 Good morning and welcome to the 10th meeting of the committee in 2019. I'd like to remind members and the public to turn off mobile phones and any members using electronic devices to access committee papers should please ensure that they are turned to silent. Our first item of business on the agenda today is an evidence session on international agreements and I'd like to welcome to the meeting our witnesses, David Hennig, Dmitry Grudewinski and Professor Alan Winters. Thank you for coming to give evidence to us today. I'd like to start by quoting from a paper written for the committee by our expert advisor, Dr Filippo Fontanelli, where he touches on the impact of trade agreements on devolved competencies. He points out that trade agreements often include rules on public procurement, rules on trade and agriculture in fisheries products, geographical indicators, environmental protection, judicial co-operation, for example, and even civil justice. Many areas of devolved competency in Scotland would be affected by trade agreements. What, in your professional opinion, should be done in terms of mechanisms to ensure that the Scottish Parliament and the Scottish devolved institutions are involved in trade agreements going forward? Perhaps, in your answers, you might like to draw from international experience with other countries where they have sub-national governments? Let me start. Others will be able to add a lot more. Very clearly, an administration, a Parliament that has got responsibility for an area, needs to be heavily involved in the design of the mandate. The very first thing one needs is to ensure that, in preparation for a trade deal, the Westminster Parliament and the UK Government are fully informed and have some obligation to take seriously the views of the devolved administrations. A joint committee possibility of regular guaranteed high-level official committees are part of that. Assuming that one can converge on a mandate that makes some sense, that, as we are proving at the moment, in a sense, quite a large part of the battle of a successful negotiation is working out what it is you want and what you might expect. Thereafter, there needs to be a mechanism for keeping the devolved parties informed and letting them, as it were, comment and modify their positions and offer advice. A lot of that, of course, has to be quite quiet. It would be done at an official level mostly. One cannot necessarily conduct everything at a parliamentary level, but at specific points in time there is room for parliamentary scrutiny, some of which may have to be private but some of which can be public. If you are doing that process properly, you end up with a deal that you know more or less is going to satisfy all the parties. Then one needs to ensure that there is some way of taking account of devolved administrations, devolved parliaments' views of the trade agreement. You cannot get into a position, I think, where one of the devolved parties can automatically and unconditionally veto a trade agreement. We have to have a system that brings that co-operative process, as it were, to an agreed solution. I would add to that a couple of things. The first is that I have said quite frequently in terms of trade agreements that one of the most important bases for any trade agreement is consensus. That consensus needs to be political across parties but it also needs to be geographical, regional, taking into account, devolves one of the interests of Scotland. To pick up from Alan's very last point, you must avoid getting into a position where an entire area like Scotland or Wales or Northern Ireland simply does not agree with the final deal. If you get into that situation, you have a really major political issue, as I am sure you don't need me to tell you. Therefore, you need to put in all the work up front to avoid that. The way that I see it is to put the mechanisms in place such that, by the end, you really are confident and comfortable that it takes into account the main interests that Scotland has. Certainly, when I was working on trade policy for the UK Government prior to 2016, the referendum in an EU context, there were always regular updates. Those updates always included representation from the Scottish Government. They may well have been at an official level just updating what was happening and providing that opportunity for input to be given, such that we knew what the main priorities were for Scotland and we knew that it was important that those were delivered. Let me first say that it is an absolute honour and privilege to be here. It is my first time, so I hope that I do not screw it up. Feel free to yell at me if I do. I wanted to pick up first on Professor Winter's point that the mandate essentially is the Bible of trade negotiators, and it is fundamentally a hierarchy of interests. A hierarchy of offensive interests, what you are seeking in terms of commitments from the other side, and a hierarchy of defensive interests, what you are unprepared to move on in response to requests for those other sides. That mandate is what we as negotiators use as our guiding star. When we are in the room, the interests at the top of the hierarchy are those that we invest the most of our negotiating coin in defending or, likewise, prosecuting for offensive interests. Determining that mandate and making sure it reflects the interests of Scotland, making sure you fed into that mandate, is absolutely crucial because once a negotiator is in the room, everything but that mandate becomes secondary, everything but that north star fades into the distance. If you are not on their radar by then, you are already three months behind. In terms of devolved competencies and how to reflect the interests of Scotland, I would separate it mentally into two boxes. First, there is the specific devolved competencies of the Scotland of Wales of Northern Ireland. This, as negotiators, are things that are constitutionally or otherwise your remit. When, for example, in Australia we deal with issues that are the constitutional authority of the states. As trade negotiators, we tend to try to avoid getting into them if we can because in Australia that does essentially add another layer of clearing process that means bringing on board a whole another group of people to essentially approve what we are doing. It makes it much more difficult to get a trade agreement done, so wherever possible in Australia what we have generally tried to do is stick to commitments that can be executed at the federal level. From the papers prepared for this committee and from the description before, that might be much more difficult in a United Kingdom context because the extent of the devolved competencies is greater. The second box is almost the more critical, which is what are the interests of Scotland and how do they feed into this mandate? As a trade negotiator, you are generally lucky if the analysis and economic data you have available to feed into the government's thinking on a mandate is economy-wide and occasionally, sometimes it is sector-specific in areas where there is an effective industry group. You much, much more rarely have information on what, say, a particular tariff line would do to eastern Scotland, what a particular commitment would mean for land production in a sub-region. You operate at the national