will between the parties, which it is important to build on, especially with the intention to modernise or develop provisions. However, it does not give much confidence when the parliamentary report states that, in respect of the EU, cumulative provisions will be revised three years from the point of the UK’s exit from the EU—and subsequently DIT officials say that this was a mistake. The review period apparently will start when the trade agreement takes effect.

My noble friend Lord Whitty has already said how important trade is with Switzerland, so I will not deal with that, but although important areas of trade are covered, large proportions depend on any future arrangements with the EU. There is a memorandum of understanding to continue discussions on the disapplied customs security agreement, chapters on the agricultural agreement and an enhanced mutual recognition agreement between the EU and Switzerland covering the recognition of manufacturing goods. As the noble Lord, Lord Purvis, said, only three of the 20 have so far been agreed. Of the other 17, the major one outstanding would be on machinery. So it would be useful if the Minister could update us on any progress in the negotiations in those 17 outstanding areas.

I understand that the joint committees provided for in the precursor EU agreements have been re-established to ensure good governance, which we all agree is important. Can the Minister inform the House whether any amendments to those joint committee decisions would be subject to parliamentary scrutiny? This point has already been raised, but it is extremely important to know where the Plimsoll line is between those that are clearly subject to the Constitutional Reform and Governance Act 2010, and those where there might be a grey area but where Parliament is hungry for further involvement and consideration.

The noble Lord, Lord Robathan, made the point earlier that up to now Parliament has not taken an awful lot of interest in some of the negotiations and treaties that the EU has made. But there was provision for that consideration and scrutiny to take place. If what he said is true, I do not know whose fault it was that this was not done properly. There is scrutiny in the infrastructure; it is allowed for and encouraged. If it was not taken up, that is our fault and not that of the EU.

My final point is that we would like some clarification on the implications of not having a comprehensive service deal. We know that it is in bits and pieces, but what are the implications of that? What are the implications of any failure to achieve mutual recognition of professional qualifications, particularly in those areas—legal, accounting, management consulting, finance, computer and telecommunications services—in which, as I have said before, we have a substantial trade surplus that we would want to hang on to.

Referring very briefly to the Constitution Committee’s recent report on parliamentary scrutiny of treaties, it points the way forward. The proposal to establish a treaty committee is welcome. It may be that a Joint Committee is appropriate, but the priorities of the two Houses often differ, and I would support the idea of a House of Lords committee on this. The Government’s commitment to provide more information to Parliament at the beginning of the process for making free trade agreements is very welcome, as is the commitment to provide Select Committees with sensitive information about free trade agreements on a confidential basis. I assume that there will be an opportunity to debate the Constitution Committee’s report in due course, but in the meantime I hope that the Minister can help us on the questions I have asked about whether this is a holding operation, whether progress is being made on the 17 outstanding sectors, how thoroughly amendments made to Joint Committee decisions will be able to be scrutinised by Parliament and what the implications are of no services agreement and no mutual recognition of qualifications.

Photo of Lord Hannay of Chiswick Lord Hannay of Chiswick Crossbench 4:45 pm, 1st May 2019

My Lords, unlike many previous speakers in this debate, I am not a member of the sub-committee chaired by the noble Lord, Lord Whitty, although I do strongly agree with and support his Motion to Regret. I should declare an interest. My noble friend Lord Kerr of Kinlochard referred to the good will we generated when the east Europeans, Cyprus and Malta came into the Community. We also generated quite a lot of good will in 1972, when I was a member of the team that negotiated the first free trade area agreement between Switzerland and the European Union. We were on our way in then, not trying to get out of the door, so no doubt there was even more good will around.

Like almost every speaker in this debate so far, I think that it has demonstrated how totally inadequate the procedures we are applying to this agreement are for parliamentary scrutiny of trade policy in the future. It will be of great benefit to us all, including the Minister, I hope, to have noted how toothless and useless this process is—other than to employ us all on an early summer afternoon in debating the matter—because there is absolutely no leverage here whatever. We can pass a Motion to Regret or we can reject the whole agreement, the first of which would be sensible and the second of which would be silly. However, what we cannot do is to influence the debate in any way.

