European Union (Notification of Withdrawal) Bill — House of Lords, 2017-02-20
Topic: Foreign Trade
David Arthur Russell Howell (Conservative, Centre-right): I must apologise to the noble Lord, Lord Russell, for accidentally queue barging. I listened with interest to most of what he said. I did not agree with his last remark, but that is another matter Like others, I welcome this mercifully short Bill. I have to confess that after more than 45 years of almost continuous EU debates, Bills, treaties and arguments, it is quite hard to think of anything extremely new and useful to say. Of course, this House can add analysis, insights and advice aplenty, and many noble Lords are supremely well qualified to do that. We have heard some such comments this afternoon and will hear a great deal more in the weeks to come. However, I just cannot see the point at this stage of trying to amend what is essentially a procedure, to use the medical term, and one that must be handled with immense and undistracted care and a minimum of elbow jogging if it is to succeed and get us through to where we want to be There are said to be two front-runner amendments in prospect, so the media tell us. One concerns the status of EU residents. That is a very tricky one. I must confess that much as I would like to be on the side of the unilateralists, I am afraid that it looks as though a unilateral approach is not going to work. Some continental countries and leaders are clearly not going to budge except under pressure, and we obviously cannot abandon 1 million British citizens. The other front-runner is about Parliament’s say in a final deal. I am not sure that it will come back in this neat packaged way, as everyone currently, particularly those in the other place, seems to think. However, I will return to that in a moment The point I wish to make lies with trade and the single market. I confess my difficulty in trying to get into the mindset of those such as Tony Blair, the excellent noble Lord, Lord Mandelson, who spoke so clearly, and our Liberal Democrat friends, and their fears of a hard Brexit. The more I hear about their fears, the more I feel that I am listening to a world view of trade which is completely and utterly obsolete. Services, digital and conventional, are rapidly coming to dominate international exchange. McKinsey says that data and information flows generate more economic value than all global goods trade. Our economy is 80% services, 33% of them in actual digital or digitally-related businesses. Slightly under half of current export earnings come from services and this will grow fast. The recent Government White Paper tells us that 37% of the total value of our goods exports are services anyway. This is not just financial services. In fact, all the other services—retail, consultancy, legal services, creative industries, design, fashion, tourism, accountancy and much more—are still much bigger earners than financial services. The reason for this unstoppably powerful trend is that in the last few years we have seen the complete collapse of communication and information costs to almost zero and the internationalisation of production, with disruptive, transformative and revolutionary effects on all trade and investment flows A massive shift of global GDP shares from the west and the north to the east and the south has taken place, a total reversal of fortunes from the old form of globalisation in the 20th century that went on before 1990, where the north and the west got richer with global trade and the south got poorer. Now it is the other way round, except for the very richest who have done well in both areas. The chief new winners and the new markets are China, India, Brazil, Indonesia, Nigeria, Korea, Australia, Mexico and Turkey. Incidentally, three of those are in the Commonwealth. Of course, services know no boundaries as they are duty free and are not part of a customs union. On the other hand, they are restricted in the EU by numerous national and local rules The fact is that in recent years the EU has not been a good place for services expansion. Our UK services exports have grown less to other members within the EU than to outside markets, and outside countries not in the EU have done better in exporting services into the EU than we have since 1993, when the single market came into being. Of the 20 countries with the fastest export growth over the last 10 years, only three are in the EU. Meanwhile, global value chains wind across all continents, making a nonsense of protected production zones such as the single market, and with components and partly processed products crossing borders multiple times. The obvious conclusion and analysis is that being in or out of the old single market is of decreasing relevance to our interests and prosperity. Skills and sheer innovative power are becoming far more important It is a bitter fact that in these novel conditions we have so far been rather a bad exporter, one of the weakest in Europe. We live off a precarious model of massive trade deficits and heavy imports to fill the gap. We cannot go on like this. As noble Lords have observed, we need a new model. As my noble friend Lord Hill said earlier, business cannot operate in a vacuum and will not wait for these deliberations and negotiations. Businesses are making their own deals and arrangements. Quite aside from the complexity of it all, the whole prospect depends on how views crystallise across the channel. The EU is entering a major period of political upheaval. Another euro crisis is just round the corner. The Visegrad Four are going their own way. A divorce has to be agreed by 72% of Council members and a new relationship has to be agreed by 39 parliamentary chambers. How will it ever be finalised at a Brussels level? Will M Barnier ever have the authority to settle it all Of course, we must stay very close to our European neighbours on a whole range of security and safety issues. However, a new mental model is required to comprehend the unprecedented trade situation. Tony Blair says that the Government are not masters of the situation. He has not grasped that in these fluid new conditions no Government are in control or in mastery. We are caught up in historic forces—social, technological and therefore political—much bigger than any single Government, as are many other countries, including the United States of America. The old single market is a smaller and smaller part of the scene. Our interests and future prosperity now lie on a wider stage and we must move confidently and unimpeded to the centre of it.