level, and that is not through lack of interest, that is generally through lack of data, lack of capacity. Frankly, civil servants sitting in a national capital do not have the same connection to local businesses and local interests as you would to those in Scotland. On a particular example, that might be relevant to the point that you have just made. That is the announcement earlier this month by the UK Government to go for liberalisation on a temporary basis in the event of no deal in which, across a whole range of areas, they announced unilateral zero-rated tariffs for goods coming in to the UK. I was surprised to learn from some of our briefing papers that we were told initially that those were areas that did not have a great impact. They went in big areas of the UK economy, so they would not be damaged. I discovered today that they include dairy products. I represent the south-west of Scotland, where the production of cheese is very important. It might not be huge in terms of the UK overall, but 73 per cent tariffs on dairy exports would certainly hit our cheese makers very hard if there were no tariffs on goods coming in. In your view, is that an illustration of the fact that perhaps the voice was not heard when that decision was made? Obviously, I was not inside the DIT index U consultation process, but you can certainly look at the establishment of those no-deal tariffs as a microcosm of the preparation for a trade agreement process. What the UK government appears to have done is to attempt to replicate that process of working out well what are our hard defensive interests, what are the industries where we must absolutely maintain protection, and what are the industries where we can pull back from it a bit or eliminate it entirely. From my conversations with business lobbies, and I haven't had these conversations with devolved authorities, there isn't a high level of satisfaction with the consultation that went into that. The objective, I think, was to try to anticipate what those interests are and craft something that would work, but that consultation didn't take place. I think what you pointed out about the south of Scotland versus the government's line is really emblematic. Trade generally, while it has a huge impact on the economy in dollar versus GDP terms, doesn't tend to be that significant because most of a modern economy is us selling things to our neighbours and buying things from our neighbours. You can take something that will be absolutely pivotal to a region, like dairy, in your part of Scotland. If you look at that against the backdrop of the entire United Kingdom economy and the 64 million people who live in it, then it's barely three points behind the decibel in terms of its GDP impact or whatever. For that community, not only for the people working in dairy, but for the pharmacy that relies on those people to have steady income to buy its services, for the local lawyer who handles their weddings and divorces, for the supermarket, at the post office, it's absolutely pivotal for that region. It's entirely possible that without adequate consultation and feed-in, it's not that it was deliberately ignored. It just never rose up as an issue. Professor Winters. I think the temporary tariff and liberalisation, which they announced for no deal, illustrates the points that are important very clearly. I think that one has to accept that it was done in rather exceptional circumstances. The DIT has sort of confessed that there was very little consultation. They clearly viewed it as politically very sensitive and wanted to keep it quiet. I think that one can use it as an illustration of what can go wrong. One shouldn't necessarily use it as an indication that going forward over the next decade or so, that is exactly how Westminster and Whitehall will always behave. One illustration of how, what a patch up it was, if you look at it, you'll notice that the tariffs on a lot of agricultural products are actually defined in Europe. When we take control and Americans sell us dairy goods that they will sell in pounds here and price in dollars in America, they have to pay euros to get them in. I think that it was just a real patch up. What I'd add to that is that the time factor, I mean trade agreements are always criticised because they take so long. You'll see that this is what happens if trade agreements don't take a long time, is that suddenly you get a tariff announcement because what needs to happen is that government goes to business, the Scottish government everybody and says, right, we're going to make a tariff announcement. What do you want to say about all the different industries? Frankly, that process needs to iterate numerous times because business doesn't necessarily know and all the different subsectors don't necessarily know the detail. You have to do some really serious analysis to get this right. That takes time. Frequently it's not the negotiation with the other country that takes the time as much as. It's the negotiation with yourselves. Do we know everything we need to know about that region, this subsector, the impacts? The final decision is, as to tariffs, will always be taken in secret by the people doing it because they have to judge some pretty sensitive trade-offs, but you have to be certain that you've had really sufficient time to have contributed. They weren't certain. The business interests, in turn, we have to be telling the business, you have to be specific. What is going to really hit you? What amount? Is there an amount? What quote or what tariff? That's the process and it takes time. One of the drivers for leaving the EU from some is the ability, then, of the UK to make new trade deals principally with America, with New Zealand and with China, are the ones that are frequently mentioned. You talked about timescales and negotiations. The two questions initially are, what do you think the timeframes for any new deals in these other countries would be? What type of Brexit would facilitate the ability to make those trade deals? If we were in some kind of agreement with the EU, what impact would that have on the ability to make individual trade deals? The EU is one of the slower countries or blocs in terms of making trade agreements. They frequently can take five to eight years would be my suggested timescale for an EU trade agreement. The US has actually done them more quickly in the past, two to three years, let us say from start of negotiations to implementation, but that's very much if pretty much you're taking the US terms and just contributing a little bit. If you are into a serious negotiation, it is going to take longer, it is particularly going to take longer because we don't actually yet know in all the levels of detail what Dimitri was talking about, about all of our specific interests. However, that is completely theoretical because those countries, the US and New Zealand and others, have made it entirely clear that they are actually going to be waiting for what kind of relationship we have with the EU and for that to be defined. That applies even in a no deal scenario because even advocates of no deal are saying that we will want some deals with the EU and there is going to be huge amounts of tension in areas where there is conflict between the EU and the US and we are talking food standards here and the