National Assembly for Wales

Back to Search

Y Pwyllgor Materion Allanol a Deddfwriaeth Ychwanegol

External Affairs and Additional Legislation Committee

11/02/2019

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Alun Davies AM
David Melding AM
David Rees AM Cadeirydd y Pwyllgor
Committee Chair
Huw Irranca-Davies AM
Mark Reckless AM

Y rhai eraill a oedd yn bresennol

Others in Attendance

Dr Ludivine Petetin Prifysgol Caerdydd
Cardiff University
Dr Maria Garcia University of Bath
University of Bath

Swyddogion Cynulliad Cenedlaethol Cymru a oedd yn bresennol

National Assembly for Wales Officials in Attendance

Alun Davidson Clerc
Clerk
Claire Fiddes Dirprwy Glerc
Deputy Clerk
Elisabeth Jones Cynghorydd Cyfreithiol
Legal Adviser
Gareth David Thomas Ymchwilydd
Researcher

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Dechreuodd y cyfarfod am 14:04.

The meeting began at 14:04.

1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
1. Introductions, apologies, substitutions and declarations of interest

Good afternoon, and can I welcome Members to this afternoon's meeting of the External Affairs and Additional Legislation Committee? Can I remind Members that the meeting is bilingual. If you require simultaneous translation from Welsh to English, that is available via the headsets on channel 1. However, if you require amplification for any reason, then that's available on the headsets via channel 0.

Can I remind Members, please, to switch their mobile phones off or on silent to ensure that they do not interfere with the broadcasting equipment? There is no scheduled fire alarm this afternoon, so if one does take place, please follow the directions of the ushers to a safe location.

We've received apologies from Joyce Watson and Michelle Brown this afternoon, but no substitutes have been identified.

2. Cytundebau rhyngwladol—sesiwn seminar
2. International agreements—seminar session

We now move on to the next item on our agenda, which is a seminar session on international agreements and the implications for Wales and perhaps the role Wales and the Assembly may play in future trade negotiations and the continuity trade agreements that we are looking to continue, following exit from the EU.

Therefore, can I welcome Dr Ludivine Petetin, from Cardiff University? Welcome back, because we welcomed you at previous sessions on the World Trade Organization. And Dr Maria Garcia, from the University of Bath. Welcome.

We'll go straight into questions, if that's okay with yourselves, and what we're trying to understand is perhaps the role of devolved institutions particularly in trade agreements and what happens with these continuity agreements, how they are going to work and how they will roll over and whether there are any challenges facing, not just perhaps devolved institutions, but the UK Government in one sense as well as to what happens in that process. The first question might be simply: with those continuity trade agreements—so we must focus on those first because, obviously, they're the ones we want to carry over—I understand there are some that are getting ready to be signed, but I'm unaware of any involvement by devolved nations in that process, so what are the roles and responsibilities of the Assembly in particular, rather than the Welsh Government, to scrutinise the agreements to ensure that the changes that are being made—and I'm sure there will be one or two changes; some will need changes—work for Wales and not against Wales? Dr Garcia, perhaps.

14:05

I'm happy to start.

You haven't got to touch anything; they'll work automatically.

Thank you very much. I think there are two issues in your question. One is: how is the UK Government handling the roll-over of existing agreements to which the UK is party as a member of the European Union? And my understanding is the same as yours—that it has been done very much through the Department for International Trade in quite an executive fashion. I think partly that is down to the fact that time has been pressing since the very beginning of the Brexit process, and the other reason is that, in theory, or at least the Government's position on these roll-over agreements was to not make changes. So, the UK's position has been: 'We would like the co-operation of other partners to agree that, post Brexit day, you will continue to apply this agreement to us as though we were still members of the EU.' I think that was also the position the European Union took, although they can't enforce it on third parties like Chile or South Korea, for example. I think it becomes more complicated in the absence of a withdrawal agreement with the European Union. So, if we have some sort of withdrawal agreement with the European Union then we have certainty that things continue as they are, and I think it's a bit easier to convince other partners of the benefit of rolling over these agreements. In the absence of that, it becomes extra challenging.

I know there are a couple that, as you said, are ready, more or less, to sign. One of them is with Chile. I haven't been able to locate the exact text of the full agreement, but what I've read about it seems to indicate that the Government has been successful in getting Chile to more or less simply agree that what there currently is with the EU will apply to the UK and that they will continue to honour that. That is, I think, a success because Chile did hint at the very beginning of the process that they might want to renegotiate certain elements. However, there are other, from a UK perspective, more significant trading partners like South Korea that have expressed an interest in renegotiating aspects of the agreement. They are not happy with how the EU-South Korea agreement has worked out for them, so this is an opportunity for them to perhaps fine-tune some things that haven't maybe worked out in practice as they had hoped.

