Free Trade Agreement: Iceland, Liechtenstein and Norway - Motion to Take Note

– in the House of Lords at 5:10 pm on 14th October 2021.

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The Earl of Kinnoull:

Moved by The Earl of Kinnoull

To move that this House takes note of the Free Trade Agreement between Iceland, the Principality of Liechtenstein and the Kingdom of Norway and the United Kingdom of Great Britain and Northern Ireland, laid before the House on 16 July.

Relevant document: 3rd Report from the European Affairs Committee (special attention drawn to the instrument).

Photo of The Earl of Kinnoull The Earl of Kinnoull Chair, European Union Committee, Chair, European Union Committee, Deputy Chairman of Committees, Chair, European Affairs Committee, Chair, European Affairs Committee

My Lords, this debate is held pursuant to the provisions in Section 20 of the Constitutional Reform and Governance Act 2010. On 16 July, the Government laid before Parliament the free trade agreement between Iceland, Liechtenstein and Norway and the UK. Following discussions between the International Agreements Committee and ours, it was agreed that, exceptionally, the European Affairs Committee would conduct the scrutiny and prepare a report; this was as the European Affairs Committee is charged with considering the UK’s relationship with both the EU and the EEA, given their close economic relationship. The report has been prepared in exactly the same format as that successfully developed in recent times by the International Agreements Committee. I warmly congratulate the committee staff involved in its preparation, particularly the lead author, Chris Johnson.

My remarks will focus on two areas: first, the agreement itself, and, secondly, the scrutiny process for this free trade agreement and free trade agreements in general. The UK became a beneficiary of the EEA agreement on 1 January 1994 as a member state of the EU. In seeking to preserve the benefits of that agreement, the parties, namely Iceland, Liechtenstein, Norway and the UK, entered into two earlier international agreements. The first, in 2019, sought to preserve matters in a UK/EU no-deal situation. That has, of course, now run off. The second, in December 2020, aimed similarly to preserve tariff-free trade in goods after the UK’s automatic exit from the EEA at the end of the transition period. This second agreement was explicitly temporary, and the Government stated at the time that negotiations towards a more permanent agreement had begun in the summer of 2020 and were due to be completed in 2021. This objective has now been met via the new free trade agreement.

Importantly, as we point out in our report, this new free trade agreement goes further than the previous agreements in at least two significant ways: first, with the removal of some tariffs in the fisheries sector, as we detail in paragraph 35 of our report, and, secondly, as it also includes provisions on trade in services. We very much welcome this and note that, while the overall provisions remain more restrictive than was the case when we were a member state of the EU, they go further than the comparable ones in the EU-UK Trade and Cooperation Agreement, as the Law Society also commented.

Nevertheless, the committee welcomes the Government’s successful negotiation of this important agreement and the speed with which it was negotiated, covering a trading relationship valued at over £27 billion, most of which is with Norway. Imports of Norwegian goods are particularly important for Yorkshire and Humber, for instance, where they make up 13.2% of all goods imports, and for my native Scotland, where the figure is 10.4%. Unlike all the other trade agreements concluded by the Government so far, this is not a rollover agreement; it contains substantially new provisions, as I have just observed. Indeed, our report concludes that it should really be seen as the UK’s first new, post-Brexit free trade agreement.

At the same time, however, it is important not to overlook that a key objective of the FTA is to preserve the trading relationship that was there when the UK was a member of the EEA. As such, the free trade agreement is, in part at least, an exercise in damage limitation: it seeks to avoid new barriers to trade, rather than to remove existing barriers. Thus, its impact in terms of increased trade is likely to be modest and incremental, both in goods and services.

Separately, as the report points out, the interaction between the free trade agreement and the protocol on Ireland/Northern Ireland is complicated. We are surprised that no reference is made to this issue in the materials published by the Government alongside the agreement. We highlight this issue in paragraph 21 of our report. Could the Minister give us comfort that, in due course, the Government will provide business with suitable guidance in this important area?

Finally, on the new agreement itself, I would comment briefly on the governance arrangements. We set out the situation in paragraphs 26 to 29 of the report. The joint committee at the core of the FTA will comprise

“senior representatives of each Party” and has a duty to oversee “further development” of the FTA and review options for the

“further removal of barriers to trade”.

Could the Minister provide some colour around the UK’s expectations of further incremental progress in this relationship?

Turning now to the scrutiny process for this free trade agreement and for FTAs in general, I note that, although this is a substantially new agreement with countries which neighbour the UK, it has not been subject to the same levels of scrutiny and transparency as other new agreements will be, such as the forthcoming one with Australia. Moreover, the materials published alongside the FTA appear to have been published in haste and are in new and sometimes unhelpful formats.

In December last year, the Minister put on record, via a Written Ministerial Statement, a set of commitments for the scrutiny of trade agreements being negotiated with the USA, Australia and New Zealand and the proposed accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. For other agreements, the Government stated that they would

“provide further clarification at the appropriate time.”

The Written Ministerial Statement commitment included the publication of objectives, extensive stakeholder engagement and regular briefings for parliamentarians and committees, plus early access for committees to documents, so that scrutiny was facilitated. None of this has happened with this important free trade agreement, nor has any “further clarification” arrived to explain matters. Could the Minister comment on this?

In closing, I note that, before Brexit, international agreements were the competence of the EU and scrutiny at all stages could take place both through the European Parliament and through the European Union Committee and our sister committee in the other place. This scrutiny has been lost, and to maintain the balance between Parliament and the Executive, a new system needs to be found and adhered to. I thought the Minister’s Written Ministerial Statement last December was a good step towards this, and I am very disappointed that its simple formula has not been followed in this free trade agreement’s genesis. Last month saw the publication of the International Agreements Committee’s report, Working Practices: One Year On. I very much hope that the draft concordat that it proposes, and that the International Trade Committee in the other place supports, will be agreed to.