famous chlorinated chicken. That decision is not going to come in any way easily. The US trade officials, they are very experienced, they are well aware of the fact that the UK has big decisions to make. They don't expect that talks can proceed particularly quickly and therefore almost regardless of what type of Brexit it is, at rate deals are going to be slow because we don't know what we want and the other countries are waiting to see what happens for our relationship with the EU. Now in the event that it's a customs union and that got the closest vote yesterday, our trade agreements are going to be extremely limited because either they are going to have to follow the tariffs of the European Union, in which case for certain the US is not going to want to play on that basis, I'm pretty sure, or they're going to have to be related to services, which we haven't mentioned but is particularly tricky to do services only trade agreements. In fact, I think there are any one or two in the world. I think in all circumstances we're talking about a pretty slow process. Yeah, I would certainly echo all of that to pick up the point about services. Services are extremely difficult to negotiate liberalisation agreements for. There are in fact only one, the WTO only records one services only general trade agreement and that's between the European Union and the after countries where we know there's an extreme deep relationship just happens that the goods section and the services section are written down in different treaties. So the notion that don't worry if we've pinned the goods market down by agreeing customs union or having unilateral move to zero tariffs ourselves, people will come along and want to negotiate service agreements with us is actually just a fallacy. We are scarily efficient in services and most trade agreements involve trying to get something and give up a little bit. What we're offering to other countries around the world is we can't give you anything in goods where you are efficient and if you open your doors to us in services we will be a really fierce competitor so they won't turn up. So I think we need to be really clear that services only agreements will be extraordinarily hard work. I think I would say all trade agreements are going to be pretty hard work. I think there's a lot of triumphalism in the hypothetical when it comes to trade agreements and talking about all of the glorious markets that will be that will be open but the fact of the matter is that in as Professor Winters was illustrating there your greatest gains in a trade agreement potential gains rather are in areas that the your counterparty protects the most just just naturally if they've got if you're you're looking to eliminate their highest tariffs. Those highest tariffs generally tend to be high for a reason and it's generally because there is a compelling and effective domestic argument often backed by a very effective and persuasive lobby that keeps that tariff high and has kept it high in the face of liberalisation pressures from every direction for decades sometimes you know up to up to a century so when you are trying to to charge up that hill it is steep indeed. On the question of timescales I think David makes it makes a critical point. Trade agreements don't take a long time because trade negotiators are very slow typers they take a long time because when you start you've got 650 paragraphs in square brackets because you disagree on everything but 50 paragraphs of standard text and it takes a long time to resolve 650 disagreements and align your requests and their offers across your schedules. The amount of time it takes a trade agreement that depends entirely on how flexible and accommodating you are willing to be to the interests of the other side. If you walk into a trade agreement and they the other side tables a text and tables a request and you go yep and yep and don't worry about anything we've asked for you can get the trade agreement done in 45 minutes they will just copy paste their last one plus some requests but I think if the UK is going to take this seriously and I would very much encourage them to do so then you know first sense of timescales the Australian free trade agreements with Korea Japan and China took five seven and ten years respectively I think I've got that order right. That is a that is a sense of timescales and that occurred because there were fundamental clashes of what we needed to see and what they were willing to give and vice versa. The last point I make also to pick up on something that David said in terms of the likelihood that other countries will wait to see what shakes out in terms of UK and EU relations. David is 100% right on standards alignment but there's a more fundamental point in terms of goods. When I as a trade negotiator am looking at an offer that your side has made so for example the United Kingdom turns around to Australia and says we will drop this tariff on wheat for example and in exchange we would like this this and this. The way I would evaluate if that is a good offer if that's a reasonable exchange is by comparing first what what will that tariff dropping mean for my producers vis-a-vis United Kingdom producers but secondly what will it mean vis-a-vis Australian competitors and until I know whether EU receives full unlimited market access in a free trade agreement that eliminates all tariffs or if it's facing WTO tariffs it's very hard for me to price the value of UK offers because I don't know if my major competitors get zero tariffs or potentially lock out quotas for example. So it actually it actually actively makes it difficult for your counterparties to make trade agreements they can they can count on as being balanced because they don't have the answer to that puzzle yet. You described a very complicated and lengthy process and obviously the UK has been a member of the EU and trade deals have been involved in have been the EU has been the lead negotiator. Do you think that there are issues with lack of experience within the UK government have we been we haven't been actively engaged in negotiating these type of trade deals for a long time when you described the US as quite an aggressive negotiator what do you think the UK government needs to do in order to be able to come to negotiate these type of deals and be involved at that level? Well it clearly needs a lot of expertise but it also very clearly needs to think very hard about what's going on before it gets into that negotiation. Trade negotiations in one sense are like other negotiations like a domestic negotiation civil servants do that all the time they come along with their own environment the World Trade Organization they come along with their own vocabulary and conventions but in a sense the real key is to have people I think the real key is one to understand what you want and what you're going to be prepared to pay for it and essentially have conducted a secure negotiation at home so you're negotiating from a strong base then you need at least some people who know the way the system works a trade negotiation is a funny sort of business a sort of mixture of commerce and law it's these are people who are tough negotiators that's what they do they don't they don't give any favours so I think the most important thing is to be very realistic about