Here I take up a point made by the noble Lord, Lord Robathan, who is not in his place, when he said that Parliament cannot be a negotiator of a trade agreement. Of course he is right, but that is not what is at issue. What is at issue, as it was when the Trade Bill was discussed at huge length in this House, is whether some process could be put in place by which Parliament could have a say in the basis for the negotiation before it began, could be briefed constantly during that negotiation and could have a reasonable opportunity to influence the outcome. The Minister will know of the amendment passed by this House, which went to the other place six or eight weeks ago. It has been some time now and I would be grateful if, when she winds up at the end of this debate, she can tell us how the Government’s thinking is coming along on that matter because it will be rather important to know that. We may of course never see that legislation again, in which case it might be a waste of time, but that crucial point has been brought out by this debate.

The other point which has come out clearly is the lack of coverage of services, which really is crucial. The figure quoted most often is that 80% of our economy now consists of services; a very large amount of that consists of internationally traded services. In the absence of any coverage of them here or, far more importantly, in the political declaration agreed between the Government and the European Union—not yet and perhaps never to be approved by Parliament—the provisions for services are either absent or totally vestigial. That is an astonishing situation. It is often said, quite wrongly, that the European Union has not got very far on freeing up trade in services. That is complete rubbish; it has got a rather long way in so doing and has a long way further to go. We have been beneficiaries of the first part of that and we need to be part of the second because it is crucial to our future prosperity.

The noble Earl, Lord Kinnoull, spoke about the insurance industry. That is just one example but there are any number of others. Whether we talk about road transport, air transport, professional services, the legal profession, banking or the creative industries, there are huge areas of our economy which are simply not covered. I wonder why that is the case. Why is nothing said about this? Enough has probably been said about this agreement to enable all of us to realise that it is not a thing of great beauty. I suppose the best thing I could hope for is that it never enters into force.

Photo of Lord Wigley Lord Wigley Plaid Cymru

My Lords, as a member of the sub-committee chaired so well by the noble Lord, Lord Whitty, I am glad of the opportunity to pay tribute to him for his work as chair and to the work of the staff of the committee. A tremendous amount of work goes on and we, as a Chamber, are indebted to all the chairs who undertake such long and often painstaking work, over long hours, to ensure that the proper scrutiny goes on and that the work of the committees is effective.

In many ways, what we have before us today is a test vehicle, because many other treaties will follow and some of the points that have been made already, which I shall not repeat in detail, need to be dealt with now to ensure that we move things forward effectively. This matter is of interest to us all, whichever side we take on Brexit; we have to get the system to work whatever the settlement may be. I am very committed to the European Union, but I have to accept that it is important that we get things to work properly, whether fairly soon, after 31 October or whenever.

One question that clearly arises is our capacity to handle all these changes and all the discussions and investigations that have to go on—the capacity within Parliament on an elected level in the House of Commons and in our Chamber here, but also within the Civil Service. Do the Government have the capacity to handle things to the timescale within which they will have to be undertaken? Getting it wrong has a material effect on people involved in manufacturing, in trade and in services, so we have to get it right. It is better to get it right a little later than to be rushing in and getting it wrong soon.

The noble Lord, Lord Purvis, referred to getting the devolved Administrations involved. That does not mean just sending an email down the road to them and saying, “This is happening. Send your reply within three weeks and we await to hear that”; it means engaging with them and making sure that there is proper buy-in at that level. We need a harmonious approach so that some of the problems that may be seen from the devolved Administrations’ perspective are dealt with at the right time and do not trip us up later.

I stress again the question of differentiation between goods and services. I always thought that this was an artificial differentiation. It is even more so now, because we cannot just draw a line between them. We need a system that works not just for now but as things move forward. As what we have regarded as services in the past become an integral part of the goods that we may be dealing with, we have to ensure that our treaties are robust enough for those circumstances.

Will the Minister give some commitment as to whether the Government can deal with the trade implications of a no-deal scenario on 31 October? God help us that it does not come to that but if it does, can we realistically deal with it in a way that is fair and reasonable for all those diverse interests in our economy who depend on the answer?

Photo of Baroness Armstrong of Hill Top Baroness Armstrong of Hill Top Labour

My Lords, I too am a member of the European Union Select Committee—not of the same sub-committee as my noble friend Lord Whitty but of the External Affairs Sub-Committee. That committee has been considering several of the trade agreements. None of those that we have looked at deals with anything more than 0.1% of our trade. When I am feeling really cynical, I think that the amount of money we have spent getting to this stage of bringing the treaties to the House will probably be more than any of them bring in trade. Then I wonder at all this talk about saving so much money by coming out of the EU. Everything I hear contradicts that in all sorts of ways.