Photo of Baroness Ludford Baroness Ludford Liberal Democrat Lords Spokesperson (Exiting the European Union) 5:15 pm, 14th October 2021

I am not used to debates without speakers’ lists; I am a bit nervous about going first.

I thoroughly congratulate the noble Earl, Lord Kinnoull, on securing this debate before the expiry of the scrutiny deadline. As he noted, this is the first genuinely new post-Brexit free trade agreement, as opposed to a copy-and-paste of the agreements we enjoyed as an EU member state. As such, it has to be welcomed—but with some caveats. The committee notes that, although this is substantially a new trade agreement, there is a different government approach to parliamentary scrutiny for this one compared to others, such as the forthcoming Australia free trade agreement.

The committee says that government commitments on scrutiny have developed “iteratively”. A less diplomatic way of putting it might be that it is all over the place. Certainly, government commitments on consultation, publication of negotiating objectives, scrutiny of documents, briefings to the committees, access to the texts and so on have not been respected in the case of this agreement. My experience as a Member of the European Parliament was that if the negotiators—the Commission and the Council—took MEPs into their confidence early on, particularly through an approval of negotiating objectives, the further stages were much smoother. But of course, the European Parliament has much greater powers than the Westminster Parliament over trade agreements.

The committee called the layout of the parliamentary report, one of the explanatory materials, “hard-to-read”. It certainly is; I made the mistake of printing it out and it has the titchiest font that I think I have ever seen. The committee also said that the

“rationale for its production is unclear” and that even the impact assessment was “less informative” than on previous occasions. I hope that this might get a commitment from the Minister to do better in future.

I am interested to note that this free trade agreement includes mutual recognition of professional qualifications, which the Government did not manage to secure in the trade and co-operation agreement with the EU, such that any UK qualified workers wishing to work in the EU have to meet the qualification requirements of each individual EU member state, such that host country rules apply. Can the Minister, as an off-shoot of the subject we are debating, tell us what progress has been reached in securing reciprocal arrangements with any EU member state on a sectoral basis for recognition of qualifications?

The committee notes that although the agreement applies differently in Northern Ireland compared with the rest of the UK, none of the explanatory materials—the explanatory memorandum, the impact assessment, the parliamentary report—makes any reference to that, which is quite strange. Northern Ireland officials advised the committee that

“there remain considerable complexities around how Northern Ireland will fully benefit from UK FTAs”, and that the

“inability to fully comply with FTA measures for NI, where these conflict with … the Protocol”, needs to be considered. Obviously, the protocol is much in our minds now—as ever. Can the Government provide the committee and the House with a full explanation of these difficulties—this interaction between the protocol and FTAs—and what they involve in terms of WTO transparency, potential trade dispute risks and any other factors?

The Northern Ireland Government apparently saw the detailed text of this agreement only shortly before the announcement that an agreement had been reached. The Scottish Government have complained that they did not have a full role and were not involved in any of the crucial detail on tariffs and goods access or consulted on significant aspects of the negotiations. Unlike some colleagues—I am sitting behind one—I am not well up on the role of the devolved Governments, but I am concerned if a professed unionist party that currently sits in government is failing to be inclusive in trade negotiations. Can the Minister explain the Government’s record in respect of this FTA and what they intend in the future?

As the committee notes, and as the noble Earl, Lord Kinnoull, repeated, this FTA is

“in part an exercise in damage limitation”.

We cannot get back, certainly via this FTA, to what we had as a member of the European Economic Area. I notice that the explanatory memorandum does not even mention the EEA in its background section; it has been airbrushed out of history. It compares this FTA only with the previous ones on goods only. A fair comparison would be what we had as all being members of the EEA. This reaches the same level of farce as “Don’t mention the war”—Captain Mainwaring style.

The impact assessment claims that the FTA

“delivers more opportunities across services and investment and a range of other areas including digital, procurement and telecoms.”

This again can be compared only to the previous 2019 and December 2020 agreements, which covered only goods. As the Law Society protested, this FTA comes

“nowhere close to replicating the level of market access members”— that is, solicitors, the members of the Law Society—had “prior to Brexit”, when we were in the EU and the EEA, in the provisions giving complete freedom to provide services. That is what the comparison needs to be with. It is disingenuous of the Government not to mention and describe that, since we here are all going to know it. At least there are some mobility provisions in this FTA, unlike in the TCA with the EU, but they are only WTO mode 4, in the jargon, and thus more far more restrictive than the freedom of movement to work that we all had in the EEA.

A big gap is the failure to get diagonal cumulation on rules of origin. This is a subject for which I have always had to put a wet towel on my head, but what it means in practice is that while the UK, Norway, Iceland and Liechtenstein will be able to cumulate EU content, the EU has not reciprocated in the TCA. This means that Norwegian and Icelandic raw materials incorporated above a certain threshold into goods exported from the UK to the EU will attract tariffs as third-country content. Can the Minister give us any glimmer of hope of resolving that important issue in future?

The preamble reaffirms the commitment of all parties to the Universal Declaration of Human Rights 1948. What about the European Convention on Human Rights? As far as I know, and indeed I do know, all the partners—Iceland, Norway, Liechtenstein and, at least for now, the UK—are members of the ECHR. So why is the ECHR not cited and namechecked in the text while only the Universal Declaration of Human Rights is? Should I be worried about that?

Photo of Lord Hannay of Chiswick Lord Hannay of Chiswick Crossbench

My Lords, speaking as a member of your Lordships’ European Affairs Committee, whose report we are debating, I welcome these three agreements. That may surprise the Minister, who has taken a certain amount of criticism on some of the other debates that we have had on trade agreements, but I do. It is important to avoid the legal and, potentially, practical hiatus in our trading relationship with those three countries that would have followed from our ceasing to be covered by the EEA at the beginning of 2021, this year. Now, as a result of those agreements, that will not happen, which is certainly good news.