So, there is the element of complexity, the element that you can't force other countries to roll them over or accept things. There is the element of timing, and I think there's also the element that, although the UK Trade Bill recognises that there will be areas in trade agreements that impinge on devolved powers and that, therefore, there has to be a consultation with the devolved Parliaments and Assemblies and Governments. It's not entirely clear how to go about doing that, especially in such short periods of time. So, I think that is the other issue—one is the rolling over of the agreements right now, and the other one is future trade agreements, future negotiations and the direction of UK trade policy.

14:10

Clearly, if they've been under negotiations, there's probably been an assumption on both sides in those negotiations that a deal would be reached—well, hopefully by now, but definitely by the time we were scheduled to leave the EU. Do you think the fact that we're still without a deal is putting a different thought into some of the negotiating teams' minds? I know there's a question of getting something done by 29 March, but then there's also, as a consequence of no deal by 29 March, a chance perhaps to say, 'Well, we can now relook at this and look at how we can make changes', because, you know, the UK may be in a weaker position on 29 March than it would have been with a deal.

I think you've answered your own question there. Yes, I think the concern, really, is the issue of timing. So, will the world stop trading with Britain, and will Britain stop trading on 30 March? No. That's not going to happen. It's just the terms, and there might be companies that are not impacted by it. There might be others that are impacted by it. So, at the moment, not having those trade deals with EU trade partners rolled over would mean that British companies would be at a disadvantage to their European partners, potentially.

Having said that, a lot of the trade preference utilisation rates for Europe are not at 100 per cent. The UK does have some of the lower trade preference utilisation rates across the EU—so, they stand at about—. UK companies are currently using roughly 67 per cent of the preferences that they could get from all the existing free trade agreements. A lot of companies choose not to take advantage of that, because it is actually rather painful to fill in all the paperwork and prove where you have produced everything, et cetera. So, for a lot of them, they choose not to even engage in that. Obviously, the ones that are currently taking advantage of those would be very interested and keen in being able to continue taking advantage of those agreements.

And, in terms of timing, I really don't know how far negotiations are with South Korea, for example. There is not an awful lot of public information on these things. I know that the UK embassies across the world are engaging in intense discussions with all of the trade partners, but it's not really coming out what is happening in those discussions. So, it's difficult.

Now, excuse my naive understanding on this, but you mentioned South Korea as an example of one where there might be some stickiness, where there might be some desire to unravel some elements of the existing EU arrangements. I would assume, on that basis, it’s because, when you come to an EU arrangement, it’s a compromise between 27 nations. They sit down and the different countries want different things out of the agreement with South Korea or with others. So, would my assumption be, then, that if there is stickiness with South Korea and anybody else, it’ll be to do with them identifying something within the particular UK situation, to do with UK goods and so on, saying, ‘Well, we never liked that entirely. Now we have the opportunity to negotiate a better result here’? It’ll be a UK-specific element, won’t it? It clearly will be. It'll be something that they now think they can untie and untangle.

Yes, it will be UK specific. However, it is also tied to the agreement that they have with the European Union and, potentially, with other partners around the world. So, if they—. How shall I put this? I’m a political scientist, so, actually, I look at this from the point of view of what are the political dynamics or the geopolitics of trade agreements, in any trade agreement negotiation, including the South Korea-Europe one. There will be domestic groups that are very much against that negotiation, and there were in that case as well—so, agricultural producers, also car manufacturers in South Korea. They want more access to other markets, but they don't necessarily want imports competing with their products coming in. So, one of the things that this renegotiation offers the South Korean Government, for example, is the opportunity to play to some of those disgruntled domestic groups. And, in a way, it's perhaps a little bit easier, because the total EU market, or the total US market, is so large that there will be other competing groups demanding access to that. The UK is an important market, but not in the same category as the US, the EU, or even China.

14:15

But as a political scientist, can I ask you then just to turn your attention to the nature of that renegotiation? Because, very often, you can be months, or years, putting together this complexity of compromises that comes to a final negotiated position. And there's a fair deal of transparency within that—people know where stakeholders are on that, as the months roll by, they make their positions very clear, and then it's conveyed through the Council of Ministers, and so on and so forth, and then you come to a conclusion. If you put that in a reverse scenario, to get to a reasonable point, where not only you had UK interests and UK Government interest, but also scrutiny from here, but also stakeholders from out in the wide world here within the UK and Wales, you'd equally, surely, need time—time to do this. It's a fallacy to say that you can just snap your fingers—unless it's all going to stay exactly the same. But if it's going to change, you need time to unravel it and to allow those stakeholders to put their opinions. Am I being stupid?

No, you're absolutely correct. Trade agreements take a long time. These would be, potentially, quite unusual. So, the Brexit negotiation is the opposite of a normal trade negotiation—normally you liberalise more; here, you're going in the opposite direction. And the roll-over of these agreements, to some extent, could be along those lines, in the sense that some countries may want slightly less liberalistion than what they were willing to pay the EU for access to the EU market. So, these things do take time. And you're absolutely correct—ideally, the UK Government should be consulting broadly with stakeholders, with devolved administrations, and that takes even longer.

