Oral evidence - Brexit: future trade between the UK and the EU in goods

Examination of witnesses

Lord Price CVO and Lord Bridges of Headley MBE.

Q106 The Chairman: Good morning, Ministers. Thank you for coming here. The Committee is very keen to get going. This is part of the External Affairs Sub-Committee’s inquiry into the trade of goods after Brexit, but we hope to follow up with some issues that we raised at the autumn session of the joint External Affairs and Internal Market Committee.

I remind you that this session is in public. It is being broadcast and will be transcribed. We will send the transcript to you after the session, so if there are any errors that need to be corrected, feel free to make them and send them back.

We have a number of questions that you have had sight of, but the Committee might have questions that are not on the paper that was sent to you. If you would like to start with any opening remarks, feel free to do so.

Lord Bridges of Headley: I will kick off and keep my answer very brief, because I know that there are lots of questions and we are here to answer them. I start with a word of apology and a word of thanks.

First, I express our apologies that we have not sent you our formal response as yet. This is in no way meant to be disrespectful to the Committee; it is simply that there are one or two other things on DExEU’s plate at the moment and we want to make sure that as Ministers we all agree with every word of what we send you.

Secondly, I want to say a word of thanks, which is more important. Your report, which we are here to address and talk about this morning, is extremely good. It is very thorough and very timely. I have been going around various embassies in London, and a number of ambassadors have mentioned that they have read it. When we drew up the White Paper, it was extremely helpful to my fellow Ministers and to me in clarifying issues and addressing a number of points that you raised in it. Clearly the White Paper, as I have just said, addressed a number of those points. I hope that, like a number of people across Europe, you feel that we have now clarified a number of the main issues and the sense of direction that we are following. It has also brought out the sense that we are looking for a unique partnership with our European partners. “Partnership” is a key word, and I say “unique” in the sense that, whereas with other trade deals where countries are trying to lower barriers, we are trying to stop them going up—a point that I think we will return to time and again.

I am sure there will be issues that you will want to return to in depth and in detail once we have spoken today, and I look forward to working with you in the future.

Lord Price: The same goes for me. I want to say two things. First, thank you for the report, which was very insightful and interesting. Secondly, thank you for your flexibility on finding this date. As you may know, at the moment I am travelling three weeks out of four. I know that it was not ideal for you to meet as late as this, so I want to express my thanks to you for being flexible in finding this time.

Q107 The Chairman: Thank you very much. We all appreciate that the report has been well received by Ministers. Our own feedback from other agencies to which the report has gone out is that it has been welcomed equally there. Thank you very much for that.

Perhaps I may start with the first question to warm up the Committee and the Ministers.

On 17 January, the Prime Minister proposed a customs agreement with the EU. What might the content of such an agreement look like, and what work are the Government undertaking to assess the feasibility of different customs agreements?

Lord Bridges of Headley: It is a very big question, so forgive me if I give quite a long answer. I will start off with the content. As I said, the first and most important thing is to point out that we are obviously looking for free and frictionless trade. The word “frictionless” is very important here. A lot of the debate focuses on tariffs, but other issues, such as non-tariff barriers and standards, which I know we will come on to, are also very important.

The second big point—the one I made in my opening remarks—is that, as I said, we are building on strong foundations in the sense that at the moment our regulatory standards are totally identical to those of the EU. The Great Repeal Bill will enshrine EU law in UK law, so that at the point of departure, with some exceptions, everyone will know exactly where they stand. Those are two big points.

On the arrangements, I know that the question refers to customs per se. I have been fortunate enough to talk to a number of businesses and operators through the supply chain. I think—and I would be interested in your views on this—that customs are obviously key. We will talk about customs, but we need to look at the entire supply chain from start to finish, as well as at its different component parts. If we focus simply on what happens at the border, although that is critical, we may miss other points. So I am looking at all those procedures that people have to go through.

On the question of what we are looking at, there is something that I hasten to add in all this. Forgive me for saying this, but it is a big health warning in relation to what I will say this morning. When I cite precedents, they are examples that we might look at and which you may wish to look at in further reports. I would not want the Government to be thought of as saying, “A, B or C is now going to be a Government position in the negotiations”. I am giving you interesting examples from around the world, and I would like to talk about a few.

Clearly there is NAFTA in relation to the supply chain across the US, Canada and Mexico borders. They have a lot of examples of how to manage very complex supply chains, especially with the automotive industry. In relation to the processes, there are examples of schemes that businesses can work with, such as Authorised Economic Operators. As you probably know, this is an internationally recognised quality mark, indicating that a trader’s role in the international supply chain is secure and that their customs controls and procedures are efficient and compliant. The AEO status can therefore give businesses simpler and faster customs procedures. I have been told that HMRC estimates that UK companies with AEO status account for around 60% of the UK’s imports and 74% of the UK’s exports.

The EU has mutual recognition agreements on customs with China, Japan, Norway, Switzerland and the US. These allow firms with AEOs in one party to take advantage of quicker access to certain simplified procedures, and sometimes they give the ability to fast-track shipments while exporting to the other party.

On top of that, there are other precedents that it might be worth looking at. For example, there is the Common Transit Convention, which the EU and other parties are party to. Under this, as you probably know, the trader responsible for the movement provides a guarantee to cover the potential duty and tax liability that will fall due in the destination country, assuming that the goods are not diverted en route. Once again, this procedure facilitates the smooth movement of goods across countries and ensures that, if things go wrong in a legitimate supply chain, there is no fiscal loss to the authority.

Those are just some of the examples and I could go on. I know that later we might want to get on to other parts of the supply chain which, as I mentioned at the start, I think are very important. Standards are key, as is conformity assessment, which we mentioned in the White Paper. Mark, I do not know whether there is anything that you feel I have missed on that.

Lord Price: As I said to the previous Committee, I will try to answer questions on matters that are outside the EU. It is very clear that Lord Bridges is answering questions on matters inside the EU.

As the Committee knows, we export outside the EU and there are customs arrangements. Part of the role of DIT, as it is now but UKTI as it was before, was to talk to other countries about customs facilitation. On a recent trip to Peru, I talked about how we use the flow of goods into Peru that go through Panama. Equally, they had concerns about goods coming into Europe and how they are moved around. At the moment there is a very active dialogue about how we improve customs arrangements. It will be one of the things that we talk to India about when we have our working groups, and it is an area where UK companies find some challenges.

This is already an active debate. It is not a new topic per se, although clearly there will be new arrangements with the EU, which Lord Bridges has described.

The Chairman: Thank you. I can see implications for follow-up questions just from your opening remarks. I think they have laid out more questions than perhaps we have answers to. Lady Suttie, would you like to start? Then the Earl of Oxford.

Baroness Suttie: Could you say a bit more about how you see the customs agreement working in the specific case of Northern Ireland?