it to be really clear what you want and understand that you will not patch it up by Christmas and it's not necessarily about numbers so you the officer of the US trade representative is actually surprisingly small there's only about 200 full-time members of staff there but they're drawing on expertise from across the government so not just about whether you've got enough negotiators in a department for international trade but do all the other government departments have people who can be dedicated to this and to understand trade are there enough people in the Scottish government and the Welsh Assembly who are going to be able to understand and to be able to get all the information required have you set up the domestic processes clearly not we've already discussed that in order to make sure that everybody has a chance to to contribute within that and so this is the point about being making sure you are fully prepared before you even before you even start to to do that and to go in first against the US in an old language of the civil service that's a very brave step to do that against some of the most fearsome negotiators that you're going to find anywhere but then again there's no country I can think of that would be easy to negotiate a trade deal with because they've all done this before and they've all got already their processes in place and we haven't and as far as I can tell we still we still haven't so or as of let us say it was going to be in two weeks time we wouldn't be ready thank you good morning panel I'd like to come on to the issue of wto rules and the possibility as unpopular as it is of a no deal scenario I know we've touched briefly on the temporary tariff regime and I appreciate what Mr Henig said around in an ideal world the process by which you would come up with such a scheme but I guess in an ideal world the plan was we weren't days away from from potentially leaving the status quo so perhaps ministers didn't have the benefit of time in that respect but if there is a scenario and it is just an F because all this is just one big F none of us know that we do have to rely and fall back on wto rules could someone with expertise of the wto just explain to the committee what that world looks like in terms of how we trade with other countries how we as a third country trades with the EU and what those international standards and protocols may look like sure so fundamentally what wto rules are are a minimum baseline if you think of the EU single market and customs union as a very advanced stage of integration where which has progressively eliminated a whole range of barriers and bound governments not to implement a whole range of barriers to trade or conditions about the way trade can happen the wto is an absolute baseline it is a minimum it is a minimum standard of non-interference or or interference limitation in international trade that now 164 members have signed up to so in practice what wto brexit will mean is that the obligations on the EU and the united kingdom vis-a-vis one another will be to treat trade flows between them in the same way that they treat the member the wto member with whom they have no free trade agreements no trade related agreements of any kind um there are many of those so the closest analog is venezuela so i think if you have a package if you picture a package now that is heading from from edinburgh to to paris that receives a very advanced degree of treatment if you are a venezuelan exporter trying to send a goods consignment to paris you find yourself facing much higher much higher fees much greater degrees of paperwork and the EU is in a way under wto rules under a principle called most favored nation status has to apply those venezuelan rules to to the united kingdom now that's that's an oversimplification but that's essentially what it means for UK businesses even with all of the commendable measures that the governments on both sides have already put in place to to mitigate against that shock it's likely to be a very sharp shock indeed in two ways first there's the question of tariffs the UK has indicated it will liberalise a range of tariffs on a most favored nation basis to allow imports to flow in more readily than they otherwise would the EU has made no such indication no such implication as far as i'm aware so if there is no deal the UK will absolutely face those tariffs anyone suggesting otherwise under unicorn schemes like article 24 of GAT or mysterious last minute arrangements is doing so without any basis on EU statements or kind of indications so they will face that's the the first shock the second shock is just in terms of paperwork and procedures the EU single market customs union has done its very very best to make moving something from Glasgow to Paris as easy as moving it from Glasgow to Edinburgh in terms of paperwork and requirements they haven't quite gotten all the way there but they've gotten far closer than almost anyone else anywhere in human history compared to that moving something internationally is actually a significant burden of paperwork there is a reason that the customs brokerage industry exists there is a reason that freight forwarders are a thing and that is because navigating the bureaucracy of international trade which is which every single country has is a really hard lift and any business in the united kingdom or in scotland that is only ever traded within the european union will have never encountered that before there is a there is the eory numbers the basically registering as an import as an exporter if you have never traded as a business outside of the EU chances are you don't even have that registration you're not registered as an exporter because you didn't have to be and eory registration numbers which are being tracked are still I think hundreds of thousands below where they need to be so tens and tens of thousands of UK businesses will not be eligible to export they will not be the type of registered firm that can export goods to markets they could easily export to the previous day because the paperwork requirements will just kick in and even if that's mitigated in part on the UK import side and I trust the European Commission will also do what it can to mitigate that in the long term in addition to the shock there is also the every additional bit of paperwork cost money and every additional paperwork cost time and business models in the UK right now the ones exporting to the EU are built around not having to do that if they do have to do that that raises their costs of doing business and may push them outside of their competitiveness margins so it's um I don't want to overstate this but I actually really struggle to overstate it at the same time this is a really really serious and sharp shock that should not be should not be dismissed understatement understatement you only talked about goods there's also an impact on services so I've um and I'm on list two particular areas and it's an impact on services there's a lot of folk from across across the UK who are selling services who basically involving them going to work across the EU we are entirely unclear what the regime for that will be there are many people in I don't know IT services who rely on working across Europe wherever they're needed there are many people in some in some fields that we're you know