And that's the third part of my argument. If that is the case, in order to do this well and properly and transparently, then not only do you need adequate time—you could find ways to speed this if there was willingness on all sides, but you need the adequate time—but, from our point of view, as an Assembly, we need to see what's important to us. And if you rush this, it rushes past us—clean past us.

There are different types of agreements, and some of them—for instance the mutual recognition agreements that were signed between the UK and New Zealand—are slightly different, because they're not so much about lowering tariffs, but ensuring that, if we have equivalent technical regulations between the UK and Australia and New Zealand, then we can still export and import. And I think this is slightly different, and it is important to make a difference between those comprehensive trade agreements [correction: trade standards] that we can talk about, and the smaller standards being put in place, which would help even Welsh manufacturers, et cetera, to export. And that's what's so important—to ensure that we keep them after the—.

I'm interested in the process that's being followed in order to reach these continuity agreements, and I presume that the continuity agreements that are being reached at the moment, which are being announced at the moment, simply transfer the agreements between the European Union to the United Kingdom, and that different aspects of them, in terms of their scope and their timescales, will remain as they were. But what I tend to be seeing is announcements by the relevant United Kingdom Minister and letters from the Secretary of State, with the occasional appearance before the trade committee of the House of Commons. I don't see any evidence of a structured scrutiny of the UK Government's actions or the opportunity for any of our democratic structures, whether they be here or in Scotland or in Westminster, to scrutinise both the objectives of the UK Government or the UK Government's work towards achieving those objectives. 

14:20

There is no requirement or mechanism for parliamentary scrutiny of these agreements whilst they are negotiated. This was the issue with the withdrawal agreement—that it could be agreed and decided by the Government and then Parliament wouldn't actually have any say in how it was drafted, and this had to be changed. At the moment, within the UK, there is no parliamentary scrutiny. The Trade Bill gives the powers to change those continuity agreements or to transfer them over or roll them over, and also gives the powers to the Government to actually change national legislation in order to be compliant and to remain complaint with those continuity trade agreements. 

Sorry, excuse me, can I just stop you there? I presume those powers are by Order, so that the UK Government's taking powers to change primary legislation by Order. 

It will depend on the outcome of the Trade Bill, because—

Yes, but they are seeking some sort of—. And that would include legislation that is conceivably passed at this place as well.

Yes. So, there is a requirement for Wales to implement these continuity trade agreements, or there would be, as—

So, conceivably, there could be a real restriction on competence here as a consequence of the United Kingdom reaching an agreement with a third party without proper public scrutiny.

It depends on how much of the agreement is changed. As I mentioned, if it's only mutual recognition of regulations or good manufacturing practices, then this is not a problem, but when you look at the Chile agreement, you have a change in tariff with quotas that is going to happen. Therefore, this will have an impact for the whole of the UK.

But this Bill, of course, will be on the statute book for all future trade conversations and agreements.

Which Bill are you referring to?

The Chile one or the trade one?

The situation will mean that it'll be a roll-over of the current agreement. That roll-over, if it's unchanged, will simply be a UK treaty in one sense with the nation, rather than an EU treaty with the nation. The question I think we need to find out is: how much changes? That will become a treaty between the UK and the other nation, but it may have different elements within it compared to what the EU has. You've highlighted one of the concerns that I have, which is the tariff-free quotas agenda. Do we know how many of those agreements with the EU contain tariff-free quota, because clearly that is going to be a major issue as to how that is transferred? 

The tariff-free quota has been a big issue, because it doesn't just apply to free trade agreements that the EU has with third parties, it also applies to the World Trade Organization's schedules. The EU and the UK agreed to how they would divide those tariff-rate quotas by looking at—I don't remember if it was the last three years or five years—importing countries and whether those imports had gone to the UK or the rest of the EU. However, countries around the world, including the United States, objected to this methodology at the WTO. So, the UK is now having to speak with WTO partners individually to try to get them to agree to what future UK schedules will be, and it's exactly the same for all free-trade agreements. They will all have some tariff-rate quota, which will have to be split somehow between the EU and the UK. We know that the methodology that the EU and the UK have agreed upon is not favoured by other partners elsewhere, so that is controversial. That is one of the reasons, I would imagine, why these roll-overs are taking such a long time. So, there's the issue of tariff-rate quotas, mutual recognition, rules of origin—the one with Chile does allow for European content in UK products to be counted as 'made in the UK', which is important for integrated supply chains. Obviously, Chile—how should I put this diplomatically? From a European perspective, it's important, but in terms of trade, it's not a massive trade partner. This might be a little bit trickier when looking at, say, Japan. The EU's agreement with Japan has not yet been implemented, but it should be implemented, at least provisionally, pretty much around now, I would imagine. 

14:25

I understand that the Japanese one came into effect—it was last week, I think.