Lord Bridges of Headley: That is obviously a significant challenge. Let me talk about the backdrop to it. As I said the last time we met, we are blessed by the fact that very good co-operation and conversations are taking place between us, our counterparts in Northern Ireland and those in the Republic. Forgive me, but I will not go into a lot of detail about where we might land up there, because these conversations are still taking place.

It is clear that, as you have said many times, we do not want to return to the hard borders of the past. To achieve that, as I said before, we are looking closely at how digital technology data can help us and how working closely—I am choosing my words very carefully here—with our colleagues and counterparts in the Republic and in Northern Ireland can help address the flow of goods and make sure that it is as free and frictionless as possible.

We are acutely aware of how much both sides of the border—both Northern Ireland and the Republic—rely on one another in the export and import of goods on a daily basis. We are acutely aware that there, among all places, we need to make sure that the flow of goods remains frictionless. Forgive me for not being more fulsome in what I can say, but it is very much work in progress, and there are obvious political sensitivities that I just have to be careful about here. My apologies, but I cannot say more than that.

Q108 Earl of Oxford and Asquith: Within the ideal frictionless framework which the Government will negotiate, do you see that in reality and in practice there will be a lot of supplementary negotiation from the corporate sector, or indeed from individual companies, following up from an overall framework? You have talked about the Common Transit Convention and AEO status and so on. Does that imply that there will be a longer process whereby individual companies or corporate sectors will negotiate their rules of engagement, as it were?

Lord Bridges of Headley: It is a perfectly legitimate question. Some of that will obviously depend on the final agreement that we reach with our European partners as regards the processes and systems that underpin the FTA. There are processes and systems—AEOs being one at the moment—that businesses use. If you are asking whether businesses will be asked, expected or encouraged to apply for schemes, clearly that might be one option to ease the passage of goods; I gave you some figures on how many are already party to those schemes.

There is the separate angle of standards and the role that individual corporates play in the setting of standards, but let us park that for the moment. In terms of what you saying, that is as far as I am going to go right now, but your point is valid.

Lord Dubs: May I just go back to something that you said about Northern Ireland? You were very reluctant to get into that, but perhaps I may be permitted to say this. You said that conversations were taking place. It is not clear to me why that is more confidential than anything else you are saying. If conversations are taking place, whom are they taking place with?

Lord Bridges of Headley: They are taking place with the Government in the Republic and with the Executive in Northern Ireland, and with other interested parties, such as businesses, on a number of levels. I am sorry if I sound reluctant to answer on this. Yesterday I met the operators of ferry lines between the mainland and the Republic. For example, the processing of roll-on, roll-off ferries at Dover is a process issue. There are obviously process issues that we may wish to look at that have a heavy political overlay in the Republic. That is all I am saying. I do not want to set up the concept that we are looking at various processes around the borders and set hares running on this.

Lord Dubs: May I throw in another quick supplementary question? If we are talking with the Republic, how does that sit with the EU’s view that no negotiations may take place at this stage at all? I do not understand how—

Lord Bridges of Headley: When I say that we are talking to the Republic, I mean that there have been informal conversations with numerous embassies and ambassadors. I have had conversations in private with lots of people. I am saying that, within the Northern Irish formal structure, there is a formal process going on within the Joint Ministerial Committee and informal conversations are taking place at the moment. That is as you would expect. I do not think that is saying anything new, because we have had numerous conversations.

The Chairman: Before we go on to the next question, I want some to get some clarity on the alternatives that you laid out in your opening remarks. Is it correct that, despite any such agreement or arrangement, border checks and requirements regarding origin cannot be eliminated entirely? Will they still need to take place?

Lord Bridges of Headley: It is very likely that we will need to do something on rules of origin. Obviously, a lot of this depends on the final nature of the free trade agreement, so forgive me for hedging on where we will be.

Do you want me to comment on rules of origin? There are examples of how rules of origin operate in other free trade agreements that can obviously mitigate the impact for different sectors. CETA [1] is one, and there are other examples that I think the Australian Productivity Commission has come up with. I do not know whether you want to stray into that.

Q109 Lord Horam: The tricky point about the frictionless agreement that you want to conclude, which we entirely understand, is the rules of origin. If you are outside a customs union, you have to have rules of origin to prevent third countries gaming the system and getting entry in that way. At the moment no one can understand how you can combine a frictionless system with having to deal with rules of origin, which cause friction.

Lord Bridges of Headley: It is a valid question, and I shall try to answer it. I want to make a couple of points as background. I am sure that you know this, because you have been studying it. First, even where we currently apply customs requirements on trade with the rest of the world, not every import needs to be inspected at its point of entry into the UK. The EU’s Common External Tariff is already zero for about a quarter of tariff lines, so preferential origin requirements do not apply on those goods.

This is why I am being very careful about what I say about the extent of the application of rules of origin. Your question is very valid. I would point you to CETA—

Lord Horam: Sorry, CETA is—

Lord Bridges of Headley: It is the Canadian trade agreement. Under CETA, goods are deemed to originate in the EU or Canada as applicable—they are called originating products—and will be tariff-free in accordance with the CETA tariff elimination schedule if they were wholly obtained there and produced exclusively from materials that originate there or have undergone sufficient production there. So there is that.

There is another interesting example—and, again, my previous health warning on all these applies—of where you could minimise rules of origin compliance. I draw your attention to the Australian and the New Zealand Productivity Commissions’ 2012 report into strengthening trans-Tasman economic relations—quite a mouthful—which waived rules of origin requirements on goods that would attract a tariff below a de minimis level of 5% in that case.

So you are correct that there is a means of mitigation by which we could address that.

Lord Horam: It is a mitigation, but it is not an elimination. That is the problem. You have no rules of origin inside the customs union. You will have something that may be mitigated under the arrangements that you hope to come to, but it is not nothing. Therefore, there is a cost. Is that right?

Lord Price: Clearly this question is linked to the shape of an ultimate comprehensive FTA with Europe, because, as Lord Bridges has said, even under the WTO, 25% of lines coming into the EU are tariff-free. Therefore, the extent to which we conform to Europe in terms of standards regulations and tariffs makes it easier for it to be less or more frictionless. We have already talked to Switzerland, which has to apply rules of origin, particularly in relation to the areas where they find that straightforward and where they find it more cumbersome. We have talked to Norway, to the US and to Canada. We have had groups of people looking at the arrangements there to see what applies.

It is also true to say—and Lord Bridges said this—that this is not news to us in the sense that in current FTAs we have rules of origin that we have to apply outside. So there are already processes in the UK. The goal is to try to make those as frictionless as possible by having as few barriers and tariffs as possible to make it easier to move goods, and to build on what we are already doing today to make it easier.

In a way, it is very hard to answer your question until the full shape of a comprehensive FTA and the extent to which you want free and easy movement of goods on both sides are known.

Lord Horam: So you are saying that there are encouraging examples from Switzerland and elsewhere that indicate that this could be not a big problem. But it is still a problem.