We are agreeing these treaties as emergency procedures to make sure that, if there was no deal, there would be some ability to continue to trade, but we have not had a real debate about what sort of relationship the Government foresee between this country and the rest of the world through trade. We have to think only of the Corn Laws and the huge divisions there were then: I often think we are in the same sort of period now, even though the world and trade have changed a great deal since the Corn Laws. We know that some members of the Government are speaking very loudly about totally free trade, where we can trade on our own terms with elsewhere in the world. I think that that is a fantasy; none the less, that is said by some Ministers, whereas others keep reassuring us that we will have regulatory standards that will protect the environment, food standards and so on.

The reality is that we need a proper, honest debate about what the options are and where they take us. I too am disappointed that the noble Lord, Lord Robathan, is not in his place. I remember very well trying, in the other place, to get people to go on to the European Scrutiny Committee. They were never very keen in the Commons; however, it was on those committees that they had sight of the treaties on trade that were being signed, and where they had the opportunity to intervene. When our sub-committee met on a private basis, someone who had had responsibility for negotiating American trade treaties with the rest of the world made it absolutely clear to us—a point made by the noble Lord opposite—that Congress was critical; that they had to keep the Houses on the Hill involved, report back to them very regularly and be questioned by them, and that they would insist on minimum or maximum standards or particular things being negotiated in every trade treaty.

There is an idea that parliaments have nothing to do with this. Having looked at other places in the world, I think our Parliament does less on this than most. We are going to have to sort that. The Government need to talk with the public in real terms about what sort of relationship they are looking for with the rest of the world and how that will be expressed through our trade policy, and then with Parliament—probably at the same time—about how Parliament will have an input into the shape and so on of whatever trade treaties we may agree in the future.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy) 5:00 pm, 1st May 2019

My Lords, I cannot pretend expertise on trade Bills. We have heard brilliant speeches here today, but I want to raise four issues with the Minister.

The first is services. As the noble Lord, Lord Whitty, explained, financial services is the second largest arena in the services sector. Excluding the treaty on long-term insurance, many other sectors are governed by a number of equivalency agreements between the European Union and Switzerland, many of them designed with the City and the UK market in mind. I am completely unaware of what has happened to those and what the consequences of that could be. I would normally have seen any SIs concerning the financial services sector and I do not recall having seen SIs in this area, so I am quite worried, particularly as all this work was done with the expectation that we would have left the European Union by now and that those would have kicked in.

The second issue I want to pick up on is one that a number of noble Lords have spoken about: accumulation. If I were sitting in the Swiss position and allowing only a three-year period for accumulation triangulation to continue before it came up for review, I would be expressing the expectation that it would take three years for most companies to reorganise their supply chains in order to make accumulation in the triangular mode unnecessary. That would seem to greatly disadvantage the UK in the long run. Does the Minister have a reading on why that particular deadline was put in place?

The third area is mutual recognition agreements. I recognise that only about 10% of trade in goods between the UK and Switzerland is governed currently by mutual recognition agreements, but the continuity agreement basically covers only three-quarters of that. So about £500 million of exports from the UK to Switzerland each year are not covered by the rollover of mutual recognition agreements. Can the Minister tell us what the consequences of that are and whether she thinks that the additional cost of becoming certified in two jurisdictions is de minimis, or whether she sees that trade disappearing or transferring over to the EU? There is nothing here to give us any sense of the impact of that.

The last area that I wanted to pick up on was the authorised economic operator, but from a slightly different angle from that of my colleague. As I look at the document that was helpfully produced in February by the Department for International Trade, it says, interestingly, although most of the trade between the UK and Switzerland is indeed governed by firms which have taken out authorised economic operator status or have been awarded it, that,

“Switzerland applies broadly the same checks to AEO and non-AEO traders”.

I raise this because that coincides with most of the information that I have had from companies, that getting authorised economic operator status is exceedingly expensive, both to get in the first place and then to maintain, and it makes not the slightest difference when you get to a border—you are held up for just as long. Since this is the structure on which so many Brexiteers are building their expectation of how we would deal with the Irish border, will the department look at its own experience and understand that this mechanism does not work well at present and that no one seems to have come forward with any way for it to work efficiently or effectively in the future? It is evident from the department’s own document that this is not an answer to the Irish border problem.