However, I have to say to the Government that they would get more credit on an occasion like this if they did not claim, as official spokesmen have done, that these agreements were in some way a massive break- through, a first new-era post-Brexit set of free trade agreements. That is the sort of hyperbole that I am afraid, since it is not true, tends to discredit what is actually a perfectly well-done job. These are nothing of the sort. We have actually been in a free trade area relationship with these countries for many decades, since before we joined the European Community when we were part of EFTA with them. I have to admit—to my shame, because there is the problem of ageism—that I was part of the negotiations for the free trade agreement with Norway and the other members of EFTA when we joined the European Community.

We have been in an even closer trade relationship with these countries since the establishment of the single market and the conclusion of the EEA agreements at the end of the 1980s, when we were all effectively in that single market together. So, as with other rollover agreements that we have debated, this is largely—although I agree not entirely—a case of running hard to stand still. Perhaps, when he replies, the Minister could spell out in what respect these agreements go beyond what we had as a member of the European Economic Area.

Then, as was referred to by both previous speakers, there is the question of applying these agreements in Northern Ireland. We know by now that nothing about the protocol is ever plain or simple, but will trade between Northern Ireland and these three countries be regulated by these three agreements or by Northern Ireland’s de facto—and in some respects de jure—inclusion in the EU’s single market? That rather matches the position of these countries.

Speaking of the EU’s single market, it is after all a living, evolving reality. Can the Minister say how the UK will be able to avoid our businesses and businesspeople finding themselves at a disadvantage to their continental competitors, as the latter improve their access to the markets of these three countries? This will occur whenever the European Union develops a new instrument for dealing, for example, with trade in services, as it will automatically apply through the consultative procedures that Norway, Liechtenstein and Iceland are bound to follow. How will we keep pace with that? What steps are the Government taking to ensure that the linked issues of access to fishing waters and tariffs on fishery products are settled, from 2022 onwards, at the beginning of the year and not, as this year, half way through it?

I do not apologise for straying a little beyond the precise confines of this debate on trade agreements with these three European countries because, as our post-Brexit trade policy evolves, it is important to situate the individual parts of it within an overall frame- work. I wonder if the Minister can say where matters now stand with respect to negotiations with the United States which, we are constantly reminded, is our largest single-country market. What are the implications for our bid to join the CPTPP of Pacific bordering nations or the recent similar bids to join that organisation by China and Taiwan? Will the bids be considered together or separately, and what will the consequences be for our trade relationship with China if we both find ourselves in the CPTPP and bound by its rules?

I revert finally to something I have raised with the Minister before: what progress is the Department for International Trade making in preparing to negotiate, with the countries of Africa and Latin America, those new-era, ground-breaking trade agreements, rather than the simple rollover ones that have been negotiated so far? Should countries in those regions not be given a higher priority than they have received so far? My own unhesitating answer is that they should, and I hope the Minister says that in future they will be given a higher priority.

The Minister has been patient and meticulous in replying to all these debates. I hope he replies to as many of the questions I have posed as possible when he responds to this debate, and the rest in writing thereafter.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative 5:30 pm, 14th October 2021

I am delighted to congratulate the noble Earl on securing the debate before us and on the work of his committee as well. I add my congratulations to my noble friend the Minister for negotiating this free trade deal. I have three short questions, if I may. All the other rollover agreements that we have looked at—I am thinking in particular of the agreement with the Faroe Islands—have been very asymmetrical in nature and I am sure it was a source of some concern to, in particular, the Scottish fishermen to see that we were probably taking three times more value of fish from the Faroe Islands than we were exporting. My first question is against the background that I welcome the comments of the noble Earl, Lord Kinnoull, that it will bring benefits both to Yorkshire and the Humber and to Scotland. I press my noble friend, in replying to this short debate, to confirm that this free trade agreement is more symmetrical, and that we are in more of an equivalent balance as equal partners with the three other countries which are party to it, particularly as far as the value of the fishing element is concerned.

I then turn briefly to the sanitary and phytosanitary measures, which I welcome as we seem to have reached an agreement with these three countries that enables the United Kingdom, Norway and Iceland to trade in plant and animal products which are from pest-free and disease-free areas. Paragraph 30 of the summary on the agreement says:

“The agreement allows the Parties to reflect changes that might arise as a result of any future United Kingdom-EU sanitary agreement dealing with sanitary measures on which Norway and Iceland are harmonised with the EU.”

If we are already harmonised with Norway and Iceland, surely then by definition we would automatically be harmonised with the EU, so I would welcome clarification on that point from my noble friend.

My last point echoes that put forward by the noble Baroness, Lady Ludford, regarding recognition of professional qualifications. My noble friend knows that this is a subject close to my heart—in the past I had the good fortune to benefit, being able to practise European law in Brussels. Paragraph 83 of the summary states that:

“Legislation may be required to deliver the commitments on the recognition of professional qualifications made in the Agreement”, and it goes on to refer to the Bill introduced in the House of Lords in May. I was grateful to my noble friend for the meeting we had, remotely, with himself and the Bill team in this regard and with the Law Society of Scotland and the Faculty of Advocates. Could he specify today what the timetable of that Bill will be? That is particularly appropriate as it is set out as being pertinent to the free trade agreement before us this afternoon. I welcome this, particularly as it is the first of the future trade agreements going forward.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade), Liberal Democrat Lords Spokesperson (International Development), Liberal Democrat Lords Spokesperson (Foreign and Commonwealth Affairs)

My Lords, it is a pleasure, as always, to follow the noble Baroness and to hear the very practical questions she put. I also commend the chairman of the committee that I had the pleasure of serving on, and the work of the staff who, along with those of the International Agreements Committee, do this House a great service by poring through all the details of the agreements and their accompanying documents and allowing us to have informed debates in this Chamber. In many respects, regrettably, by the nature of our process, as the noble Earl, Lord Kinnoull, outlined, these are retrospective—in many cases, we look at agreements that have already been signed and, as my noble friend Lady Ludford indicated, we look at the small print. Indeed, it is suspicious when entire documents are made of small print rather than just the footnotes, which, as the Minister knows, I am very keen on studying in detail.