Lord Price: It is an issue that we do not have today on goods that go through Europe. It is an issue that we do have today on goods that go outside Europe under some of our treaties. It is a hurdle that would be there in the future, as not full members of the customs union, that is not there today. Our research, as the Prime Minister has said, is trying to guide us on how we make that as frictionless as possible. The more comprehensive and closer the FTA, the lower the hurdle will be.

Q110 Lord Stirrup: With regard to our trade in goods, about 47% of our exports go to the rest of the EU and about 54% of our imports come from the EU. So after Brexit we will essentially double the quantity of goods that flow across our borders, to which some sort of regime will have to be applied. Whatever the nature of the final customs and free trade agreement with the EU, presumably there will be some bureaucratic requirement. We all understand that there is a desire to negotiate to minimise this, but, as Lord Horam said, there will still be something there. The UK will need the capacity, both human and technological, to deal with that doubling, and let us be frank: government is not very good at this. I do not just mean the Government of which you are a part; I am talking about all governments. One only has to look at our glorious history of large IT projects to understand that this could be a real problem. That kind of capacity cannot be created overnight, so what thought are the Government giving now to building that capacity, both human and technological, to deal with the challenges that lie ahead?

Lord Bridges of Headley: You say that we are not very good at it. Okay, government IT projects are not the kind of thing that make you sleep easily at night, I agree. But I would say a few things. First, on our record to date, if you look at our performance at customs internationally, you will see that actually HMRC does a good job, and we can furnish you with some figures on this. I am not trying to say, by the way, that we are complacent, and I am not trying just to waft this away, but I would just point out—

Lord Stirrup: On a point of clarity, I am not suggesting that the people who are charged with doing this are not good at their job. I am saying that government is not very good at building such capacity.

Lord Bridges of Headley: Yes, okay. That is a fair point. But at the moment, we have very good processes at our borders. As Mark said, that is obviously for non-EU trade, but just to give you some figures, HMRC figures show that 92% of all declarations relating to goods arriving from third countries are cleared for UK customs purposes in less than five seconds, and that 8% of goods are identified for further control requiring examination of paper documents or physical inspection. The 8% shows the kind of figures that they are dealing with, and the 92% shows how quickly they are dealing with those declarations.

On the question of how we go forward from here, you are right, of course, that there could be a significant increase in the capacity required in that system. However, the first thing to say is that we have quite a strong system on which we can build. On the question of managing it, we have a joint customs consultative committee consisting of 20 associations representing priority business sectors, and from Government the Treasury, HMRC obviously, my department and BEIS, working together to look at exactly the issue that you are talking about.

I do not know how many of your Lordships have seen the reports about the new IT system that is being created—the CDS.[2] It was planned before the referendum to increase the capacity of the current CHIEF system.[3] We have looked into this a lot, and it should—should—provide us with good timing, because we need the extra capacity that it will provide. The two systems, I have been assured, will be able to be run side by side, so we should be able to have the capacity. Also, in the longer run, the CDS should make things quicker and easier to operate.

I absolutely hear what you say about government IT projects, and you are quite right to raise it with us. We are really focused on this, and we will continue to scrutinise it.

Lord Price: Just to add to that, we are helped by the fact that we are not starting with a blank sheet of paper here; we already have considerable exports to countries outside the EU and, of course, considerable imports from outside the EU.

I have to say, from having run Waitrose in my previous job, that our ports and airports do a really first-rate job of moving goods through. We principally exported outside the EU and it was rare ever to have a problem with the movement of goods coming into or out of Asia and around the world. I would say that we have a very good system at the moment for moving goods through customs. It is just that we now need to add the capacity in some form for what will happen in the EU. It is not as though we are starting with a blank sheet of paper with no capability and no expertise. I would rank our expertise as pretty good worldwide. I have had no UK exporter say that they have a problem with UK ports and airports. I have had no international company importing to the UK saying that they have a problem. Normally, it is the other way around.

The Chairman: May I just come back to you on the CDS? When do you think you will see it come online? To add to that, you agree that there will be a need for additional capacity. Have you estimated what the cost of the additional capacity will be?

Lord Bridges of Headley: We are obviously looking at that. I am sorry if I sound elusive, but the cost will depend on what we expect to happen at the borders, and what we expect will need to happen at the borders in physical terms, such as new infrastructure. So I am sorry to say that I will not give any figures now. When we can provide figures, we will, and I am sure that there will be further added scrutiny, quite rightly, on this point when we introduce primary legislation on customs, which we have said we will need to implement.

On the implementation and delivery of the CDS, I am told that HMRC is making every possible effort to make it ready for operation in 2019. As I say, this was already in train, so in a sense, although I know what was said earlier about the wider government IT projects, here it might be a blessing to have this process already under way.

The Chairman: Finally, with all IT projects, the one thing that worries all of us is cyberattacks. Perhaps you could this answer in writing, because we have a number of questions to get through, but it would be useful to have an idea of the means that you are employing to ensure that that is covered.

Lord Bridges of Headley: I am happy to look into that.

Baroness Symons of Vernham Dean: Have you already started the additional training? You say that this is all under way and that we are getting prepared, but there is the IT issue and there are also the human beings involved.

Lord Bridges of Headley: Absolutely right.

Baroness Symons of Vernham Dean: When are you going to start saying, “Right, we now really have to start a training programme to make sure that we are ready on day one of a changeover”?

Lord Bridges of Headley: That is an extremely good question. I will not give an off-the-cuff answer. I would like to write to the Committee about that. I know that HMRC is really focused on capacity in terms of both system and personnel, but may I write to you about that? It is a very fair point.

Q111 Lord Balfe: I want to turn to agencies. There are a lot of EU agencies. Some of them, like the one relating to working and living conditions in Dublin, are merely advisory and collect facts. Others, such as the European Medicines Agency and the European Aviation Safety Agency, play a quite central role. To what extent will we seek to remain part of these agencies, and to what extent do we envisage leaving some and joining others? And where are the negotiations? Has anyone done an assessment of the agencies and their value to UK plc?

Lord Bridges of Headley: I have a little list of agencies in front of me. It is not even a comprehensive list, so I will not read it out, but it is quite extensive. The straightforward answer to your question is this. As we say in paragraph 8.42 of the White Paper, we are very much looking at all the agencies. We are approaching all these issues in terms of what is in our national interest and therefore of what will be in the long-term interests of a partnership between this country and the European Union. There will potentially be agencies that we will wish to continue to play some sort of role in—I do not rule that out—and there may be others that we do not play a role in. I cannot say that there will be a blanket all in or all out. Some of this might depend on the role we wish to play in, for example, the creation of standards, which we will come on to. Europol is an agency. I know that this is not for this Committee but what kind of a role do we want to play in that? That is very much where we are approaching this from. It is not going to be a one-size-fits-all rule, so the role that we play is not a binary choice that can be made right now.

Lord Balfe: Do you envisage a statement on our relationship with agencies?