I will make one last comment and then sit down. My attention was originally drawn to this trade deal by the press releases at the time, and I was pleased that they were so positive, as was the press coverage: no disruption in economic and trade relationships between the UK and Switzerland. Yet when I dug into this—which others have done far better and more forensically than me—it was full of holes. I ask for there to be much greater consciousness of giving a full picture when reports are made both to the public and generally to this House. We all understand that these are difficult, but the pretence that they are easy, complete and deliver no change is a poor message to give the companies that will bear the burden of the loss of opportunity and access that is consequent on the shift from the current circumstance to this continuity arrangement.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords)

My Lords, this has been a very good debate, and, not the first time, your Lordships’ House owes a considerable debt of gratitude to the EU Committee, and in particular to this sub-committee, for the hard work it has done in trying to bring together the arguments, the pluses and the minuses and the difficulties that we face in relation to this agreement. In addition, through this Motion today, my noble friend the chairman has been able to bring forward a much broader context within which we have to think harder about the processes and procedures we will need to have in place if we are not to repeat the mistakes that he has drawn to our attention today.

The regret in the Motion before us today is about the fact that the trade agreement that has been given to Parliament to consider does not have sufficient on services—all the arguments have been made clearly about that. However, in addition to the points about the specificity of services, is there not a slightly bigger worry behind all this? It must have been obvious to those negotiating on our behalf that, even though the figure of 80% of our economy may be different in practice, the relationship we have with Switzerland is based on a substantial volume of services activity.

If we have been unable to agree anything on services in this relationship, what does this say about our future ability to negotiate in a much broader context with all the countries of the EU, if we have to? What about the US and other countries for which our services, although valuable to us, may not stand in the same arrangement? Our failure to do it with a supportive friend—a country that has always been engaged with the UK—raises wider questions and leaves uncomfortable echoes for future arrangements.

When we look at the detail that the committee has pointed out, we see the omissions, changes, adjustments and disapplications. Although what we have today is a substantial document—my goodness it is; if those who have read it right through to the end are not concerned about how it distinguishes between the customs duties that will be applicable for gherkins, fresh or chilled, while aubergines go free, they are not doing their work, and I am glad someone else did it for me because I would have given up at that point, although it is quite late on—surely the issue here is that we are not getting what we think is the complete package. It is just a trade agreement, not the trade agreement that should be there. Therefore, my second worry is that we have been given something which is more to satisfy the vanity of those responsible for the department in relation to the promises given about the ability to do trade deals than it is about the specificity of our exporters and importers in relation to the country of Switzerland. That leaves me a little concerned.

The wider context of this is the question of scrutiny. Others have raised all the points and I do not need to go back through them again. We are still stuck trying to use 19th century resources and processes, relying on the royal prerogative, to try to take forward our treaties, when we need to replace them with a system that engages with the obvious interests in this House and the other place, the wider world and the devolved Administrations, to make sure that we can do something positive with our trade. That concept was debated at length on the Trade Bill, and I shall not go back over the issues. As has been pointed out, that Bill awaits Commons consideration of Lords amendments, but the irony is that if the Commons were willing to accept, at least in part, what has been put forward today—and we are certainly happy to talk about that—we would have a system that would set mandates, require Parliament to be kept abreast of developments and changes in the negotiations and recommend whether Parliament itself should ratify the end conclusion.

The Minister may reflect on the following question when she responds. If our EU Committee—or whatever committee structure is set up in future—had been given the chance to look at the mandate for this trade agreement and given periodic reviews of the discussions and debate and had the power to recommend whether it should be ratified, would we really be in such a mess on this issue as we are?

Photo of Baroness Fairhead Baroness Fairhead The Minister of State, Department for International Trade

My Lords, I thank the noble Lord, Lord Whitty, for drawing the House’s attention to the UK-Switzerland continuity trade agreement. I add my thanks to him and the committee for their work. Just to read a synopsis of the report shows how much work has gone into this one agreement, so we owe a genuine debt of gratitude.

I also thank all your Lordships for contributing to this debate, which has been insightful and challenging. I welcome this debate and informed discussion about some of the details raised. As I understand it, the Motion did not engage the process under the CRaG Act, but I am keen to address the questions that have been put.

As for the committee’s detailed examination, I am thankful to the noble Earl, Lord Kinnoull, for saying how helpful DIT and other officials have been. I will definitely take that back because that is how this has to work. The report created complements the explanatory materials we have, and will continue to, put alongside the agreements.