I do not mean to offend or insult the noble Lord, Lord Hannay, but it is with great respect for his experience that I say that he negotiated a free trade agreement before I was born, so it is some surprise to me that the Government, in promoting this agreement, as with others, have highlighted only what they consider to be great positives. But as he clearly and forensically indicated, and as the noble Earl, Lord Kinnoull, indicated, in many respects this is an agreement of damage limitation.

After the agreement with the European Union, this is the second agreement with major trading partners which erects new barriers and burdens, rather than reduces them, for goods and services. The Minister does not necessarily have to take my word for it, but I hope that he takes the Government’s word for it, because I accessed today from the UK-Norway page on GOV.UK the following:

“Due to the interdependencies with EU laws and systems, the services and investment provisions of the existing EEA Agreement have not been transitioned. This means the agreement does not cover trade in services and investment. The UK has put in place some unilateral measures to ensure, where possible, business continuity in services and investment trade between the UK, Iceland and Norway but you may face additional steps or trade barriers if you provide services in these countries.”

The question before us is whether, when we analyse what these new barriers are, there are ways of mitigating against them.

This would be particularly important in Scotland, where, as the noble Baroness indicated, service sector trade between the north-east of Scotland—which I know the Minister knows extremely well—and Norway is fully integrated and very deep, with both trade co-operation and competition. The lack of a services agreement is of very significant consequence. As my noble friend indicated, there is also the impact on movement of people.

When Norway and the EFTA countries required to have constant debate and discussion with the EU, the parliamentary assembly for EFTA and the EU was of great help. Can the Minister indicate what the Government expect to be the Parliament-to-Parliament relationship between us and the three countries over this agreement? This point was raised by the noble Lord, Lord Hannay, and the chair of the committee with regard to the operation of the agreement. It is particularly acute given that, for Northern Ireland, there is a significant democratic deficit in the ongoing relationship, and because these countries are part, in effect, of the single market. With goods coming to the UK which will then go to Northern Ireland for trade, operating under single market rules, what say is given to Northern Ireland representatives and Members of this Parliament in overseeing this agreement? Or do the Government simply believe that it is a Government-to-Government trade agreement?

On people, can the Minister confirm or clarify the current situation for UK nationals who had been providing services in Norway who now require to be considered resident in Norway and receive residence permits to continue their work? This is just one of the new barriers and burdens ahead of them. New permits are required for British citizens and their family members if they are operating, and they need to apply by the end of this calendar year. Can the Minister confirm that all UK nationals are in this position and that there will be no discontinuity of them providing their services in the new regime if they do not have a valid residence permit? As my noble friend indicated, this is now under mode 4, the greatly reduced 90 days in 180 in Norway and 90 days in a year in Iceland. For those operating in deep sea or offshore engineering—who have to have, almost by definition of the industrial relationships, long-term placements and long-term work—have the Government indicated that there will be any disruption to the North Sea oil and gas industry relationship and deep sea and offshore engineering?

The committee that I serve on has just taken worrying evidence from musicians and those in the cultural sector, the impact on whom we are now well aware of. When it comes to those who will be touring and working within the creative industries, the Government trumpeted in their press release just on Monday in respect of visa-free short-term touring:

“Our recent trade deal with the three EFTA countries was based on the same offer”— as that made to the EU—

“and shows it is workable.”

Am I therefore to think that what is in this agreement with these three countries is the same offer to the EU which was rejected? Is this what we wanted from the EU? Up until this point, the Government have refused to publish the offer to the EU. Is it the case, from this press release, that, if we want to see what the relationship with the European Union would have been, this is the basis for it?

When it comes to the new arrangement for travelling to Norway, can the Minister confirm that those wishing to operate under this agreement will need a new ETIAS for travel to Norway? Do they need the €30,000 insurance to cover visiting? Can he also outline the cabotage arrangements for carrying out haulage and trade within these three countries?

Moving to one of the areas mentioned by the noble Baroness, can the Minister say why the UK failed to secure in this agreement protection of our agricultural products for geographical indications for Norway and Liechtenstein? Clotted cream from Cornwall, Cornish pasties, Cumberland sausage, Welsh lamb and beef, Stilton and Cheddar cheeses—all of which the Prime Minister and Liz Truss, when she was in the DIT, were fond to cite—are no longer protected for our trade in Norway, nor is Scottish wild or farmed salmon, a direct competitor with Norwegian salmon. The Norwegians already own much of the industry, and now we have failed to protect our products. Why are they protected in Iceland—I noticed in the fine print that Yorkshire forced rhubarb is protected for Iceland but Scottish salmon is not protected for Norway. I do not think it would take an economist to work out which is more significant for our economy.

It is not clear from this agreement whether goods will have to be labelled for export to those countries with the European EC mark, or whether those to be imported will have to have the new UK mark. It has been welcome that the UK mark has been delayed, because business is not ready to use it, but is that the case? Given the fact that, as the noble Earl, Lord Kinnoull, said, there was concern about the lack of detailed consultation with Northern Ireland, can the Minister say whether any goods coming from those three countries which will then end up in the Northern Ireland market will have to have a separate Northern Ireland mark, because I understand that that is still the Government’s position?