Lord Bridges of Headley: A statement per se?

Lord Balfe: Outlining what we hope to achieve.

Lord Bridges of Headley: I am not going to commit us to that right now. There may be but, as I said, they deal with so many different issues. For example, there is the European Police College and the European Union Satellite Centre. They are very different kinds of agencies dealing with very different things. To be honest, I do not know whether we will be able to give a position on all of them at the same time, but we will see.

Q112 Lord Risby: Could we move on to mutual recognition and regulatory harmonisation? In our discussions with businesses, and certainly in my discussions with businesses, this always arises as an issue. We were struck by a very clear and defined message not only in what businesses said but in what the Japanese Ambassador said when he came here.

As we move on to create FTAs, what are your thoughts on how we deal with this problem? I think you mentioned earlier that there was already a precedent in countries such as China and India for moving in that direction. It is obviously a matter of huge significance as we create FTAs, not only within Europe but outside.

Lord Bridges of Headley: I totally agree, and it is one of the areas on which your report usefully focused our minds. It is not that we were not focusing on it already, but it brought it into sharp relief. As a precursor, as I said at the start, the Great Repeal Bill will take EU law and regulation and import it into UK law. I very much hope that that will provide a level of certainty for businesses. Having gone round the country and talked to scores of businesses, I think that should help. Secondly, as I said at the start, we are starting from a good base in terms of conformity.

On the question of where we go from there, as you said there are examples of mutual recognition agreements (MRAs) that exist in other relationships. The EU-Swiss deal provides a broad-based mutual recognition of conformity assessment for checking requirements. Canada and the EU also agree to mutually recognised conformity assessment practices, and they have a regulatory co-operation forum. On top of that, the initial EU proposals for TTIP also put forward the establishment of a regulatory co-operation body to facilitate US and EU regulatory authorities working together.

If I may build on that a bit, my conversations around the country with a whole range of businesses, from very large multinationals to much smaller businesses, has brought into very sharp relief how standards are developed. A very interesting piece of evidence was given to the Science and Technology Committee of this House by Dr Scott Steedman, Director of Standards at BSI. He said, “The EU does not make standards”, and that the UK is, “not on a treadmill of local, national, European, international. We, the UK, seek to work at the global level first”. Those are his words, not mine. That brought into sharp relief in my mind how some standards are created.

At the international level, you have bodies that we will remain party to. Those standards come down and some are incorporated or recognised by the EU in regulations. Then there are European non-EU bodies that create standards, some of which are recognised in EU regulations. Then there are our own standard setters. So this world is not straightforward in the sense that there are people in the European Union creating these standards. As you all know, many standards originate from business itself. As we look ahead, obviously we will look for the kinds of arrangements that I set out a second ago, but we are also looking at what participation we already have and might have in multinational, European but non-EU bodies and elsewhere.

Lord Risby: May I add one small thing? Maybe it is too premature to invite you to give an indication of what might happen, but yesterday a number of us heard the Secretary of State talk about the Great Repeal Bill as the basis from which we are going to advance. I would be interested to know whether any thought has been given to the process thereafter. He talked, for example, about the role of the House of Commons in this. Having brought it back and put it into our law, we then begin a process of amending, changing, improving or whatever. Do we have any thoughts about that process, other than the general umbrella that you have outlined?

Lord Bridges of Headley: I will dodge the bullet in a sense by saying that my department’s responsibility is to deliver a smooth, orderly and successful Brexit. When we have left, it will be for other departments and this House—not just the other place—to consider what we do and how we do it. We have made it very clear that standards, workers’ rights and so on will be protected. In certain cases, we already have a better record than the EU. For example, we have had a strong track record on the environment and we definitely intend to keep it in that position. That is basically my approach to that.

Q113 Lord Horam: As a follow-up, you were very kind in what you said about our report on the options for trade. You will see that we took evidence from the automotive industry. In your introductory remarks, you talked about supply chains. In the case of a company such as Nissan, they are just-in-time supply chains, with parts going backwards and forwards between France, Holland and the UK and then becoming a final manufactured good. How would that be affected by us being outside the Single Market and the customs union? It would not be possible to have a completely frictionless—to use your word—arrangement if we were outside the customs union.

Lord Bridges of Headley: I draw your attention to what I said about AEOs as regards mitigation.

Lord Horam: That is one possible answer.

Lord Bridges of Headley: Yes. There are other possible answers relating to inward processing relief within the EU, which is in the UCC.[4] That can also mitigate tariffs—I am just raising this as something that is there or will be there. As regards standards, this would obviously be something that we looked at.

Lord Horam: I do not think that is an issue.

Lord Bridges of Headley: Sorry, are you thinking just of time?

Lord Horam: These are time-critical arrangements, which are part of a fully integrated manufacturing process.

Lord Bridges of Headley: We are really focused on this. Going to ports around the UK, the first thing you see—I do not want to cite the automotive industry or a specific company—is that the digitisation of containerised traffic, if it is just-in-time, is at a very high level. At certain ports, you see lorry drivers driving in. They have had an app that they can tap in, so they drive straight through the port under a gantry that has automatic number plate recognition. The lorry will be told exactly where to go. It goes straight on and straight through. Those systems now exist—this is containerised traffic for non-EU. That is one system that you could look at for making sure that things remained really swift.

There is undoubtedly an issue. I was talking yesterday to operators on the Channel routes about roll-on, roll-off traffic. We are very focused on this. There are issues there, as you so rightly say, with the time it takes to process on both sides of the Channel. The obvious point is that having identified a problem we are now trying to simplify the solution to it as far as possible—and it is not just automotive; I have been to aerospace companies and others that rely on this. I do not want to sound complacent or say that I am dismissing the concerns that certain people in those sectors might have, but those businesses have supply chains that, because they are complex, are highly digitised. Many of them have data within their grasp that may be able to help us as we move forward on this. Your point is well made and we are really focused on it.

Q114 Baroness Symons of Vernham Dean: Perhaps I may follow up on that, Minister. Earlier on, you said that 60% of British firms were reliant on AEOs. Is your advice now for companies to start looking at compliance issues if this is a possible mechanism for overcoming the problems that Lord Horam has identified?

Lord Bridges of Headley: I am not going to use this platform to start issuing governmental advice, if you will forgive me. We are in close conversations with large multinationals, which, as Lord Horam said, have very sophisticated, just-in-time delivery—often to the minute, or minutes—about what mitigation might be imposed. Forgive me, I am not going to start issuing advice, but we are certainly talking to them. When and if we wish to start issuing advice, I can assure you that we will do so formally. I should add that when I stand at the Dispatch Box and say that I want a smooth and orderly exit, when I leave the Chamber I will have discussions with businesses about precisely this. We have to talk to businesses, and I am, as much as possible about what practical steps we and they could take in the months and years ahead.

Baroness Symons of Vernham Dean: I think that answers the point I was trying to raise. Thank you.

