My Lords, Clause 33 amends the withdrawal Bill to debar any Minister from agreeing to an extension of the implementation period beyond 31 December this year. Such a possible extension is provided for in article 132 of the withdrawal agreement, which says that
“the Joint Committee may, before 1 July 2020, adopt a single decision extending the”
implementation,
“period for up to 1 or 2 years.”
My co-signatories and I object to this clause standing part because we believe that ruling out an extension of the implementation period in all circumstances is impractical and against the national interest. We do not believe that it will be possible to negotiate a comprehensive agreement covering trade, security and the other issues covered by the political declaration by the end of the year and, this being so, the logical and sensible thing to do is to allow for the possibility of an extension.
Why do we believe that such an extension will be necessary? I will concentrate on trade, although reaching agreement on other matters such as security will be equally contentious and time-consuming. What is the evidence that it will be impossible to conclude an agreement on time? Let us first be clear about what we mean by “on time”. The EU will decide on its negotiating mandate next month, so no talks will be possible at all until towards the end of February. The withdrawal agreement makes it clear in article 184 not only that the negotiations have to be concluded by the end of December but that ratification has to take place before the end of the year, so that the negotiated agreement can come into force, as far as practically possible, by 1 January next year.
Any comprehensive agreement will be a so-called mixed agreement, which will require it to be ratified not only by the EU Council and the European Parliament but by all national Parliaments and a number of regional assemblies. In the case of the Canadian trade agreement, the one we are told is closest to what the Government now have in mind, ratification itself took over five years. But to be very generous, let us assume that it might be possible within two months. This would mean that the agreement must be concluded by mid-October, giving a maximum of eight months for the negotiations.
It is well known that all trade negotiations, so far in human history, normally take years to complete. The Canadian agreement took more than five years, for example. The Government rightly claim that these negotiations will be different because we are already in full trade and regulatory alignment with the EU, so it will be easier than starting from scratch. While this may be true, it is absolutely clear that the negotiations will not be straightforward.
The head of the Commission, Ursula von der Leyen, said last week in London that it would be impossible to reach a comprehensive deal within the timetable. Even the Prime Minister yesterday said that, while he thought reaching a deal would be “epically likely”, he did not rule out the possibility of a failure to do so because of, as he put it, a possible
“complete failure of common sense.”
I looked up “epically” because, when I first read it, I thought it was a spelling mistake—it is a word that I have neither seen nor used before. It does not mean what the Prime Minister thinks it means. It means
“in a lengthy, grand or important way”.
He is in fact more correct than he probably realises, because this will definitely be done “in a lengthy way”.
What evidence is there to support the Commission’s view and to doubt the Prime Minister’s breezy optimism? It is worth looking at the Canadian deal to get some clues. First, despite the fact that that deal took many years of negotiation, it does not even give full tariff and quota-free access, something that the Government say is absolutely the first building block of what they are looking for. In the case of Canada, there remain quotas on poultry, eggs and meat and tariffs on beef, pork and wheat. This difficulty over agriculture is before we get to the even more difficult issue of fishing rights. The idea that we can easily reach agreement is simply false.
Secondly, on services, according to the Government’s own estimate produced in the document that we were allowed to read only by submitting our phones and going into a windowless room in January 2018, the Canada deal includes over 550 individual restrictions on the trade in services. Yet the Prime Minister says he wants the deal to cover all services. It might be possible in some areas, but the idea that there is a possibility of agreeing 550 concessions that were impossible to reach with Canada within the period that he is discussing is wholly implausible.
More generally, the Government want to minimise the cost of trading with the EU. This assumes a particular importance, because it applies not only to trade between the UK and the EU but also, now, to trade between Great Britain and Northern Ireland. We had a fascinating debate last night on the amendment of the noble Lord, Lord Hain, in which he sought assurance that there would be no restrictions on trade between Northern Ireland and the rest of the UK— restrictions, incidentally, that are envisaged, and indeed set out, in the Northern Ireland protocol. The Minister, the noble Lord, Lord Duncan, made a valiant attempt to argue, in line with the Conservative election manifesto, that there will be unfettered trade, but could not give a definition of “unfettered” consistent with the terms of
the Northern Ireland protocol, which clearly provides for customs and other checks. Incidentally, “unfettered” is now the word when it comes to trade. For how many years, and how many hundreds of times, have we heard the Minister talk about “frictionless” trade? How much of a tactical retreat “unfettered” is from “frictionless” is an interesting semantic issue. There is something in it, but the fact that the Government are not even pretending that they are trying to seek frictionless trade says something.
The noble Lord, Lord Duncan, who was masterful—as was his Sir Humphrey-inspired brief—had to admit that achieving even unfettered trade across the Irish Sea would not be straightforward. This means that it will take time. If noble Lords wonder whether the kind of checks that may well be necessary in future between Northern Ireland and Great Britain and between Great Britain and the EU matter, I would direct them to the impact assessment produced by the Government on 21 October last year to coincide with the publication of the withdrawal agreement Bill. On customs declarations alone, HMRC produced estimates of administrative costs—nothing to do with tariffs—of between £15 and £56 per declaration for goods going from the UK to the rest of the world.
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That is before the considerably greater costs that will be incurred in checks on any agricultural products. If at least some of these potentially crippling costs—particularly crippling to small businesses that currently trade only with the EU—are to be reduced, and it is very important that they are, there will have to be extremely detailed and no doubt contentious discussions, and they cannot be done quickly.
The likelihood of a comprehensive agreement being reached by mid-October then looks vanishingly small. Does this matter? What are the consequences of leaving without such an agreement? If we leave without such an agreement, there are two possibilities. Either we leave with no agreement at all—the so-called “crashing out” option, which we have discussed exhaustively over the last couple of years and which your Lordships’ House has consistently agreed would be disastrous for the economy and many other aspects of our lives—or there might be a so-called “bare bones” agreement. This possibility has been acknowledged by the Commission. To me, “bare bones” sounds quite businesslike and potentially attractive, but in practice it means an agreement that covers only tariffs and quotas and leaves all other aspects of the deal—not only trade in services but other issues such as security co-operation—still to be agreed. While this would be better than crashing out, it would be, again, potentially extremely damaging. Such a deal would give the EU tariff-free access in goods, in which it has a balance-of-payment surplus with the UK, but would leave the UK with nothing on services, where our exports to the EU are worth £90 billion—almost twice as much as our total exports of goods and services to the US—and where we have a large surplus with the EU. In these circumstances, our service industries would be at an immediate disadvantage from 1 January next year, and there would then be no pressure whatever on the EU to do a deal covering them.
In both scenarios, an extension of negotiations would clearly be in the national interest. The only third option, in the event of a failure to agree a comprehensive agreement by October, would be for the Government to negotiate an amendment of the withdrawal agreement to agree an extension of the implementation period, notwithstanding the current cut-off date of 31 June, and then to amend this legislation along the lines of that amendment. This would be, in one sense, what the Government did twice last year to extend the Brexit date for further negotiations and to get the legislation through Parliament. But in that, as in the other two scenarios, having the current Clause 33 in the Bill is simply unhelpful. It is unnecessary and potentially damaging to the economy, our security and the national interest. It should be deleted now.