On the point of diagonal cumulation raised by my noble friend, given that a key export to Norway from the UK is engineered component parts for vehicles and transportation, and that they are the second biggest exports from Norway to the EU customs union, what is the economic impact of the lack of diagonal cumulation on the competitiveness of British trade?

I also ask why the Government failed to secure anything in addition to the basic WTO terms for procurement. The Scottish shipbuilding industry is a direct competitor of the Norwegian shipbuilding industry, so why are we now at a disadvantage in opening up procurement for potential bidders from the UK?

Given that the Minister, my noble friend Lord Fox and I are in ongoing discussions about the Professional Qualifications Bill—as the committee highlighted, the Government intend to implement part of the agreement in a piece of legislation that is not yet on the statute book—there is an interesting difference in terminology in this agreement on the professional recognition of “comparable” qualifications, which is not language used in the Bill. The Minister may not have time to address that today, but I think he will have plenty of time to consider it—I am sure he is looking forward to it—in discussions on the Professional Qualifications Bill.

One thing that he may be able to reflect on, which was raised by the Law Society, the Scottish Government and the Law Society of Scotland, is that we will now be in the rather ridiculous position that the single market will be operating in part of the United Kingdom, in Northern Ireland—so Norwegian businesses will be trading with part of the UK under the single market rules—but we have failed to negotiate an agreement where UK lawyers can trade to provide EU legal advice in these three countries. If that is not a competitive disadvantage for our legal services industries, I do not know what is.

My final point is about the consultation. The Minister knows well enough that it has been raised on many occasions, in the Trade Bill and on other agreements, that the UK Government should genuinely be much more open with our devolved Administrations when it comes to consultation. I completely understand that the Scottish Government have a very different narrative going forward with regard to the situation with the single market, but that is not an excuse for the Government to not share negotiating texts, when 84% of UK animal and fish exports, 67%—£150 million-worth—of petrol and petroleum products, £155 million-worth, or 40%, of general industrial machinery, and 42% of iron and steel exports to Norway and Ireland are sourced from Scotland. I could understand that if the Government believed that trade agreements have very little impact on our nations, but, when there are agreements that have very significant consequences, it really is incumbent on the Government finally to have a change of approach, to be much more open and to consult in a genuinely free and open way at the outset. That would mean that all parts of the UK would be likely to have a much better deal at the end of it.

Photo of Lord Grantchester Lord Grantchester Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Business, Energy and Industrial Strategy) 5:45 pm, 14th October 2021

I thank the noble Earl, Lord Kinnoull, for the timely report of his European Affairs Committee on this trade agreement and for his excellent introduction. The report supplements the earlier scrutiny provided by your Lordships’ International Agreements Committee in February this year before the signing with Iceland, Liechtenstein and Norway. This deal has been categorised by David Henig, director of the European Centre for International Political Economy, as

“a pretty bog standard Free Trade Agreement, with some level of tariff reduction and other preferential access against WTO terms”.

Of course, deals with our European neighbours are important as we want good trade deals that grow our economy, stimulate sectors and add to the prosperity of our communities by upholding our British values. But let us give this a closer look.

There seems to be a bit of a competition with Japan regarding whether its deal or this deal can be said to represent the first new post-Brexit trade agreement. The Minister will remember the debates during the passage of the then Trade Bill in 2019, which he emphasised was a continuity Bill, when many proposals were made to modernise this procedure and the way the UK would approach trade deals in the future. The Government refused to go further than the procedure of the CRaG Act, with some enhancements. However, they know that this Act was part of the process for parliamentary scrutiny when the UK was a member state of the EU. As the noble Earl’s report stated at paragraph 9:

“Although this agreement is substantially a new trade agreement, the Government has not adopted the approach to parliamentary scrutiny it is applying to other new free trade agreements”.

The Government published a parliamentary report more usually featured alongside other continuity agreements. The objective in this supposedly new deal is to replicate as far as possible the effects of the UK’s existing trade agreement. All this means that this agreement has not been subject to the same levels of transparency and scrutiny as other new trade agreements. In addition, materials and memoranda published alongside the trade agreement appear to have been produced in haste.

I therefore ask: have the Government yet decided on their blueprint of how they will undertake trade agreements? Do they yet have a consistent approach? The noble Earl, Lord Kinnoull, mentioned the new proposals outlined in the latest report from the International Agreements Committee. As he asked, it would be illuminating if the Minister could make some initial comments on this.

Meanwhile, it can be considered how this agreement reflects a modern approach to trade deals. This model has many expected elements, notably chapters on trade in goods, trade in services and investments, government procurement, intellectual property, cross-border trade, customs and trade remedies. In view of the many previous discussions, it is to be welcomed that this model includes important sanitary and phytosanitary measures to maintain levels of protection for human, animal and plant life and health, with co-operation commitments on animal welfare, AMR and sustainable food systems. The tariff reductions are also welcomed as part of the usual bartering. According to Erna Solberg, outgoing Prime Minister of Norway, Norway has

“given on cheese, but we got a little more on fish”.

There are some very worthwhile new features to congratulate the Government on achieving, but, regrettably, many notable omissions and inconsistencies. First, it is good to note the inclusion of labour standards and so refreshing to see the chapters on women’s economic empowerment and trade. Can the Minister confirm that these will now become universal and included in all future trade deals?

Also to be noted is the chapter on the environment, including climate law. Under paragraph 93 of the department’s parliamentary report, the agreement

“sets out provisions which seek to implement the Paris Agreement, cut greenhouse gas emissions and to promote trade and investment to grow the low carbon economy”.