Last week. So, yes, around now. So, that is much more significant. There, you've got issues around rules of origin. So, will the partners, the UK and the EU, all agree to cumulations—so, to allow inputs from any of the three partners to count for local content requirements? They've done it in the case of Chile, so I guess there is a precedent there. But they need to agree to it, and sign it.

There are also complications around 'most favoured nation' status, particularly—. All the things that we've discussed so far apply to goods, which I think are challenging but, in a way, they are more concrete to look at. In the case of services, some of the EU's agreements—with Korea, with Canada—include 'most favoured nation' clauses in services liberalisation. So, that would mean that the trading partners—. If the UK wanted more access for UK services to the Korean market, and Korea was, let's say, willing to do that, because of that 'most favoured nation' clause that they have in their agreement with the EU and also in their agreement with the United States, they would have to give that same access to the rest of the EU and the US, which might not be in their interests to do so. So, even in cases where you can have agreement between the partner and the UK, depending on each agreement, and each agreement that the party has with other countries around the world, they may be put in an awkward position. The same applies to the future UK-EU trade agreement. 

You say that it might not be in their interests to offer more liberalised service access, but wouldn't the benefit to their consumers of lower prices outweigh any loss to competing producers?

Well, I think that's—. That's a debate on the merits of free trade. That then comes down to domestic politics. So, absolutely: all free trade agreements create benefits to some groups, not least consumers, as you said, in terms of greater choice and lower prices. But all of them also create some losers as well, and that's the politics of it. Different Governments—and this will apply to the UK as well—will have to decide if they compensate losers, how they do that, and what is in the interests of the country. So, South Korea will have to decide that, and then it depends on the different coalitions at a particular moment—who has the ear of the Government, so to speak. So, it would be in their interests to have that. Certainly, in the EU—the liberalisation in trade in terms of legal services that the EU-South Korea agreement affords has been taken up by UK firms. So, all the European firms that have used that and set up there are British. That's because Britain has some of the world's largest international firms. I don't know exactly how much work they're doing there or what their contribution is in South Korea—so there might be room for negotiation, but it comes down to each Government, and when they're facing elections, what parliamentary majorities they hold, and all of these different elements.

14:30

Are there not countries that may have trade agreements with the EU who would prefer a greater degree of liberalisation than the EU are prepared to agree to at that time, and therefore might see Brexit and rolling over these agreements as an opportunity to improve them by making them more rather than less liberal?

Potentially. I'm looking at you, because I would say, in terms of agriculture, I can think of a lot of countries who would want more liberalisation in terms of agriculture.

The other thing to bear in mind and I need to say is that, at the moment, if you are heading towards a 'no deal', the Government is actually looking at having no tariffs for all the exports or quite a few exports coming into to the UK, and that would put agriculture and the rest of the economy under very, very different markets, different pressures, and that also needs to be considered. And even with future trade agreements, we need to rethink the supply chains that we have, both within the UK and within Wales, because at the moment, even in Wales, you have a lot of products coming in from the EU, because it has been historically the case that a company has done that, whilst it could have been brought from down the road. But because, historically, a company does it, it keeps on doing it. And therefore, this is now the time to think, okay, can we source our produce locally or nationally so that we can keep in line with the rules of origin that were mentioned and to increase the percentage of national content, as opposed to EU content that the products have, and just find also a way to advertise that to the world if it's actually 100 per cent British, as opposed to being rules of origin coming in, and sell that to the world as, 'This is 100 per cent British; this is 100 per cent Welsh'? So, there are some advantages as to rethinking the way we currently sell products or sell services, and just thinking about taking advantage of that.  

Could I just add one quick comment on that, on the possibility of 'no deal' Brexit and zero tariffs? Whilst as a consumer in this country, I would definitely welcome that, however there are challenges attached to that and one of them is, in terms of negotiations, you need some leverage. And as far as I am aware, there are no single standing services agreements. Even countries that have negotiated services on the agreements—they normally also have a prior trade in goods through trade agreement amongst them. So, that's also perhaps something worth bearing in mind. The UK is a service economy and it will likely go out to the world seeking service liberalisation. Some countries may want that traded off against better access to goods. If we already have zero tariffs in terms of goods, that could make it difficult to make those.

Why, then, do you think Singapore has been so successful in negotiating more comprehensive free trade agreements, notwithstanding it's unilateral free trade in goods policy?