we have some great skills in and I've come across people who kind of go around Europe giving advice on wind turbines or you know off-shore oil and gas installations there's another is another one and I think there's quite a few of those people here in here in Scotland who are going to find that their rights to work across Europe are entirely unclear after in the event of a no deal Brexit and when I say entirely unclear you know to them they may well not be able to do it and many of them are fearing that they will not be able to provide their services in the event of in the event of a no deal Brexit even if they themselves could travel to work there are the services schedules at the WTO which tells you what you can and can't supply in terms of services as another country and they are far below the the single market integration it is often said there is no such thing as the single market for services in the EU it is incorrect it said there is that you know generally you do have the right to travel anywhere around the EU and provide services under WTO you you know generally there's an awful lot of exceptions to you being able to to do that can I add just one further wringle the the the WTO rules will also constrain the way that Britain can conduct its own trade policy I mean exactly as they constrain the European Union but for instance we will only be able in terms of WTO rules to be able to calculate and impose anti-dumping duties in a moderately disciplined way there will be disciplines on subsidies there is the most favoured nation discipline that we have to charge the same tariff to every partner with whom we don't have a full free trade agreement so the WTO minimum which Dmitry talked about will apply to us and I have some conversations with people in government who think that after brexit they'll be completely free to do whatever comes into their heads well the WTO has over 70 years actually a constrained a fair amount of bad behaviour in the trading system and it will continue to do so for us one conversation I had in America a year ago I guess a bit more than a year ago I think warned me that the American the USTR in America is preparing to bring a large number of WTO disputes to Britain because essentially when we take over our own trade policy all the things about EU trade policy that United States hates will now be owned by us we will have voluntarily introduced things like a ban on hormone fed beef which is generally held to be WTO inconsistent and that they've got fed up of beating against the brick wall of the united of the European Union but they are very clear that when it's ours little Britain they'll come and talk to us so the WTO rules will constrain us and will condition the way that we conduct our trade policy. Thank you convener it's just a couple of points of clarification that came up from your answers there so you mentioned in terms of selling of goods internationally how does that then affect businesses if they're selling goods on likes of an amazon website or an ebay website how does that affect these businesses if they don't have that particular registration so it generally depend on how they're structured around how they actually do this selling whether they are using amazon whether they are effectively selling to amazon so it goes to an amazon warehouse and the amazon warehouse distributives in which case amazon will take care of it they've got the world's best logistics that's not a problem however if you're using the amazon marketplace you're essentially an independent vendor so you are or like ebay is a really good example of this so you have your own little store it is listed on ebay somebody goes online and buys your crocheted hat and then you get the order and you send it to them yourself the ability the extent to which you can do that might be curtailed if you are this gets a little bit complicated when we're talking about e-commerce because a lot of countries have minimum thresholds where if you're sending like a 30 dollar hat that you've that somebody's bought from you online then it's tariff free it's large it's it's much easier but if you are selling higher value or higher volume goods then you might and you're selling them into the EU then you might suddenly face having to to implement all of these procedures if you want to kind of be an exporter and be square with all of the laws and you might find yourself facing barriers to give you an example i live in i live in switzerland and it is virtually impossible for me to buy anything on amazon because the customs costs and the procedures are actually quite difficult in switzerland and so what everyone i know who lives in geneva does is have a friend across the border in france to whom and i swear to god this is true there is a massive industry in france of basically mailboxes where amazon deliveries go because selling something into switzerland on via online retailers is considered so much more onerous it's worth jumping in the car and driving to you know you've had on the block and and getting a and picking up your package there so it is a barrier okay thanks for that that's an interesting example of the garden of france on another point just regarding the services obviously that the large oil and gas companies are global but they will employ many small contractors so if a large oil and gas company was bringing in contractors and sending them to like so of either the us or the kazakhstan or not the african countries what would then happen in that example regarding the the services and any potential additional costs so in the case of some of those countries there is no the wto rules already already apply and the large company is taking care of it and working out how they will be you know they may well have set up as a you know they may well have set up that you know they will probably have set up subsidiary in those in those in those countries and that they will be complying with the complying with the local laws so in that kind of supply chain example now there may be new obstruct obstacles to them doing it in europe i mean they already have obstacles and they use where that where you have those major companies bringing in people in countries like kazakhstan is probably a good example you know they will spend a lot of time at the moment complying with the local laws to allow them to do that at the moment they will spend a lot less money and time complying with the local laws in the EU because EU UK is not that too many barriers it just means it will be harder for the for the large companies to bring in a UK supplier and they may choose if they were you know if there's a choice and it comes back to dimetrius point one of the things we've got to measure here is not you know the UK in isolation but the UK against other countries as competitors and so in the future if there is a choice between say a UK or an Irish company to bring in as a as a supplier for for something they may say well it's just i've got 10 less laws to comply with if i bring in an Irish company than if i bring in a UK company therefore i'll bring in the the Irish company so it applies in services what applies in what dimetrius already said applies in goods which is to say it's extra paperwork it's extra rules to go through the single market is a pretty permissive environment in a sense of you can more