This includes commitments to net zero, renewable energy, CCUS and hydrogen technologies. If this is to be the new model for future trade deals, which at last we can celebrate, can the Minister confirm that the newly proposed agreement in principle with Australia will also contain strict protocols on climate change in its final drafts, which are now being drawn up? With COP 26 only a couple of weeks away, I cannot stress enough to the noble Lord the urgency with which this must become part of everyday business for the Government.

The most serious omission, most notable by its absence, is the inclusion of a human rights clause. The Government have been repeatedly called on to explain their policy on the inclusion of human rights in trade agreements, with the Government agreeing to their importance but, yet again, failing to implement any commitment. On these Benches, we believe that the protection of human rights is fundamental to British values and our way of life and is to be included in how we trade. The Joint Committee on Human Rights declared that there was

“a strong case for requiring minimum standard processes, practices and clauses to protect and promote human rights in all international agreements”.

Can the Minister explain why this is excluded from this trade deal? While I am sure that there will be no concern when it comes to trade with our Scandinavian and near neighbours, what precedent does this set for future trade agreements? Can the Minister clarify whether human rights clauses are to be a standard inclusion in trade agreements by this Government, or will Ministers continue to fail to fulfil commitments to suspend preferential treatment to trading partners who knowingly commit genocide, the most heinous of crimes?

I would also like to mention issues around professional qualifications, which are part of this agreement. We recognise the importance of professional qualifications to allow skilled workers necessary to the UK economy to enter the UK and contribute to the UK’s overall economic benefit, as well as allowing British workers to live and work abroad. Regulators must be allowed and guided to seek mutual recognition agreements, but essentially in a way which does not undermine their regulatory autonomy, and which must ensure that domestic standards are protected.

This is crucial to the Professional Qualifications Bill currently awaiting Report in this House. It was revealed in Committee that the Bill had been drafted without the Government being able to understand which professions and which regulators were to be caught under the legislation. The Professional Qualifications Bill contains a power to implement the recognition of professional qualification elements of international agreements. Can the Minister explain how Clause 3 of the Bill relates to this trade agreement? Can the provisions of this agreement be implemented without Clause 3? How do the provisions in the trade agreement maintain and secure regulatory autonomy?

I shall briefly mention freeports, which are supposedly a flagship post-Brexit policy under this Government. Despite the Prime Minister’s words that freeports will drive growth and create thousands of high-skilled jobs in the so-called left-behind areas, this continuity agreement contains a clause which excludes business and manufacturing firms using the duty mechanisms in freeports from receiving preferential access to those markets. Is this at odds with government policy, yet another oversight or just another muddle? The economic value of freeports is yet to be properly understood. Can the Minister explain whether this prohibition clause will have an impact on jobs? The Government state that this agreement will support 18,000 jobs in Scotland and the north. Can the Minister outline what sectors these jobs are being created in and over what time period the Government intend them to be achieved?

I will draw my remarks to a close by considering specific aspects of this agreement in relation to the operation of the protocol on Northern Ireland, which is much in the news this week and has already been referred to in this short debate. It means that the agreement will apply differently in Northern Ireland. The noble Earl’s committee draws attention to the Government’s Explanatory Memorandum, which makes no reference to the interaction between the trade agreement and the protocol. I am sure the Minister will wish to explain the considerable complexities around how Northern Ireland will fully benefit from UK trade agreements. As the Government will promote the claimed benefits of this agreement, does the Minister believe that Northern Ireland will be getting an equal share of these benefits or are they limited by the Government’s negotiated protocol?

This trade agreement, while important, may not be considered massively instrumental to the future of the British Isles. Yet contained in it are many important features that the Government need to take far more seriously and consider again carefully.

Photo of Lord Grimstone of Boscobel Lord Grimstone of Boscobel The Minister of State, Department for International Trade, The Minister of State, Department for Business, Energy and Industrial Strategy 6:00 pm, 14th October 2021

My Lords, I thank the noble Earl, Lord Kinnoull, for tabling today’s Motion, and I congratulate the European Affairs Committee on its first foray into reporting on free trade agreements. Given the quality of this report, the IAC will need to look to its laurels. I also thank the committee for acknowledging the speed and pace at which these negotiations were successfully concluded and the ambition that is inherent in the final outcome. I will try to take the advice of the noble Lord, Lord Hannay of Chiswick, and prize modesty over hyperbole in my remarks—but perhaps not that of the noble Lord, Lord Purvis of Tweed, about stressing negativities rather than positivities—as I go through this.

I shall quickly deal with the question that my noble friend Lady McIntosh asked about the Professional Qualifications Bill. My understanding is that the House is likely to have the pleasure of returning to it some time after the first week of November. I am sure that when it returns we will be debating the points that my noble friend and the noble Lords, Lord Purvis and Lord Grantchester, have raised today. I look forward to that.

I note the comments made by noble Lords about the fact that the explanatory materials accompanying the FTA fell short of the committee’s expectations. The materials were drawn from the practice and approach we took to such materials for other continuity FTAs to date. Perhaps the difference between us is that I see this as a continuity FTA with some enhancements, as opposed to a new FTA, but I will come back to that rather arcane point later. Of course I note the concerns raised by the committee, in particular by the noble Baroness, Lady Ludford, in respect of accessible formats. As someone who is having a cataract operation on his right eye tomorrow, I fully endorse the need for fonts in these documents to be readable.

Moving on, I welcome the opportunity to debate and discuss this continuity FTA with noble Lords. I thank all those who contributed to the debate. I will try to respond to the many insightful and well-informed points that have been made. I think we all recognise that this debate has covered a wide range of topics. Some of them were perhaps not entirely within the scope of the Motion, while some were very technical, but I will of course respond to noble Lords in writing on all these points.