I think there are some things to bear in mind about Singapore and some of these very small states that have unilaterally liberalised their trade policies, including New Zealand and Chile. All of them have some things in common, and one of them is that they're not seen as a threat by the other countries with whom they negotiate. So, to give you one very clear example, New Zealand negotiated a free trade agreement with China years before Australia was able to finalise those negotiations. They started at similar times, and a lot of it had to do with the fact that New Zealand cannot threaten the Chinese economy. There is nothing that New Zealand can produce that will really make a dent in China's economy, so the Chinese were fairly generous in terms of allowing agricultural products, milk et cetera, to come in from New Zealand into China. By the time the Chinese were negotiating with Australia, they actually gave Australia worse terms for their agricultural exports and their milk exports, despite the fact that there is enormous demand for these products in China, and that has to do with pressures from the Chinese agricultural producers, and their fears that Chinese consumers prefer milk from these countries—they think it's of higher quality, they trust it more. So, if the New Zealanders have been so successful at increasing their exports—'What's going to happen if we give similar access to Australia?' So, these smaller countries do have some very clear advantages. They might not have the advantage of saying, 'Well, look, we are the world's fifth economy, we are a large market, we are attractive', but they also are no threat to anybody. So, other countries are much more willing to enter that. 

The other thing that particularly Singapore and Chile have in common is they've set themselves up as hubs. So, Chile, for Latin America—the gateway to Latin America; Singapore as a gateway to Asia. So, they have very dense networks of free trade agreements that allow investors in these countries to access lots of different markets. The UK—obviously, we're not entirely sure what the access route to the EU, which is a huge market, is going to be. Yes, in the future it is likely we will have some sort of trade agreement with the US, but, again, we don't know how long that might take or what level of access that would give, so it's slighly different. I take your point and I understand why some have put forward that vision for the UK, but I think it's not as simple as saying, 'Oh, we'll just copy Singapore', because there are specificities there that would not apply to the UK case.

14:35

Would you describe Chile as—[Inaudible.]—access to South America, having been outside Mercosur, having had the US alignment much before elsewhere—surely, if you were looking to export to South America as a whole here, historically, wouldn't investment within the Mercosur four countries have answered that better at most times?

Chile is an associate member of Mercosur. The only reason they're not a full member is so that they can have these other free trade agreements that they have with the EU, with the US and other partners. So, you can access—

But it's not part of the customs—. It's outside the customs union of Mercosur.

But it has a deep free trade agreement with the Mercosur countries.

So, in the sense that Switzerland might with the EU, for analogy. 

Broadly speaking, at the moment, the devolved institutions influence trade policy through the foreign office and the other key departments through—[Inaudible.]—which is then used in the European Council. We'll be out—I've no doubt about that—of the EU sometime this year, and we're going to be in a very different place as to how the current influence, which is quite considerable—. Another committee of the Assembly in the fourth Assembly looked at this and found the Welsh voice in Europe quite strong in terms of how the Foreign Office was dealing through the JMC process and officials and then the politicians coming in at the headlines. So, key things like Welsh lamb, Scottish fish, seem to get due weight, then, when things are negotiated. For that to continue now in a relatively loose, informal, more cultural way, which I think is what we could describe that system—you know, a Government in Whitehall could have said, 'Well, you know, this is reserved; we'll consult with you and we note what you've got to say and value it, but we decide.' So, a lot of people in Scotland and Wales are arguing for a much more structured approach. Looking at the fact that I think in your papers you say nearly every aspect of international trade is likely to have some impact on devolved services, therefore, does that not give some form of right for a decision-making role—it could go up to veto level, possibly—and how would that be managed? Myself, I think that creates huge tensions, and I think Dr Garcia mentioned, 'Well, what's going to happen if that's the case for Scotland and Wales holding these key trumps over products that are very important in those countries?' What happens to the regions of England? They, suddenly, are in a terribly disadvantageous position. So, what sort of—? We're going to need a structure; I don't doubt that. But do you have any sense of what's happening in Whitehall at the moment to try and get something that gives due influence to the devolved institutions but doesn't create these distortions within the UK, particularly in England, which could spark off quite serious discontent there?

14:40

I would say—. It's something that I've mentioned in the past to this committee: you need something like the subsidiarity principle to remain in the UK to enable the kind of impetus that the devolveds have—at the moment, at least—to enable that bottom-up approach and to influence what the relationship is with central Government, because, under the EU, this is what happened; because of the subsidiarity principle, the UK had to engage with the devolveds.

Now, of course, even something like the principle of subsidiarity doesn't fit with taking into account what happens in various regions of England, but I think that if you had four nations with four separate powers that would then feed into central government, that would be slightly different. However, this is not the constitutional system we work under and it is incredibly difficult to actually change the power relationships when they are very informal. As you will know, whether it's JMC or something else, those are—. Sometimes, they actually run the meetings, sometimes they don't, or they aren't held for quite a while. And, of course, it would be ideal for Wales to be consulted on these agreements, whether they are agreements that are being rolled over or whether they are future trade agreements, to make sure that Welsh interests are not lost within the bigger picture, whether it is services, as was mentioned—so that there is a voice for the devolveds. But that would be incredibly difficult to achieve in terms of a constitutional perspective. In terms of creating consultations, at least this should be a start in order to have—. Because this is what we need: we need a cohesive trade policy, not this kind of piecemeal, 'We're going to try to copy and paste trade agreements', because those trade agreements might fit the EU but they might not necessarily fit the UK, and I think that by saying, 'Well, we're going to try to replicate it because it works for a big trading block'—it might not necessarily work for the UK as a smaller party now than it used to be as part of a 28 trading block. I completely agree with you that the devolveds and regions within England need also a say. You have very different economies between the north and south, east and west of the UK, and within England as well. So, achieving that change in power relationships—it's going to be incredibly difficult to change the system that we currently work under.