Q115 Baroness Armstrong of Hill Top: Nissan is already moving very fast in changing its just-in-time processes, which are causing real challenges to the local authority in Sunderland. I want to pursue a little more the issues of regulation, non-tariff barriers and standards, and how they will be monitored in the future. Will you push this down to the industries?

Lord Bridges of Headley: Sorry, push who?

Baroness Armstrong of Hill Top: Do you push it down to the industry to do the monitoring? The EU has been very important in monitoring environmental standards and adjudicating. We do not have those same operations in this country at the moment on the level that the European Union uses. So I wonder how we are going to do that.

Lord Bridges of Headley: Forgive me. Do you mean when we have left and on those issues where we have ported EU law back into UK law?

Baroness Armstrong of Hill Top: Yes.

Lord Bridges of Headley: That is an excellent question.

Baroness Armstrong of Hill Top: How are we going to monitor? It is not just a question of what people are going to have to do but how we monitor it.

Lord Bridges of Headley: I totally agree. First of all, they already need to abide by the laws that are in the EU corpus, in the acquis. When we bring them back into UK law, they will continue to need to do that. On your very good question how we monitor it, we are looking at UK agencies and their capacity to do precisely that. I am sure that when we come to the Great Repeal Bill, we will talk about this at greater length. It may have to say “watch this space” on that, but we are looking at this the whole time to make sure that we have the capacity on day one.

Q116 The Chairman: Lord Bridges, may I come back to a basic question about communicating to the British public what you rightly said is a necessary debate on EU standards, given that the UK is often attacked for being entangled with the EU far too much? How will you communicate that outwards?

Lord Bridges of Headley: As regards future standards regulation?

The Chairman: Yes.

Lord Bridges of Headley: That is a great question. I have been in contact with the CBI and the IoD, and we are in contact with the FSB and the other major bodies.[5] To pick up on your good point, I am looking at what we might do when we publish the Great Repeal Bill, which should be an opportunity for us to bring some certainty and clarity to what we are doing. I am not going to get into too much detail, because it is still a work in progress, but we are looking to use all the networks available to us to ensure that businesses large and small are fully aware of just what we are doing and the certainty we are trying to bring on day one. Any suggestions on this will be gratefully received.

The Chairman: Yes, I think you may need quite a lot.

Q117 Baroness Suttie: How does the proposed phased process of implementation differ from a transitional arrangement?

Lord Bridges of Headley: An implementation phase is an implementation phase, and you could call a transition arrangement an implementation phase. In many free trade agreements—I am sure that Mark will be able to give you chapter and verse on this—there is a phase after the agreement has been signed in which businesses, legislatures and regulators have time to put in place what has been agreed. It is pretty much that simple. There will obviously be a number of processes that we will need to change. Mark, I do not know whether you have anything to add on that.

Lord Price: Not really. With most FTAs, you will find that some of it is applied provisionally and other parts are applied at a later date, and some need parliamentary approval and some do not. With most agreements, you find that there is a phased process. In the work we do around the world now, we constantly try to find ways to reduce tariffs and barriers within what we are allowed to do in the UK. You therefore have to see any FTA as an iterative process of continual improvement over time. What makes the EU FTA so unique is that we start from a point of no tariffs and complete conformity, with tariffs or different conventions applied at some point in the future. I do not think anybody is quite sure how that will work, because nobody in the world has ever done this before. We are doing the complete reverse of every FTA that has ever been done.

Q118 Baroness Armstrong of Hill Top: Can I therefore ask about timing? It has been made clear by the European Union that the process of divorce precedes, as far as it sees it and understands it, the establishment of an FTA. We have not had that level of clarity from the Government. Are you proposing that you go further than the framework, which will then be negotiated after the divorce agreement, if you see what I mean? In our earlier report, we saw it as virtually impossible to negotiate an FTA within a two-year period unless it was simply a framework of how we wanted to proceed. We would like a bit of clarity on how the Government see what they are doing. For example, the Prime Minister has said that if there is not a deal, there will be “no deal”. We cannot just put the walls up and say that we are not going to trade with people. There has to be some sort of deal at some stage, and it is really a question of how the Government see the timing of things and what they are seeking to achieve within the two-year window.

Lord Bridges of Headley: That is a very good question. I have made it clear in the House that we read the reference to the legal framework in Clause 2 of Article 50—I do not have the legal framework in front of me and I do not know the precise terms, but it is in Clause 2—as meaning, as others have defined it, negotiating an agreement that covers both. Guy Verhofstadt, I think, has said similar things. That is what we are seeking to achieve in two years.

To pick up on Lord Price’s earlier point, as I said at the start we are in a unique position because of the way in which our laws and regulations are so entwined with one another, and we do not wish to raise barriers. So we see it being technically possible to do this, as does Karel De Gucht, the former EU Trade Commissioner. That is our position.

Baroness Armstrong of Hill Top: So technically you will have a full free trade agreement within the two years.

Lord Bridges of Headley: We are seeking an agreement within the two years.

Lord Price: Perhaps I could just add that there is precedent. I think that the US-Jordan FTA was completed in four months and the US-Canada FTA in just over a year. Where good will exists on both sides and where you have, as we have today, complete conformity, agreeing the principle of an FTA within that time is theoretically possible. There may be some practical things that you will want to talk about and manage through, but there is certainly no reason why an FTA could not be negotiated within that timeframe.

Baroness Armstrong of Hill Top: No one whom we have spoken to in Europe agrees with that.

Lord Price: Everyone is allowed to have their own point of view. Just to reinforce the point I made earlier, I should say that nobody has ever concluded an FTA from a position where the countries negotiating it have complete uniformity on every rule and every standard, be they voluntary or imposed, with no tariffs and no barriers. Therefore, the unique thing about our position is that somebody will argue that you put a tariff in place where none exists today, or you change a rule because you want to make things different. So it really is quite unique, and therefore it is difficult to second-guess how long it will take, when more complicated agreements have been done within the two-year timeframe. The simple truth is that nobody knows, but there is precedent and we have a rather unique starting point.

Baroness Armstrong of Hill Top: But we do not have the people who know how to do this or who have done any of this for 30 years. Are you confident that you have now recruited sufficient negotiators who know what negotiations are all about?

Lord Bridges of Headley: Perhaps I can answer that. I am confident but never complacent. As Mark said, this is a unique and unprecedented situation, so in a sense no one has done this precise thing before, but we have 300 very good people in DExEU—this is a cross-government effort—looking at this day in and day out. Am I confident in the team? Absolutely.

Q119 The Chairman: Lord Bridges, we can see that you are confident, but, just in case, do you have an assessment of the costs if you have to use WTO terms?

Lord Bridges of Headley: Various analyses have been done on this. As I have said, our preferred outcome is obviously not WTO terms. As regards the WTO costs, we make clear in the White Paper that there are a number of tools in the Government’s toolbox that could be deployed were we to get into that situation. As the Prime Minister said, the preferred outcome is what we set out in the White Paper.