Before I address specific questions on this agreement, a number of noble Lords asked where we are in the trade agreement continuity programme. I can confirm that the UK has continued to sign further trade continuity agreements since the last debate on the Chilean, eastern and southern African and Faroe Islands agreements. Since then, alongside the Swiss agreement, we have signed agreements with Iceland and Norway, Israel, the Palestinian Authority, the Pacific states and members of the CARIFORUM community. An additional trilateral agreement between the UK, Switzerland and Liechtenstein has also been laid before Parliament. Together, those agreements represent 51% of the UK’s trade with countries and territories party to the EU trade agreements for which we seek continuity. Further details as the agreements develop will be available on GOV.UK. To address a number of questions, we continue to work with partner countries to secure further continuity agreements; the Government will keep the House informed as soon as those further agreements are developed.

Turning to the Swiss agreement, your Lordships have highlighted that Switzerland is one of the UK’s most important trading partners. In 2017, trade between our countries totalled more than £32 billion. We have seen great growth. Between 2007 and 2017 our exports to Switzerland grew by more than 107% and total UK imports from Switzerland grew by 73%. Switzerland has strong economic and historical ties to the UK and, as a number of noble Lords mentioned, it has been open about its desire to maintain a close relationship with the UK as we leave the EU. I want to recognise that on the Floor of the House.

This agreement will serve as the basis for economic and trade relations between our countries. It will largely allow businesses to continue preferential trading. For example, through this agreement: the British vehicle sector can avoid up to £8 million a year in tariff charges; aluminium, precious stones and metal exporters could similarly avoid up to £4 million a year in tariff charges; and, importantly, our consumers will continue to benefit from more choice in and lower prices on goods imported from Switzerland, including vital pharmaceutical products.

As the House will know from previous extensive debates on trade, the clear priority is to deliver continuity through the trade continuity programme. This trade agreement replicates to the greatest extent possible the cumulative effect of those bilateral agreements that relate mainly to trade. However, as the noble Lord, Lord Whitty, and other noble Lords noted, the EU’s current trading relationship with Switzerland is complex; it has been built over decades. There is no single comprehensive trade agreement between the EU and Switzerland, so those that relate primarily to trade—the eight agreements to which the noble Lord, Lord Whitty, referred—have been pulled together into one umbrella agreement.

Under the agreement, we have created that umbrella agreement and secured the full replication of all preferential tariff rates, including an approach to rules of origin—I will touch on them in a moment—that still allows the accumulation of EU content, the full continuation of reciprocal government procurement market access and the continued protection of geographical indications. For the most part, changes to the agreement have been made only to bring the agreements together under one overarching agreement and to ensure that they function in that bilateral context. However, there are further changes that the committee and the noble Lord, Lord Whitty, have highlighted, and I would like to address those in substance.

Some areas of the existing EU/Switzerland agreements are based on the harmonisation or recognition of equivalence of the rules between Switzerland and the EU. As the UK’s future relationship with the EU is not yet agreed, it is hard at this stage to determine the implications in these specific areas for our relationship with both Switzerland and Liechtenstein. We have therefore had to suspend the application of those elements, and those include the customs security agreement as well as certain provisions of the agricultural agreement and the mutual recognition agreement. However, it is worth noting that we have secured full continuity for three of those 20 chapters: good laboratory practice, good manufacturing practice and motor vehicles. Those three account for around 75% of the goods currently traded under the MRA, amounting roughly to £1.6 billion of UK exports.

The noble Baroness, Lady Donaghy, asked where we were on the remaining 17 areas. We have agreed with Switzerland to revisit the suspended areas, with the possibility of reinstatement or replacement if we reach an agreement with the EU and therefore have a clearer idea of the future relationship. That is per the MoU we have published. In a no-deal scenario—I know that a number of noble Lords are concerned about this—we have sought to provide as much continuity as possible. There are, however, places where that is not possible; in such cases, it is likely, to pick up on the point of the noble Baroness, Lady Kramer, that businesses may face some additional administrative requirements, with potentially increased costs. Again, we have sought to minimise the effect: we have, for example, looked to include Switzerland in the Government’s planned unilateral measures. They are not reciprocal, but could reduce the impact for businesses.