14:45

I would agree with that. I would also add, as far as the Governments and parliamentary discussions and call for evidence regarding future scrutiny of trade policy in the UK and the White Papers on the future of UK trade policy, the language is very encouraging—so, it is about inclusiveness, it is about ensuring that the devolved administrations are there, that stakeholders of all types and varieties are there, but there is very little in terms of actual detail as to what structures and what processes will be put in place to guarantee this.

I would only add to what Ludevine has said that, essentially, we are going out rolling over trade agreements or trying to negotiate trade agreements without having a trade policy, without having had a national discussion of what UK trade policy should look like. And, of course, trade policy has an impact on the industrial policy, on agriculture, on all kinds of other things. So, in a sense, time is what is required to really think through how does the UK want all of these different things to be integrated in the future. Because I would hate to be a Department for International Trade negotiator going out to negotiate with the US without having certainty on any of these issues; they are a very tough negotiating partner as it is. So, you really need to know what is going to work for the country, what are the compromises that we, collectively as the UK, have agreed to make.

Now, the way that, first, the withdrawal agreement with the EU has been negotiated is very different from that. So, in the case of the EU, for instance, and in many other countries, even the US, you would have some sort of mandate given to the Executive to go out and negotiate. That didn't happen, so then we have the problem of the Government coming back with what they've negotiated and Parliament not agreeing to that. So, in a sense, there needs to—. In my opinion, there needs to be something a little bit more robust than the current cultural, 'Yes, we co-ordinate a little bit, we meet, or maybe we don't meet'. I think there needs to be something a little bit clearer as to meetings on trade policy will occur and they will involve the devolved administrations and Parliament will be kept abreast of what's going on in negotiations, and there needs to be a clearer role for negotiating that mandate before going out and negotiating.

And if those structures are not evolved—and there may be a mix of formal and informal ones—is there a danger that a UK trade policy driven strongly by, say, London and the south-east is going to be much less optimum as a trade policy than the current European one is for Wales, Scotland and the north of England, or do you think it's inevitable that a UK policy will, at least, be balanced in representing the areas further away from the only part of the country at the moment, I think, that actually pays in net to the Exchequer and is a world economic region, really, isn't it, as much as a part of the UK economy? In fact, it's probably more a world economic region than it is an integrated part of the British economy.

Well, it would be sensible to do so, to draft a policy that builds upon the strength of the whole of the UK. And it would make sense to make this policy a vision as to how you want things to progress and the steps towards how you achieve this, whether it is a trade agreement with the US or any other country. But, of course, if it was only purely London-driven or the south of England-driven, then you would have a very different policy. So, I would hope that Brexit is seen as an opportunity to draft a policy that is cohesive for the whole of the UK, and where every region within the UK, whether the devolved regions or in England, has the possibility to see, 'Well, actually, I can see something for us in this trade policy that will result in a trade agreement', whether it is five, six, seven, 10 years down the line. But I think it's really important to get the regions, the councils, on board so that they feel part of this new venture, because it's quite scary at the moment, and not to make really rushed decisions that will have an impact for quite a long time. So, for instance, reducing or having no tariffs and having complete trade liberalisation would have a huge impact. Even if this is taken in the short term as a decision for the whole of the UK, this could have consequences for a much longer time than this short temporary, I'm going to say 'ease' to enable exports to come in and keep on trading. So, decisions that are taken now will have huge consequences and not for a short period of time; it will be quite long term, because it's trade policies and trade agreements that we're talking about.  

14:50

Can I do the classic university thing of asking you to disagree with me on something that I'll put to you—turn it round? It seems to me that we actually have to, to pick up on David's point, get to a point where we have more formal structures now than we've had before, because before there was an understanding from devolved nations that there was one seat at the top table, that there was a representative voice for the UK, and that UK voice had to understand competing voices not only within the EU, but outside of the EU as well. There was an understanding—'We'll take a back seat, we'll put our views in, we'll make sure that we are heard', as David was saying, and we did well at that, but we took a back seat. Now, it's slightly different, and part of the different context is—but please disagree with me—we actually have different legal frameworks as well in the two countries. So, for example, here in Wales we have the future generations legislation. That could lead us to very different points of view, and this is not a value-laden judgment, but there is an argument that argues we could be a much more liberalised economy and we could do things differently and quite excitingly and so on.