or less do what you want unless there's you know specifically laws against it whereas in the in a wto field you've got to go through each law in turn to see whether you're actually allowed to do what you do and how to get around it i think remember with the example that you quoted mr mcmillan is that um you're dealing with visa regulations which are for some countries right outside the purview of trade agreements the US for instance and anyway are hugely hugely sensitive so while a large company may in a trade agreement have negotiated the right or the government has given large companies the right to move key workers that they are employed who have been employed already by the company into two particular jobs that is still constrained but it exists when it comes to small contractors you really are absolutely dependent on what the local visa regulations are and now if we're talking about how will the remainder of the european union treat us visas are basically a national competence we're going to have 27 sets of trouble to think about and generally they are not very liberal so i think the example that you quoted about the large company wanting to be able to direct small contractors as it were on their own without an employment relationship with that large company um one's looking at considerable increase in difficulty okay well thank you for that thank you very much ross greer thanks community i'd like to turn to the rollover or not of much of the treaties that currently apply to us as an EU member state it's probably not gone as swimmingly or triumphantly as leon fox predicted a couple years ago and some relatively significant deals like with turkey or with japan have not been rolled over yet what is what will the noticeable impact of a failure to roll over these deals be on UK trade the in general the situation will be when we drop out of the european union and therefore drop out of the european union's trade agreements that the partner countries will be obliged to treat us as third countries and we will be facing their tariffs we will be obliged to treat them as third countries and they will face our tariffs whatever they happen to be there will in addition quite in some some of these trade agreements do have a degree of service liberalisation and we will fall outside that as well there are sort of smatterings of mutual recognition in some of the trade agreements we will fall outside of that so in principle we will lose our market access will deteriorate in what amounts to nearly 15% of our exports of that 15% the government has negotiated rollover trade agreements in 2.2% of the 15% and even the rollover agreements that it has negotiated actually do not guarantee a perfect replication of current trading conditions so the rollover agreements are potentially quite important there as you say they haven't gone very well there are sort of different different agreements are different degrees of distance from the finishing line it is very very clear for instance that turkey is extremely difficult and because it's so it is so tied up with the european union the japanese are immensely irritated with us the south koreans think they will get a better deal these are all you know countries that are going to take quite a long time some others are said to be imminent norway we're told is imminent but norway will only deal with goods they can't do an agreement with us because they essentially are in the single market and that very very much limits what they can offer to us when we are a third country so these rollover agreements or the absence thereof or and the failings thereof is moderately serious news i think so well i would add to that i mean there was clearly over optimism at the start i think there was an assumption that other countries would roll over agreements because trade was good and therefore they would do this well unfortunately negotiators don't quite work like that as dimetrius sort of already been outlining negotiators want things they you know that's what they're they're trained to to do and so us going to another countries and saying you know please and it roll this over and they were always going to say well what what do we get from this what's um and so you know and we weren't really you know there was over optimism that this could be done quickly that other people wouldn't wouldn't want things and we weren't we aren't necessarily well set up to understand whether we can offer something in in return i mean in terms of the noticeable impact on that i think what we've got to understand is that at an economy wide level individual trade agreements are you know fractions of one percent of of gdp if if that so you know um getting a successful trade agreement with some of these countries will only be worth point one or point two percent of gdp so losing losing them could you know will equally will equally um take off a fraction at an economy wide level but for individual companies who are who are using these trade agreements they could be really quite devastating and so for example a lot of um in the example of Korea a lot of um it opened the career trade agreement opened up the legal the legal services market to UK providers it was really hard fought and the Koreans never really quite liked that bit anyway but they've gone there now it never quite opened up as much as they hope but it did open up a bit now if you're those legal services companies based in the UK you're about to lose that right again from from from doing it that you have so you know that that would be that would be one example and there will be other and there will be other exporters of particular goods who will suddenly find themselves uncompetitive in the case of Turkey there's an awful lot of UK companies who are importing from turkey at the at the moment now under the uh if it was no deal under the under the no deal tariffs uh many you know what they're going to have to do is switch potentially from from turkey to other uh to other sources and they may be they may be able to to do that uh but they this clearly that that is going to come potentially come at some kind of cost and re and re-routing of supply chains so and turkey's also by the way a good case of the of the over optimism though you know even last year officials a minister was saying we will we will we're confident we will be able to roll over the turkey agreement but turkey has always been almost impossible to roll over because it's part of the uh it has a customs union with the EU so i was never we were never quite sure how they were so confident um but yeah the impact on on individual companies who are using these agreements will be um could well be very very severe at an economy wide level uh it's it's maybe you know it it takes a hit but not necessarily a huge hit i think if you're looking for a kind of microcosm example of what this looks like uh the US negotiated TPP the Trans-Pacific Partnership and then pulled out before it was implemented and now what US farmers are finding is that they are being undercut in the Japanese market which is quite a lucrative market by Australian producers now as an Australian producer i don't see any problem with this whatsoever i think this wonderful but they're now this is a major problem for for the US now across the scope of the US economy uh agricultural exports to Japan do