Lord Price: Of course, the principle is that we do not get to that. Some work was done pre the referendum. That took into account the fact that we would have no EU FTA rollover into the UK’s name, so it painted a particularly stark picture of where we might come to. Since the referendum, the economic position has been much stronger than was anticipated by many. So it is hard to second-guess where we will get to with the WTO, what we will be able to do with EU rollovers, what might happen to the economy in general, what might happen on the world markets—in China, America and elsewhere—and whether the flows of money, like the flows of water, continue to go to the place of least resistance. At the moment, that place looks like the UK; we are looking like an increasingly good place to invest. All those things will have a huge bearing on the number, which is why it would be very hard for the Treasury to give a precise figure. But attempts were made before the referendum that are in the public domain.

The Chairman: I do not think that we are looking for precise figures, but we are looking at least for indicators of those costs. We see that you are determined to have something in place within two years, but “want to” does not always translate into reality. It would be interesting to see what your assessments are, if they are there.

Lord Stirrup: Lord Chairman, could we include in that the costs to the rest of the EU of operating on a WTO basis?

Lord Bridges of Headley: Our position is that we will be very mindful of requests for information. We obviously wish to be as open as possible but with the one caveat, which has been endorsed by the House of Commons, and I have said it repeatedly, that we will not publish anything to undermine our negotiating position. We will be very mindful of the points that you are raising here. As you rightly say, we import £290 billion of EU goods and services each year, so one would think that it is to our mutual benefit to ensure that there is an agreement at the end of this process.

Lord Price: As a very crude assessment, 25% of goods that come into the WTO attract no tariffs through Europe today. The average bound tariff is just over 6%, so you could do a bit of maths and calculate the impact of that 6% charge on UK companies and whether it would it affect their ability to export. You could argue that the value of sterling will have a far bigger impact on that than any bound tariff that might apply. So a whole host of factors make it very hard to work out, in a circumstance in two years’ time and given all the other factors that affect trade, what reverting to WTO might mean. The principle here is that it is not our intention to fall back to WTO. We have talked constantly about a “smooth transition”—or all the words that have variously been used; the Prime Minister has said “no cliff-edge” repeatedly. Our intention, and I know that it is the intention of trade ministers in Europe, is not to get to that eventuality. That is not an outcome that we want. Because of that and for other reasons, it is very hard to come up with a calculation of where we are going to be and what it might mean.

The Chairman: Thank you. We are going to go on to trade and third countries.

Q120 Baroness Symons of Vernham Dean: Thank you, Chairman. I want to make one little point about the precedents. Forming country-to-country agreements is not the same as dealing with 27 other countries, all of which will ultimately have the right to veto. I hope you are right, as I am sure we all do, but I cannot help feeling that we are erring on the side of optimism in a way that is not entirely realistic. However, let us go on to FTAs.

Lord Price: May I respond to that?

Baroness Symons of Vernham Dean: Yes, of course.

Lord Price: I am pouring every ounce of my energy into being optimistic, because I think that is the best thing right now for the country. Therefore, in all the conversations that we are having with Europe and outside it, I want to make sure that we have a positive outcome. With any of the understandable hurdles that you are raising, we want to make sure that we understand and address them, and that we find the most straightforward solution to them. Otherwise, we are putting our country in jeopardy, and nobody wants that.

Baroness Symons of Vernham Dean: Minister, we all want to be optimistic, which is why I would like to talk about the FTAs. I could not agree more: if we are not optimistic, we will not be able to drive the best bargain. However, a touch of realism is also very important. Can we go on to the question of FTAs?

I think it was in the Daily Telegraph that your Secretary of State said that the UK was conducting trade audits with 12 countries. Can you tell us in more explicit terms what you mean by a trade audit? Lots of us have a great deal of contact with countries that are murmuring about free trade agreements. I work a lot in the Arab world. Just about everywhere there is interest in the possibilities that may open up, and I am as enthusiastic as I can be in encouraging them to think in that way. But what are you including in a trade audit that will make it a useful instrument at the end of the day?

Lord Price: I just want to correct you on one small point. The Secretary of State said that we were conducting trade audits with a number of countries. In a second report, the Telegraph wrote that we had announced working groups with 12 countries, so the two are slightly conflated. However, the point you are making is not changed by that nuance.

Trade audits are principally about sitting down with a country—we have announced India as one such country—to look at what the barriers might be to businesses doing trade there. The discussions could be about customs arrangements, which we talked about earlier, or they could be about access to particular sectors. So in a trade audit we look at the barriers in that country that inhibit our companies doing trade there, and vice versa.

There are things that we do all the time. For the last 43 years we have been conducting trade audits. We have trade envoys who go round the world on behalf of British companies exploring how we can improve business relationships or trading relationships through trade promotions. We also actively go around the world and promote EU trade agreements. So we already do a lot through joint economic and trade co-operation meetings—JETCOs—and through economic finance dialogues, which the Treasury runs. Today, under UK competence, we are allowed to look at how we can improve the trading relationship that is in our competence between the UK and another country.

The Secretary of State has said that we have trade audits with a number of countries and we will be doing them on a more formal level, but we also have working groups where we are looking to explore how we can continue to trade with those countries in a post-Brexit world.

Baroness Symons of Vernham Dean: Are you going to be more explicit about which countries we are actively engaged with in these trade audits? You mentioned India. Can you be more explicit about any others?

Lord Price: I think that we have announced the list. I think that every single one has been announced, but I can send the Committee the full list of countries. I think there are now 15 countries in total, because the Prime Minister recently added Turkey and Israel. But, yes, they are in the public domain.

Q121 Baroness Symons of Vernham Dean: I have another question. How many people do you have working on the FTA audits?

Lord Price: That was a question that you asked me at the last meeting. There were 45 people working in trade policy in June. We are now up to 185. By the end of this year, we will probably be at around 240 or 250. So the team is swelling. To answer Baroness Armstrong’s question, from an international point of view rather than an EU point of view, we have a lot of good-calibre people with experience in international relations. You might have seen an advert in the Economist last week, I think, for a government-appointed chief trade negotiator to advise on all trade deals. So we are now starting to beef up our capacity.

Of course, understandably we have been sensitive about how we do that before triggering Article 50. At the moment, it is really a case of understanding what needs to be done and how we will shape ourselves for that. Once we go past signing and triggering Article 50, we get into the hard work of transitioning those deals and working with lots of third-party countries on the best way to continue our strong trading relationship.

Lord Balfe: Could I ask whether this recruitment includes looking at our staff who are presently in the European institutions? They have expertise and would be of great value to us.

Lord Bridges of Headley: I will pick up on that, and I completely agree. Thanks to the conversations that you and I had way back in the summer, my department has certainly been looking at that. We have to be somewhat careful with our European partners so that we are not seen as trying to poach people, but we are making it clear that opportunities are available in the way that Mark explained. They are obviously a valuable resource.