Additionally, we are still working with Switzerland to create further solutions that aim to minimise the practical problems for business. For example, the UK is working towards arrangements which allow for the mutual recognition of conformity assessment bodies in the sectors covered by those suspended chapters. The clear aim is to have those ready for exit day. With those additional arrangements in place on the MRA, we assess that we would achieve a position of close to continuity for businesses in those areas.

The noble Baroness, Lady Donaghy, raised the rules of origin and the review mechanism. The interim review mechanism will apply only if the UK leaves the EU without a deal and that situation continues for three years. We are aiming to have a deal but, if we leave without one, we aim to have an ambitious relationship on services with Switzerland.

On the potential mistake by DIT officials, I do not have the details so cannot comment. However, I can confirm that what I said about when the rules of origin apply is correct.

The noble Lord, Lord Whitty, referred to the rules of origin. The agreement between the EU 27 for recognition of UK exports to Switzerland ensures maximum continuity. For other, non-EU, countries, it is correct that for accumulation to take place, bilateral FTAs need to be in place between the UK, Switzerland and those countries. However, we have already secured, for example, continuity agreements with Norway and Iceland, which are two of the relevant countries.

The noble Lord, Lord Wigley, said that much of this is within the focus of no deal and asked whether we have the ability and the capability. I know that a significant amount of work had been done with the aim of being ready for no deal on 29 March and clearly the additional extension gives us more time to put the preparations in place.

I turn to the issue of guidance for business. The noble Earl, Lord Kinnoull, made a strong point about consolidation of guidance. All I say is that businesses can look to the GOV.UK website for guidance on how to deal with changes to our trading relationship with Switzerland post Brexit. We have now pulled all the guidance together into one place and the aim is to have a system which funnels businesses to the exact responses to the questions they may have for their specific sector. We will provide further advice to businesses on all the trade continuity agreements to ensure that they are prepared for exit day, whatever form it takes. I am happy to write to the noble Earl and put a copy of that letter in the Library.

As noble Lords know, trade in services is crucial to the UK economy and trade with Switzerland is critical. We have secured agreements with Switzerland in areas of services. There is no single comprehensive services agreement. We have taken the patchwork that exists and continued with it. As has been mentioned, the agreements include air services, road transport and the critical non-life insurance area, replicating the effects.

We have also reached an agreement on citizens’ rights. The agreement we have signed delivers on the commitment to safeguard the rights of citizens as we leave the EU. It protects the rights of Swiss nationals living in the UK and of UK nationals living in Switzerland whether we are in a deal or no-deal scenario. It ensures that we can continue to contribute to their communities. As with the citizens’ rights parts of the EU withdrawal agreement, the rights include residency, access to healthcare and so on.

I realise that I am running tight on time so I shall try to highlight the key areas. The agreements on service providers will last for five years, which will allow for the 90-day service provision. There is an ability to extend if both parties agree to do so. Our aim is to have a new agreement in place and therefore that will take place only if that is not the case. The other element is the assumption that we will continue unless there is a compelling reason not to. We are close to finalising an agreement on transitional arrangements for workers moving between our states even in a no-deal scenario, and further details of this were published on 24 April. On a future agreement on services, in the agreement we are committing to further progress it within 24 months after we leave the EU. We will look for a more ambitious agreement.

Perhaps I may touch briefly on scrutiny because I know that it is critically important to the House. This is a continuity agreement and we have tried to make sure that we have as much continuity as possible. We sought to make sure that as much as possible is done and we have put in place a joint committee to oversee any changes, to make sure that we can continue to align. As part of this, an additional amendment power was given to the joint committee in article 1.3 to decide to reapply these provisions with or without modifications. Amendments made would not trigger the scrutiny process under CRaG because they would be part of the continuity arrangements. That ensures that we are able to move quickly. The joint committee does have the power to amend other parts, but it is intended to provide consistency; no additional levels of power will be provided for the committee. Decisions taken by the joint committee would not normally be subject to CRaG. However, should any amendment require any change in domestic legislation, clearly it would come to the House, as is usual.

The issue of future scrutiny was discussed at length during debates on the Trade Bill. We are committed to working with the House. We have put together a Command Paper, which we have laid before the House. Our Secretary of State has written to the committees to ask for their input, and we will further develop that. We will respond to the Constitution Committee on its concern over CRaG, and to the Trade Bill.