not register as a as a blip it's a 13 trillion dollar economy or something but for those farmers who relied on those exports it is a significant blur and this is kind of the same situation you're going to see if Japan turkey and um Korea aren't rolled over which is as David was saying as Alan was saying um you have to get down to that kind of regional level uh i was talking about at the start and there are going to be problems there short of the deal with Norway and Iceland if that comes to pass and we there seem to be indications that it has been agreed but no one's seen any text um so short of that the rollover with switzerland is the most significant one that has been announced and there is clarity on so far i suppose to meet you maybe have some specific knowledge on this does this rollover mean that trade with switzerland will continue exactly as it was the day before brexit or are these rollover agreements in fact somewhat different to what they are rolling over from so i'm i'm not uh i haven't studied it in absolute great detail my understanding from um the work of peter anfocorn who's done probably the most detailed study of this is that the swiss agreement is is structured in this way if the withdrawal agreement with the EU is passed then the agreement with switzerland is very very close to current arrangements um if it does not and there is a no deal then the agreement with switzerland kicks in anyway but it is not quite it doesn't quite replicate um what the uk currently has with switzerland under the EU um though it comes it comes within within reaching distance but there are individual areas of of divergence but i think switzerland's probably of all of the agreements with developed countries i think switzerland's probably the one that's come closest to saying continuity uber allis let's just let's see what we can do to have under the mind the gap strategy to make sure that there's no rough rough transition other countries are playing much more hardball because can i add to that yes absolutely pardon me i had a young colleague looking at this actually just a couple of days ago there are a couple of places oh i think your paper actually mentioned these and the paper from the welsh assembly um there are issues over mutual recognition so in a number of areas there are 20 agreements between switzerland and the european union on mutual recognition of certification that the EU recognizes swiss certification of that good meets the standard switzerland recognizes EU of those 20 agreements only three have been rolled over although they pertain to quite a lot of trade the other 17 are waiting they are waiting until the uk has decided whether it will align with the EU standards essentially the swiss are obliged you know the sys have signed and committed to apply EU standards and uh and equivalence and recognition and they therefore cannot recognize the processes of someone who doesn't adhere to those things so this is a case where the agreement between the UK and the EU determines not only EU uh UK but also uh UK switzerland it's also the case that these agreements cannot achieve trade within value chains in exactly the same way as it goes on now free trade agreements require so-called rules of origin to prove that the goods originated in the partner country to which you're giving the tariff preference at the moment switzerland EU anything from France Germany and the UK is all added into EU content and satisfies the swiss the swiss have agreed that they will continue to count french and german inputs as if they are british inputs for giving free trade to goods from britain so that's okay getting british goods into the swiss market but when a swiss firm uses those goods and wants to re-export back to the European Union the European Union has not agreed that it will treat UK origin as if it is swiss origin and so goods that are taking a leg uh sort of UK to switzerland into EU or switzerland UK into the EU uh there is a rule of origin that this bilateral swiss UK agreement can't touch it's actually a trilateral business the european union needs to be involved and they haven't talked to the european union and the european union is not apparently willing to um various rules thank you and just one final question to move on to the future trading relationship between the UK and the EU we spent some time last week talking about what the US's offensive interests would be given the amount of publicity they've got and how media friendly talk of coordinated chickens etc as what would the EU's offensive interests be in negotiating the future trading relationship with the UK so EU offensive interests are typically first and foremost around agriculture just like the US so first and foremost I mean geographical indications but they are already in the with in the withdrawal agreement that's how that's how strong an interest that that that that is this is both a strong offensive interest in in agriculture to make sure that we will accept all of their uh products it's also a very strong defensive interest so we there's been some debate as to whether the EU has never dropped all tariffs on agriculture for in a in a free trade agreement today um there is some debate as to whether they would do so for the UK um that's we don't we don't know that yet but there will be strong arguments from within the the the EU that they should still keep some protections on agriculture while ensuring that we are free to take as much uh agriculture as as they can have in terms of industrial tariffs the EU are very happy to remove remove most of those and will be and will will be quite happy to to do that I think they'll be will be quite a debate on uh uh people which is the mode four is known in in in in services that um the EU are very keen to make sure that they you know people will have a right to work in work in the UK to be transferred within within within companies that will be certainly one of their strong interests I think certainly also the whole US um voluntary standards infrastructure what's called technical barriers to trade in trade agreements speak they are very keen to make sure that the um as many countries as possible follow their um they they follow European voluntary standards particularly in the um in the European region um and also align pretty strongly on regulations so that um essentially don't have to go through double testing if the if if a car is safe in Germany it's safe in the in the UK so that is something that they will also want to uh to to achieve um I'm trying to think I think those are the those are the main things that they were that they always prioritise I've probably missed one or two which colleagues will add to so I would probably say I would pick up on two points David made right from the start I think there has been an assumption in a lot of the discourse around a future trading relationship that zero for zero tariffs are a given that is that it's automatic but I don't think I'm not as comfortable with that as others I think the EU will face very very strong internal pressure to say well if we have if we do have a no deal if we are starting from a place of WTO terms why don't we treat this like any other free trade agreement negotiation where there are some tariffs we are willing to cut such as in industrials there may be some agricultural products