Lord Balfe: Good.

Q122 Lord Whitty: This goes beyond the mandate of either of our Committees. I say this as a former Minister of Agriculture and having just been to Scotland and Wales. In any trade deal with many of those 15 countries, agriculture will be a major dimension. In most cases, the Common External Tariff, as it currently exists, also includes a quota. Take, for example, New Zealand, which I suspect is on that list. A significant proportion of its exports to Europe are under quota and under tariff. It is a relatively generous tariff because of the UK’s original deal with Europe. However, the sequence will be that we have to unpick that tariff and allocate the UK portion to the UK as we come out of Europe and before we can do a sensible deal with New Zealand. That, in turn, depending on the level of the quota, will have an impact on British agriculture.

Getting out of tariff quotas is extremely complex, and it means that the ability to go straight in to a broader deal with the likes of New Zealand, South American countries and indeed Canada and the United States depends on being able to get out of those quota systems in a way that is successful for the third parties and does not destroy British agriculture. That may take some time.

Lord Price: Perhaps I may pick that up. I have a meeting this afternoon with representatives from food and farming in the UK. You are quite right to say, Lord Whitty, that unpicking this is probably one of the more challenging areas as we rectify our schedules with the WTO. Having said that, officials at the WTO have been very supportive of our approach to this. Importantly, the EU has said that it is very happy and willing to engage at the earliest stage that it can in working with us to look at and allocate those quotas. So, based on the conversations that we have had, we feel pretty optimistic that we can work through the quota issue in farming.

You are right that, for the vast majority of countries, food quotas and farming protection is the biggest single free trade issue. Our position is slightly different from that of the EU in that we do not have citrus growers in the UK, but they do in Europe and so on. Therefore, I suspect that there may be slightly more latitude for the UK independently to think about its food policy quotas and so on as we go forward. As you will know, we are also a net importer of food, so, again, our circumstances are slightly different from those of the other countries. But on the whole issue of quotas, everywhere we go the importance of food is recognised, with countries wanting to be part of a free trade agreement.

The responsibility for managing that obviously lies with Defra, which has expertise in that area and will lead on it in the EU negotiations. On the question of the WTO and what we come up with, we will work closely with Defra to make sure that we get to the right solution.

The other underlying principle that I should set out—you may come on to this question—is that we are looking to replicate as far as possible the current UK agreements within a new WTO schedule. In that sense, we are not looking to deviate from what we do today. Our working principle is that whatever the UK does today within its schedules we will look to do in a post-Brexit world. That demonstrates on our part a degree of partnership with Europe; we are not looking to change the balance. It is reassuring for third-party countries, because they know that the terms are going to be the same. Of course, it is also reassuring for business, because, again, we will be in the same world. As far as possible, our WTO tariffs et cetera will remain the same post Brexit. That is what we are looking to organise.

Q123 Lord Horam: Lord Price, you talked about there being maybe 15 countries with which we are in discussion about free trade. Do any of those countries already have an agreement with the European Union? Are they third parties?

Lord Price: They are a mixture. For instance, the Prime Minister has announced a working group with China and high-level talks with the USA. Some of them do not have EU FTAs, but a lot of them do. In DIT, we are trying to find the best way in which we can have a continued trading relationship on the same terms with the countries that we currently have access to through an EU FTA. Much of our discussion now is about how we carry on our trading relationship post Brexit and make sure that there is not a cliff edge. In total, that includes 60 countries through 36 agreements.

Lord Horam: Sorry, 60 countries?

Lord Price: Sixty countries—36 agreements cover 60 countries to which we have access now through an EU FTA.

Lord Horam: That is a large number.

Lord Price: It is a large number. Going through the process today, we have Singapore, Japan, Vietnam and Canada, so by the time we exit the EU there could be 64. We are trying to make sure that, with all those countries, we have sat down and talked through how we ensure that trade flows continue to be smooth in a post-Brexit world. I am spending most of my time on a plane to visit those 64 countries and talking to the Governments about how we achieve that.

Lord Horam: So you would like to replicate what those countries have with the EU.

Lord Price: Our broad principle in the WTO and in existing FTAs is to carry on in the most straightforward way what we are doing today. On all sides that is what is desired. A number of countries will say, “We’d like to do more comprehensive free trade agreements with you, but we are very clear that we can’t negotiate those until you leave”. Also, we cannot sign until after we have left. So for the moment it is about promoting British business exporting to those countries today and how we make sure that that continues smoothly.

Lord Horam: So the European Union is quite happy with what you are doing in this area.

Lord Price: We feel that, within the context of what we can do today, having discussions with countries about continuity of trade with the UK is perfectly acceptable. The EU knows that I have been visiting all these countries. Most of these countries are looking for an upgrade of their EU deal and we are tremendously supportive of that. When I was in Japan, I made the point that the UK’s interest is in making sure that there is an EU-Japan FTA that we can look to roll over in some way to the UK. I have been to Vietnam and have had the same conversation. The same is true for Canada, where the Secretary of State was last week. We want to ensure that all those countries know that we support the EU and we support the EU FTAs. We want those to succeed, as we always have done—that is our position. We hope that, as part of that, those arrangements will become the base of the UK arrangement going forward.

Q124 Earl of Oxford and Asquith: Is that a relatively mechanical issue, rolling them forward when we leave the UK? Does it require a large amount of negotiation post leaving?

Lord Price: I wish that that was an easy question to answer. The simple truth is that some are very straightforward and others are more complicated. It is about the extent to which they are bound into EU legislation and regulation. We have now worked through every one of them to understand the level of complexity. Quite a lot of them are EPAs—economic partnership agreements—with developing countries. We are mindful that, where those countries now have very good tariff access to the EU, we would want to continue that, if not improve it, where the UK is independent, so we are also working on what regime could be put in place. We are working with DfID to make sure that we come up with the right answer.

The Chairman: Thank you. We are pleased to have Lord Whitty with us today from the EU Internal Market Sub-Committee. You have a question, Lord Whitty.

Q125 Lord Whitty: We are conducting a parallel study in relation to trade in services. In that area, it is not so much tariffs and customs as the equivalence of regulation and so forth. What is clear is that almost every sector that has come to see us has said, “We want a bespoke sectoral deal”. When you press them, the bespoke sectoral deal is not unlike what they already have with the EU. Whether you are talking about aviation and other transport sectors, audiovisual, professionals, lawyers, accountants and universities, they want the existing equivalence to continue, mutual recognition of qualifications to continue and passporting or the equivalent to continue—broadly speaking, the Directives under which those sectors operate.

Although there is not such a full Single Market in services as there is in goods, and although EU FTAs deal with services somewhat differentially, so we do not have a clear model, the message that is coming to us seems to be that the free trade agreement ought to be a whole series of individual sectoral agreements, much of which reproduces what we already have. There are, of course, difficulties with that. First, we cannot differentiate that much under WTO rules for FTAs. Secondly, the existing framework involves some enforcement, which eventually means the European Court of Justice. Unless we are going to reproduce something like that post the Great Repeal Bill, it is difficult to see how you could simply take, for example, the audiovisual Directive and say, “We continue to operate under that and for these purposes the EU includes the UK”.

