Free Trade Agreement: Iceland, Liechtenstein and Norway — House of Lords, 2021-10-14
Topic: Foreign Trade
Charles Hay (Non-Affiliated, Unknown): My Lords, this debate is held pursuant to the provisions in Section 20 of the Constitutional Reform and Governance Act 2010. On 16 July, the Government laid before Parliament the free trade agreement between Iceland, Liechtenstein and Norway and the UK. Following discussions between the International Agreements Committee and ours, it was agreed that, exceptionally, the European Affairs Committee would conduct the scrutiny and prepare a report; this was as the European Affairs Committee is charged with considering the UK’s relationship with both the EU and the EEA, given their close economic relationship. The report has been prepared in exactly the same format as that successfully developed in recent times by the International Agreements Committee. I warmly congratulate the committee staff involved in its preparation, particularly the lead author, Chris Johnson My remarks will focus on two areas: first, the agreement itself, and, secondly, the scrutiny process for this free trade agreement and free trade agreements in general. The UK became a beneficiary of the EEA agreement on 1 January 1994 as a member state of the EU. In seeking to preserve the benefits of that agreement, the parties, namely Iceland, Liechtenstein, Norway and the UK, entered into two earlier international agreements. The first, in 2019, sought to preserve matters in a UK/EU no-deal situation. That has, of course, now run off. The second, in December 2020, aimed similarly to preserve tariff-free trade in goods after the UK’s automatic exit from the EEA at the end of the transition period. This second agreement was explicitly temporary, and the Government stated at the time that negotiations towards a more permanent agreement had begun in the summer of 2020 and were due to be completed in 2021. This objective has now been met via the new free trade agreement Importantly, as we point out in our report, this new free trade agreement goes further than the previous agreements in at least two significant ways: first, with the removal of some tariffs in the fisheries sector, as we detail in paragraph 35 of our report, and, secondly, as it also includes provisions on trade in services. We very much welcome this and note that, while the overall provisions remain more restrictive than was the case when we were a member state of the EU, they go further than the comparable ones in the EU-UK Trade and Cooperation Agreement, as the Law Society also commented Nevertheless, the committee welcomes the Government’s successful negotiation of this important agreement and the speed with which it was negotiated, covering a trading relationship valued at over £27 billion, most of which is with Norway. Imports of Norwegian goods are particularly important for Yorkshire and Humber, for instance, where they make up 13.2% of all goods imports, and for my native Scotland, where the figure is 10.4%. Unlike all the other trade agreements concluded by the Government so far, this is not a rollover agreement; it contains substantially new provisions, as I have just observed. Indeed, our report concludes that it should really be seen as the UK’s first new, post-Brexit free trade agreement At the same time, however, it is important not to overlook that a key objective of the FTA is to preserve the trading relationship that was there when the UK was a member of the EEA. As such, the free trade agreement is, in part at least, an exercise in damage limitation: it seeks to avoid new barriers to trade, rather than to remove existing barriers. Thus, its impact in terms of increased trade is likely to be modest and incremental, both in goods and services Separately, as the report points out, the interaction between the free trade agreement and the protocol on Ireland/Northern Ireland is complicated. We are surprised that no reference is made to this issue in the materials published by the Government alongside the agreement. We highlight this issue in paragraph 21 of our report. Could the Minister give us comfort that, in due course, the Government will provide business with suitable guidance in this important area?