The free trade agreement between the UK and Norway, Iceland and Liechtenstein is an important achievement. We have enjoyed a strong trading relationship with these three countries for many years. Securing this trade agreement was important to all parties; as we have heard, total trade between them was worth no less than £21.6 billion in 2020. This continuity FTA is comprehensive and will support UK businesses across a wide range of critical sectors, including digital, financial and professional business services. It also locks in tariff-free trade on the vast majority of goods.

I agree with the noble Lord, Lord Grantchester, that this agreement contains some very progressive clauses on matters such as the empowerment of women. Of course, when negotiating new free trade agreements, it is always our objective to carry on this process of including progressive clauses. Perhaps it is the case that, with these three particular parties, we had like-minded counterparties in these matters. Negotiations are negotiations; they may not always be straightforward but I assure noble Lords that we always press for such things in our negotiations. There is much common ground across this House on the matters that it is right and proper for us to press on—including human rights, which we have debated many times in the context of free trade agreements.

As part of a shared goal to continue the deep trade relationship the four countries have shared in the past through the European Economic Area and single market, we have very good provisions in digital trade, mobile roaming and business travel. That is to be welcomed.

With all due respect, I want to correct the point made by the noble Baroness, Lady Ludford, about some of these mobility provisions. The mode 4 commitments with the EU under the TCA are similar to our commitments in this agreement and the mode 4 chapter provisions in the EU TCA. Indeed, in some ways, they go beyond what was agreed with the EU. If I may, I will write to the noble Baroness to clarify that further.

The agreement delivers services market access across a wide range of sectors. This is great news for professional and business services, financial services and transport services sectors. For example—it is a small example—Norway has agreed to remove residency requirements for senior management and directors. As I say, it may seem small, but it means that more British talent can be on Norwegian company boards without having to relocate there. These benefits, and the others in the agreement, demonstrate that this is a good agreement. Let me say to my noble friend Lady McIntosh that this agreement is good for all parties; it is a symmetrical agreement. I was pleased to see this acknowledged in the committee’s reports.

These negotiations were undertaken in the spirit of continuity to protect existing trade and future-proof our long-term relationship. However, translating the trade relationship that the UK enjoyed with these partners via the EEA agreement and single market into a bilateral FTA context has been a complex task. To future-proof our long-term relationship, all four countries agreed that the legal framework of a bilateral free trade agreement was the best way to protect and build on existing trade.

In answer to the question of the noble Earl, Lord Kinnoull, about further incremental progress in this relationship, these countries are our close trading partners and we will continue discussions on how to further strengthen trade in the future, using the joint committee arrangements as appropriate. I pick up the point made by the noble Lord, Lord Purvis: I hope that our Parliaments will have close contact with each other, which will be a good thing. We have pressure from our Parliaments and parliamentarians to improve and strengthen this agreement as we move forward. We will, of course, absolutely try and keep pace—the worry of the noble Lord, Lord Hannay—with any progress that the EU makes with these countries. We will try to make sure that we do at least as well as the EU does.

The noble Earl, Lord Kinnoull, asked about scrutiny of this trade agreement and questioned, quite properly, whether it fell short of undertakings that we have previously given. This was also a matter of concern to the noble Baroness, Lady Ludford, and the noble Lord, Lord Grantchester. We are in no way pulling back from the WMS of last December, but perhaps I may remind noble Lords that it outlined the Government’s approach to new FTAs with countries that did not have a trade agreement with the EU before the UK’s exit. We and I regard this agreement as a continuity agreement, albeit with some enhancements—I am trying to avoid hyperbole—and the Government have followed the same scrutiny process for this agreement as we did with other continuity agreements.

I can reaffirm that for new FTAs, the Government are committed to even greater transparency. In the ongoing live trade talks with Australia, New Zealand and CPTPP—although I hope noble Lords will understand that I cannot go into fine detail as to where those negotiations have reached—we set out our negotiation objectives, alongside a response to the public consultation as well as an initial economic assessment. The Government have continued, and will continue, to keep Parliament and the public informed on the process of negotiations via regular updates, including close engagement with the International Trade Select Committee and the IAC.

Some Peers have been kind enough to refer to the Grimstone rules in this matter. Modesty prevents me claiming credit for them but I can reassure the House that I am absolutely committed to the concept of parliamentary scrutiny for FTAs. I will continue to be committed and to argue for it whenever I see that we may be pulling back from that, which I certainly hope that we will not.

Perhaps I may say a few words regarding consultation with the devolved Administrations because I know that this was an area of concern to the committee and other noble Lords, including the noble Lord, Lord Purvis of Tweed. It is of course important to note— I have to put this on the record—that international trade negotiations are a UK reserved competence. It is in that context that we carry out our consultations with the devolved Administrations. However, regarding the specific negotiations that we are talking about, I can reassure noble Lords that there have been months of engagement with the DAs. I should recite, slightly at length, how that has been manifested.

It has involved a quarterly ministerial forum for trade with Ministers from the devolved Administrations; a six-weekly meeting involving senior officials from across the devolved Administrations; several chapter-specific policy round tables hosted by departments on key areas such as goods, rules of origin, and services and investment; regular chief negotiator calls running in parallel with key moments in the negotiations; and texts shared in areas of devolved competence such as services, climate change and environment, women’s economic empowerment and procurement, to name but a few, before the text was finalised with the negotiating partners.

I can understand why the devolved Administrations will perhaps always ask for more, but I believe that the level and frequency of engagement at all levels in the short timeframe for these negotiations makes clear our commitment to deliver trade agreements that will benefit every corner of our country.

This is a good point for me to turn to the issues surrounding the Northern Ireland protocol. I will come back to a point that several noble Lords have made. Perhaps we should have highlighted more in various memoranda that we did work very closely with the partner countries in this agreement to reach a shared understanding on implementing the agreement alongside the Northern Ireland protocol. After several meetings and lengthy discussions, the parties exchanged letters recording our shared understanding of this, as the committee’s report notes. I stress that the UK Government have negotiated this FTA on behalf of the whole UK, representing the interests of all UK nations, including of course Northern Ireland.