There is a counter argument that may come from Welsh civic society, from the Youth Parliament, from the Union of Catholic Mothers and anybody else, that says, 'Actually, we don't want that part of the liberalisation because of the impacts this will have on workers in a developing country, or on animal welfare standards, or on our rural economy, because we—', and so on. Now, unless we have a more formalised—but I'm asking you to disagree with me, genuinely—. My hypothesis would be that, unless we have that more formalised one, we're in danger of just being led by a strong UK voice that understands all these complexities, but has to come to a UK decision. Whereas the legal framework here within Wales could be quite different, the civic voice could be quite different, the future generations stuff we're taking about—we might have different agendas entirely in terms of ethical supply chains here in Wales from the UK Parliament that flow from this. So, surely all of that argues for a much more formal structure of scrutiny for this place, and it's not us as politicians sitting around, because sometimes we are the siphons of what's coming up, bubbling up, from the environment link, as well as from the Union of Catholic Mothers, or whatever. 

So, you want us to—

Have you recently given them a talk or something? [Laughter.

So, you want us to disagree with you on which point, because you gave us two sides? 

Well, tell me that I'm wrong. Tell me we can do this in the more informal way that we've done it previously, with back-room discussions between devolved Ministers and so on, agreeing the terms before the UK Minister steps into a room and sorts it all out. Tell me that that can still work. 

Well, it really depends on the pace of things. So, if it's trying to do as many agreements before the end of March and trying to carry them over, then that might be more difficult, to have this kind of time and space to actually do that, because, if you are talking six weeks—or is it 46 days—there will be no time to actually do the informal talks and procedures and talk to stakeholders. If, obviously, there is a transition period, then, of course, you have another two and a half years to actually do that, and, of course, then you have space to have those informal discussions, and build upon that and actually get the position of Wales all the way to central Government. But in the very tight 46-day deadline, I think it's almost impossible, because I'm not sure—. Because the Department for International Trade, they need to talk to other Governments. In order to get agreements for certain trade agreements [correction: to get consent for certain international trade agreements], you need the agreement of the regions, and if the regions need to step in, then this is another issue for other countries. It's 46 days. 

14:55

I'm going to take a longer term view. So, in terms of the immediate roll-overs, the Trade Bill already gave, in essence, the Ministers—UK and devolved Ministers—the powers to do whatever needs doing. But any post-Brexit free trade agreement with other parties, irrespective of how it is negotiated, will have to go through Parliament and get voted. Now—

Only ratified, though. 

Ratified. No third party wants amendments or anything in that. So, in order to make sure that the Parliament votes in favour of it—and this is what happens in the US, Canada, this is what happens in the EU as well with regard to the European Parliament—it is in the interest of the Government to make sure that they are discussing with the stakeholders, with different regions, different groups, with the Parliament, what is being negotiated, in one way or another, so that when it comes to that final ratification, it is not a negative vote. So, even within informal arrangements, there will be—the Government will have to consult.

Now, as a personal preference, I think it really depends on the system. So, in the EU, it is a very co-ordinated system. In Canada, it's a bit more informal, although there are also formal mechanisms as well. In Australia, it's completely informal, and apparently rather, how shall I say, dysfunctional. But it's a large country, but will small populations—the Government is very aware of what each state needs and what their main interests are.

I think you've both done exceptionally well with my academic, turn it on the head question. You've both said, in effect, that with sufficient time and goodwill, you could make it work informally. However, if you're up against deadlines, and not enough time or goodwill to, frankly, do it and make it happen, then it could all fall apart. But you could make it happen under the current system, and you could have levels of scrutiny as well, because, in some shape or form, it would need to come back. A practical example: if the UK got itself into the position where it said that, outside of the EU agreements now, it was going to come to an agreement with a third country on imports of timber, and they were going to weaken the source of origin criteria that have been established at EU level, so that it doesn't really matter which village or wherever it is that it comes from, what it does to that community—if you had time and goodwill, we would still have the opportunity to say, 'Well, we are representing what we feel our future generations Bill said, but what we can't do is do it by 40 days, 42 days. 

But for clarity, you did say that ratification is the issue. If it had been ratified, not amended, we would not have a say in that process. It would simply be a Westminster process. So, informally, if they wish to ignore us, there is nothing we could do to actually raised those concerns more widely.

The UK Parliament cannot amend, reject a treaty, or approve it. It's only the ratification that will be signed—that will be, sorry, voted on by the UK Parliament. 

15:00

Absolutely. And of course trade policy is a retained issue as well. What if it ran counter to, for example, our future generations Bill?

Well, you still have—

You still have the competition between what is reserved and what is devolved, to the same extent as you have it currently. So, you still have different levels of protection, or standards, across the UK.

But with sufficient time—sorry, Chair—we would be able to argue, through the JMC process, through other means, we'd be able to say, 'Don't go where you're thinking of going, Mr UK Minister, Mrs UK Minister, because we're going to end up in court over this.'

Of course.