A number of noble Lords mentioned the importance of having one or two committees of each House with the ability to share sensitive information. That has been fundamental to the scrutiny process. We believe in the need for proper scrutiny from this House.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade) 5:30 pm, 1st May 2019

I am anxious that, because she is running out of time, the Minister may not be able to cover the point that I and the noble Lord, Lord Wigley, raised about consulting and involving the devolved Administrations throughout these processes and discussions. Exports from the Scottish economy to the Swiss market are worth about £800 million; this is major for that economy, and has implications for the Welsh economy also. What level of consultation and involvement was there with the devolved Administrations?

Photo of Baroness Fairhead Baroness Fairhead The Minister of State, Department for International Trade

I am happy to deal with that. I was given the wrong information that I had two minutes left in which to sum up. I apologise: I rushed through, rather.

We share the text when it is in a stable form; it goes to the devolved Administrations at the same time as it goes to Ministers. We realise that we have to work with the devolved Administrations. We offer briefing sessions on the continuity agreements, and I believe there is ongoing dialogue at official level. For future trade agreements, we are working with the devolved Administrations on a concordat, and that is, I think, progressing.

I can now say what I was going to say to the noble Baronesses, Lady Armstrong and Lady Donaghy, about the need for any future agreements to take into account civic society, trade unions, businesses and consumers. That is part of the consultation process. We also have the strategic trade advisory group. We are trying to make sure that there is a broader discussion on future trade agreements.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

I promise I will not take up the Minister’s extra time with other interventions, but I would like some clarity. She referred to ongoing and future consultation on agreements, but the questions asked were about this agreement and this treaty. What was the extent of the consultation with the devolved Administrations on this treaty?

Photo of Baroness Fairhead Baroness Fairhead The Minister of State, Department for International Trade

My understanding is that there were conversations at official level. After the debate in this House, we made a change and shared the full text of the agreement. For all agreements in place from 20 March, they will get the full text of the treaty. Prior to that, we gave them the text when it was initialled in draft form. We are learning as we go through this process, and fully understand the importance of that involvement.

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, I thank the Minister very much for her comprehensive reply, and underline my thanks to her officials for taking us through this process.

I do not intend to keep the House much longer; I have already indicated that I will not move this Motion to a vote. I thank everybody who has taken part in the debate. It indicates that, while this may be an umbrella agreement—and the Government clearly needed to provide a degree of continuity with what is, I repeat, our third-largest non-EU trading partner, and mainly in high-value trade—we need to ensure that the holes in that umbrella are rapidly filled, particularly in relation to the whole range of service industries, as noble Lords have raised.

Hardly anyone has disagreed with the findings on the Swiss treaty. The most wounding disagreement came from the noble Lord, Lord Kerr, who, in effect, said that we are being far too optimistic about potential future trilateral arrangements with the EU. Of course he is right—and that is the difficulty. It demonstrates that unless we can reach accommodation with the EU, the arrangements with Switzerland will be more difficult.

It will be even more difficult with the other big trade treaties. A great deal of reference has been made to the good will of both parties on this treaty, but it will not be so easy with Japan and many other countries. Unless they are played against the background of a positive arrangement with the EU, they will run into difficulties. This provides for no deal, but we hope that we will not be in that situation and will move to a broad understanding with the EU. However, if we do not, those problems will undoubtedly arise.

On the wider problem of scrutiny, Parliament has to take a decision and I am glad that the Minister has indicated that the Government are thinking about it. The noble Lord, Lord Robathan, is right that in the past Parliament did not get much involved in these matters or in treaties as a whole. However, since 2010 it has begun to get involved in treaties but, as far as trade treaties are concerned, until we leave that is a matter for the EU. The point I am making is that parliamentary scrutiny was at the EU level. It was not that the noble Lord, Lord Robathan, was asleep in the House of Commons when treaties were considered—not on that occasion anyway—but that they received the detailed involvement of the European Parliament, in a way similar to Congress’s involvement in trade agreements in the United States, as the noble Lord, Lord Kerr, pointed out.

That had the benefit of allowing time and interface with the devolved Administrations and civic society as a whole. That is the way in which we will have to approach the future pattern of our trade—not long-term continuity arrangements—and it will involve a profound rethinking of the role of Parliament in that respect. For all the reasons the Minister has just adduced, we will return to that issue. This treaty demonstrates the need for that. It also demonstrates the shortcomings of simply trying to roll over and the fact that this House and Parliament as a whole will have to return to these issues in short order—particularly if, regrettably, there is no deal. I beg leave to withdraw my Motion.

Motion withdrawn.