The Government have been very clear that the UK must function as a single customs territory in practice, as we operationalise the protocol. This means that, where the UK has FTAs, Northern Ireland businesses will of course benefit from preferential tariffs, just as the rest of the UK will, and Northern Ireland businesses will of course benefit from the tariffs that we have agreed in this deal. In direct answer to the noble Earl, Lord Kinnoull, I assure noble Lords that business guidance will be published in the usual way in relation to this.

In summary, this agreement or deal will protect our long-standing trade relationship—

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade), Liberal Democrat Lords Spokesperson (International Development), Liberal Democrat Lords Spokesperson (Foreign and Commonwealth Affairs) 6:15 pm, 14th October 2021

I am grateful to the Minister for giving way. He knows that I am a cheerful Jeremiah, even if I wish to be awkward sometimes and ask specific questions, some of which are about geographical indications. Could the Minister explain why the Government failed to secure with Norway the protection of the geographical indicator for the UK’s fifth-biggest food and drink export, the biggest single sector that is protected under a GI—Scottish farmed and wild salmon? Norway is our biggest competitor country around the world and is very keen for the world to take Norwegian salmon as Scottish—so why did the Government fail to do this?

Photo of Lord Grimstone of Boscobel Lord Grimstone of Boscobel The Minister of State, Department for International Trade, The Minister of State, Department for Business, Energy and Industrial Strategy

I thank the noble Lord. That was the first intervention I have ever had at this Dispatch Box, so it was a pleasure that, perhaps unsurprisingly, it came from the noble Lord, Lord Purvis. I quite accept the importance of the point that he raises. You cannot get all that you ask for, of course, when you negotiate these agreements. The agreement is as it is, but, if I can provide more information on the background to the noble Lord, I will of course do that and copy it to other noble Lords.

In conclusion, I again thank all noble Lords for their many insightful contributions to this important debate. I have resisted giving a running commentary on our total trade policy in this debate—we would be here for a lot longer if I were to do that—but, of course, I am always very happy to answer noble Lords’ questions on that. I look forward to continuing to engage—

Photo of The Earl of Kinnoull The Earl of Kinnoull Chair, European Union Committee, Chair, European Union Committee, Deputy Chairman of Committees, Chair, European Affairs Committee, Chair, European Affairs Committee

I am very sorry to be the second person ever to intervene on the noble Lord—and, of course, I am going to speak after him. But could he address the concordat point that has been raised?

Photo of The Earl of Kinnoull The Earl of Kinnoull Chair, European Union Committee, Chair, European Union Committee, Deputy Chairman of Committees, Chair, European Affairs Committee, Chair, European Affairs Committee

Certainly—there is a recommendation in the latest report from the International Agreements Committee that a concordat be entered into. The International Trade Committee in the House of Commons has written in support of that. So there is considerable support for it in Parliament, and it would be very interesting, as the noble Lord is here, to hear the Government’s current thinking.

Photo of Lord Grimstone of Boscobel Lord Grimstone of Boscobel The Minister of State, Department for International Trade, The Minister of State, Department for Business, Energy and Industrial Strategy

I thank the noble Earl. My memory flooded back as soon as he started to explain that. I thought that the report from the IAC was very good, as a marking of progress over the last year. It has made recommendations, which we are studying closely, and we will of course respond to the IAC on that in the normal way within the agreed timeframe.

Coming back to this debate, I look forward to continuing to engage with noble Lords on trade relationships between the UK, Norway, Ireland and Liechtenstein in the future.

Photo of The Earl of Kinnoull The Earl of Kinnoull Chair, European Union Committee, Chair, European Union Committee, Deputy Chairman of Committees, Chair, European Affairs Committee, Chair, European Affairs Committee

I thank the Minister, who is unbelievably courteous and was as courteous as ever when still answering emails from me at 9.20 pm last night. I think he realises that the whole House is very grateful for his engagement. I add my thanks to my many colleagues who have spoken in this interesting debate, unfortunately held late on a Thursday—a time when not so many of our colleagues were going to be here. I will not go through what everyone said—I would certainly never do that—but I have written down three things that I thought worthy of reflection.

The first is the chimera nature of this free trade agreement, which on the one hand is new and on the other is old. There is an element of a chimera nature, but I hope the Minister will reflect on the fact that the scrutiny processes in this House are well developed. The International Agreements Committee, which was born out of the European Union Committee earlier this year, is a highly professional organisation that wants to do good, not harm. Rebalancing, as I put it, between Parliament and the Executive is necessary, so I hope that if a similar agreement came along it might fall on the other side of the fence and that there would be some engagement.

In fact—this is my second point—as the Minister went through the good news about the devolved Administrations, I very nearly got up and said, “Can we have that as well?”, because they are getting a heck of a lot more engagement and discussion of these things than our own International Agreements Committee. That is another thing that the Minister might like to reflect on. I know he is deeply interested in scrutiny, and getting that balance right is very important. It is indeed a balance, and there could be too much. Reflecting on that would be good.

The final point—it seems to be the final point every time I get up in debates such as this—is Northern Ireland, of course. The Minister generously said there would be business guidance. There was no timetable on that, but I very much hope that guidance will come along pretty quickly. At the moment, if I were trying to import raw salmon into Northern Ireland, I am not sure what I would do, because it is the beneficiary of now being tariff free in the UK but not in the EU. Who knows what would happen to a piece of raw salmon when it arrived in Belfast? That needs urgent attention. There are quite a lot of other things to do with Northern Ireland that we raise in the report and that I hope would be coped with at the same time.

Motion agreed.

House adjourned at 6.23 pm.