That's with sufficient time. But the position here, and one of the concerns that has always been on this, is that the decision to do a treaty on trade is with the UK Government, but the implementation of that is with devolved nations, and we would have challenges if, actually, it would go against some of the illustrations here.

Just to point out, that has happened—it wouldn't be the first time that a state enters into an agreement with another state, or third party, and then the implementation of certain aspects doesn't follow through, because subnational levels of government decide otherwise. That's one of the reasons why the EU, in the agreement with Canada, was very keen to have the Canadian provinces at the table.

Well, it's those examples I'm anxious to learn from. Because you're not painting an extraordinarily happy picture here this afternoon, for future stability within the United Kingdom, in all sorts of ways. And I'm interested in resolving issues like this before they become issues for us, and that means having structures in place that we can rely upon. And one of the reasons the EU has operated so well is because you've got a rules-based system, where people recognise where they are. Now, I'd expect and anticipate that a UK Minister would prefer an informal structure of consultation within the United Kingdom, and we would prefer a more formal, structured relationship. That's what I would guess. But are there any lessons where we can learn from any states that do this well, if you like, where we can look and understand how, for example, if an agreement was being reached with another state, we could say, 'Actually, if the Department for International Trade wish to embark on this process, then the Welsh Government, Scottish Government, Northern Ireland Government, would be involved in terms of the development of the objectives, the negotiating position'? They would then report back to structures here, and we would then be a part of that negotiating team, rather than just being told by press release what's going to be agreed tomorrow morning.

I would say Canada has been able to do that, with the agreement with the EU. That is the first agreement where the provinces were themselves directly involved and turning up at the negotiating table.

Can I add—? The reason why that is with Canada is that trade within Canada is very difficult between the provinces, but when it moves to international, it's much easier. So, it's easier to have international trade with Canada, or out of Canada, but between the provinces, there are different [correction: different standards]—it's not as easy to trade, which is very interesting and very different from what we have in the UK. So, you can't really make [correction: make comparisons]—it's a very different trade regime, and very peculiar as well.

We've come to the end of our allocated time and I'm going to just ask the last question. In a sense, we've discussed this very much, and we've talked about the continuity of roll-over agreements, and we've also touched a little bit on new agreements. But one of my concerns—you talk about the time—is capacity. At the very beginning of all this, we were quite clear and were informed about the lack of capacity within the UK Government of the actual trade negotiators. And here we are talking about trade negotiations on 30, 40 agreements, possibly very simultaneously, and beyond that into some of the major agreements that may take place. Does the UK Government have the capacity and the quality of trade negotiators to ensure that these negotiations will work for the UK and not simply—because you've already highlighted South Korea will want to change it, and it'll have the power, because it wants to change it to suit itself, not to suit the UK? So, do we have the capacity? Do we have the capability to actually deliver on these agreements, on the continuity ones and new ones, in the time we currently have? Because we know that, even if we did have a transition period, we're still talking about 2020—the end of 2020, which is less than 18 months away, or just over 18 months away.

15:05

I think, you know, it's—. When you're talking about an agreement, you need consent from two countries at least, and even more if you are talking about a trilateral or more agreement. Therefore, looking at the capacity within the UK and how they can deliver future trade agreements, it's only one aspect; there must be willingness from the other party or other parties to actually go as quickly as the UK wants it to be, because the UK is really—

The UK's rushed to, 'Okay, let's try to have those trade deals in place', and I think you [correction: we] are still talking to other countries, and some of them are much more powerful than the UK is. We have to be honest about this. It's not, you know—. The US is a big, big country—China, and all the other countries in the world. It's also the power relationships that need taking into account.

As to the capacity, I believe that the Government has recruited quite a lot of experienced people in order to deliver these. And, you know, they should be, or I'm hoping they are, ready to deliver. We all hope so, I think.

I would say I haven't encountered—. This includes the European Union and the US trade representative office. If you ask any country engaged in trade negotiations, more than three or four at a time around the world, they would say that they are overstretched. So—.

Well, that answers it all. Thank you very much.

Thank you very much for your evidence this afternoon. It's been very helpful to us. You will receive a copy of the transcript. If you find any factual inaccuracies, can you please let the clerking team know as soon as possible so that we can get them corrected. So, once again, thank you very much for your time.

Thank you very much.

Thank you.

3. Cynnig o dan Reol Sefydlog 17.42(vi) i benderfynu gwahardd y cyhoedd o weddill y cyfarfod
3. Motion under Standing Order 17.42(vi) to resolve to exclude the public from the remainder of the meeting

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).

Motion:

that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi).

Cynigiwyd y cynnig.

Motion moved.

If Members are content, we'll move on to item 3, which is a motion under Standing Order 17.42(vi) to move into private session and to exclude the public for the remainder of this meeting. Are Members content to do so?

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 15:08.

Motion agreed.

The public part of the meeting ended at 15:08.

Explore the National Assembly for Wales