Lord Bridges of Headley: So what is the question?

Lord Whitty: The question is: do you see the FTA for services consisting of a series of sectoral deals that are close to what they want and have already?

Lord Bridges of Headley: That is a great question. In a sense, the negotiations about the negotiations should be the first bit and I am sure that, when we trigger Article 50, there will be a lot of discussion about that. What I would say without wishing to prejudge the outcome of that conversation, which will no doubt need to take place, is that when I have spoken, like you, to people across services, clear themes have become apparent. One is qualifications, which you mentioned; law is another; data, which is critical, is a third. One could undertake thematic approaches to this to address a lot of the main issues that you have raised.

You also mentioned dispute resolution. We put in Annexe A of the White Paper a whole series of dispute resolution processes that exist between the EU and various other nations, with a whole range of different outcomes in terms of how the process would work. CETA is very interesting: five Canadian panels, five national panels and five third-country nationals in a tribunal for arbitration. You talk about a role for the ECJ. Let us see where we get to in the detail, but we are very clear: we are leaving the ECJ and we are looking for a dispute resolution that would meet the needs of our national interests and, as we would negotiate, would meet the needs of the European Union. Mark will have seen in his travels around the world other dispute resolution mechanisms. There are a number of processes that have been incorporated into FTAs that we will look at.

Lord Whitty: This has a bearing on the Great Repeal Bill, because it is not just a question of putting European law into British law; you also have to have some enforcement and dispute resolution system there. If you are not going for the ECJ, you will need some parallel or joint—

Lord Bridges of Headley: We made it clear in the White Paper that there will need to be a dispute resolution mechanism, and every FTA contains one.

The Chairman: Similar to an EFTA-type court?

Lord Bridges of Headley: There are a number of options here and I am not going to start picking my favourites. Forgive me.

Q126 Baroness Armstrong of Hill Top: Are you confident that the Government will save money in relation to what they currently contribute to the EU and what they will have to pay in the future?

Lord Bridges of Headley: The contribution and the budget are obviously things that we will need to negotiate on.

Baroness Armstrong of Hill Top: I mean generally. If we are going to refigure all these bodies in another way, that will be expensive.

Lord Bridges of Headley: That is a good question. You refer to refiguring bodies. There may be refiguring of entities here and we will look to see what that costs. I will not go into the detail in depth on that, but it will definitely be something on which we will wish to negotiate at length when the delightful Great Repeal Bill comes to this House.

Q127 Earl of Oxford and Asquith: Sticking with services, can you say something about the Government’s thinking on services scheduled with the WTO?

Lord Price: I can say that the principle that we have set out is that we will replicate as far as possible the schedule that we have today. Within the WTO currently, the EU has filed service schedules. There is a Common Commercial Policy, but, within that, Member States have differing degrees of access to their markets and differing requirements.

On indexing, a lot of work has already been done to understand in quite a granular way, by country, what barriers are in place in the EU’s WTO services schedule that will begin to apply to the UK. These are also expressed in FTAs. I could give you examples but I will not, as I know you get the point. They differ according to the country, but the policy that exists is Europe-wide. The accounting or legal access that you can have to a market in Europe will depend on the requirements that a country sets. To practise at the Bar in Spain, you have to be an EU national or a Swiss national. Countries have specific rules on access to their markets but the trade policy agreed in FTAs, such as enabling the free flow of data applies all across Europe. We are currently trying to understand, country by country, what those barriers are, and then, within an FTA, how to change them.

The CETA arrangement knocks over the vast majority of those rules. The UK is very liberal in its standards. On the CETA deal, I think there were 161 provisions or protections on professional services in the agreement and only two applied to the UK. That gives you a feel for the difference between nations in terms of access.

Earl of Oxford and Asquith: So quite a lot of negotiation will be needed for a UK-specific schedule or schedules?

Lord Price: Yes, for the EU FTA. This is a blunt estimate, but about 60% of services are covered by what is set out by the WTO; the remainder you would negotiate with the EU. You would find that some countries like the UK are already extremely open within their schedules, whereas others are more protective. So WTO schedules exist, but within a free trade agreement you would look to go further than those schedules.

Earl of Oxford and Asquith: Do you see any obstacles for our various services and sectors in the negotiations, whether on data or law? You have said that they would not apply so much to law, but perhaps on financial services.

Lord Price: This comes back to the point that noble Lords made earlier around harmonisation and standards. A great number of standards are voluntary—for example, the BSI standards and some international accounting standards. Some are voluntary and are adopted by businesses; others are set by government. What you draw out, quite rightly, is that it is hugely complex to work out which of these are voluntarily accepted by professions and which are applied under some kind of restraint by government. The question is then how you trade those away as part of an FTA.

The Canadian deal goes quite a long way in doing that, but the key for us is that we start by having conformity and access to the market, and that goes both ways. That is clearly what the team would hope to negotiate.

Q128 Baroness Suttie: This question follows on from Lord Whitty’s comments on the Great Repeal Bill, which I think we expect to be in the next Queen’s Speech. You have been very confident today about getting a comprehensive free trade agreement sorted within the two years. Are you equally confident that the Great Repeal Bill can be put into domestic law, with all the necessary regulatory and standards issues sorted within those two years?

Lord Bridges of Headley: Again, I am confident but not complacent. A lot has happened on this since 23 June. This will all be set out in the White Paper but we have looked at the powers that we need to take to tidy up EU law and the consequential actions in terms of implementation that may be needed. I am very concerned that in our department and right across Whitehall we do not just think in the silo of what piece of legislation needs to be passed. We also need to think about the consultation that needs to take place, as well as what happens on the ground with the implementation. So we are looking at this matter right the way through from the introduction of the legislation to its implementation.

There will also need to be primary legislation. I hope that the White Paper will flesh out what pieces of primary legislation are required. The Government would not wish to think that all the legislative changes that need to be made should be done by secondary legislation.

It is undeniably a very big task, but I am heartened by the co-operation right across Whitehall. We now have a number of mechanisms in place to co-ordinate this, so, as I said, I am confident but not complacent.

Lord Dubs: Good luck.

The Chairman: Thank you very much, Ministers, for coming this morning. The Committee really appreciates what you are able to tell us at this point, and we look forward to you coming to give us more evidence as the work progresses. I remind you that a transcript will be sent to you to check for errors and corrections.

On behalf of us all, this has been a very fruitful evidence session and we thank you for your time. We know that you are extremely busy, but we will try to catch up with you at some future date with some equally interesting questions. I formally declare the meeting closed.

[5] The Confederation of British Industry, the Institute of Directors and the Federation for Small Businesses.