that we are willing to cut but we do not simply as a basis as move one of the chess game put on the table zero for zero tariffs so I think agricultural market access and defensiveness will definitely be one of them I'll probably expand the this kind of notion of standards and regulations the EU is sometimes described as a regulatory superpower compared to compared to US and China they have placed a lot of their kind of soft power view of the world in this ability that once the EU has set a standard or regulation that begins to define their region in addition to what David said the EU has a very strong interest in that when it establishes a standard or regulation those often it involves some cost to EU businesses the EU has a strong interest that as many people as possible also have to adopt as many countries as possible have to adopt that standard and regulation so they can't be undercut by partners that don't follow that regulation that produce in a less costly but perhaps I don't know less environmentally sensitive or less labour friendly way the third point I make is to if you examine the the way that the UK talks about what it wants out of future trade agreements and trade policy in general it's probably it's you can transpose that onto the EU when either major party in the United Kingdom at the Westminster level talks about trade they talk about jobs and they talk about attracting good high paying jobs they want to take back control of their policies in such a way that they can structure their economy to attract jobs and capital into the United Kingdom as I think it was Ivan Rogers said the the one thing about taking back control is that the other side yet to take back control too and so there is a if you are in the European Union if I was a an EU member state or if I was advising the EU member state I would be looking at the kind of jobs that are currently being done in the United Kingdom and onsold into the EU or which rely on access into the EU and looking at other ways that we can without being massively disruptive and without hurting our own economies structure our standards regulations and trade policy in a way that creates nudge factors to move those jobs to to Ireland to to Luxembourg to to you name it and so I think what you will find is that they will look for opportunities to do that in sectors like finance where the where part of the competitive advantage of UK firms has been the fact that you can use them as a gateway into Europe now if that gateway becomes tighter squeeze will firms look to base their capital in EU member states or countries with greater access to EU member states I think that's that's a real possibility and I think it's fair to expect the European Union to approach this with the exact same kind of interest base as the UK does which is how do we get these good jobs how do we get these like capital very briefly very clear strong offensive interest not one that will cause us much difficulty I don't think but would be state aids regulations and competition and the second thing I would mention is the GDPR the general data protection regulation the UK have made fairly encouraging noises about aligning with that but if we were to go off and try and join the comprehensive trans specific partnership that had that has rules about e-commerce data regulation that are not necessarily compatible with the GDPR and so the EU I think in any negotiation would want to insist that the UK adhered essentially to the GDPR truly fascinating if disconcerting discussion has to be said and I think it shows the kind of naivety of some of the Brexiteers has been somewhat exposed I mean Professor Winters you talked to just a second of what you touched on competitiveness I mean how concerned are you and other members of the panel that we could see through this entire exercise is effectively a return to increased protectionism across not just Europe but beyond well let me talk about the United Kingdom the there is no doubt that the United Kingdom is going to become less competitive in well terms we're just incurring all of these extra costs we're fragmenting a market we don't have a domestic market and so British firms will come under a lot of pressure I don't think there's any doubt about that we are also taking back control of a trade policy instrument as the chair referred to right at the beginning have something we've never we haven't done for 40 years have very little experience at a bureaucratic level and just about no experience at all of discussing at a political level so you think about anti dumping duties the British government would say well it be can't put anti dumping duty at the european we would put anti dumping duties on steel to help south wales but the european union won't let us that was not true we had in europe argued not to have anti dumping duties those sorts of things they're our problem now so i think we in britain face a world where British firms are going to come under serious pressure political life is not going to settle down very much we've not had a debate about exactly how we want to respond to issues of open trade and so on there are zealots who say free trade is necessarily a good thing there are some zealots on the other side who say it's a very dangerous thing it's just no resolution of that so my prediction is that the UK is going to slip into quite a lot of ad hoc protection over the next decade or so colleagues jump in there i was just wondering your views on the issue of public procurement because another issue that was raised before the referendum not so much since it seems to me is about oh we can we can buy british and all that kind of stuff i mean obviously the issue of comparative advantage being completely ignored in this kind of argument but the idea is oh and we don't have to you know buy a a ferry at a polish yard we can ensure that it's a British yard whatever it happens to be um what's your view on public procurement and how that would be impacted because obviously if there's a reduction in competitiveness then the cost to the pub to the public purse would one expect increase as well as um the impact perhaps on quality and delivery well the european union of history has focused a lot on public procurement as a sort of matter of market access um it's bound quite a lot of that in the world trade organization government procurement agreement and we have just acceded to that and as i understand it although i confess i have not read the schedule my understanding is that the uk is basically rolling over that same set of commitments and so at least relative to the 42 43 other members of the government procurement agreement we cannot discriminate very much against them i think there is bits that we can discriminate where europe offers a constraint but not very much so i think you're exactly right there will be pressures to use government procurement as an instrument but there will remain constraints i'm afraid i can't say exactly how much lucid they will be i was going to pick up the sort of the global agenda part of that that question as well i mean clearly in the last five to ten years trade policy trade agreements have become more and more unpopular so there was this idea really before that trade agreements are great nobody nobody loses everybody everybody gains maybe not a huge amount but we all gain so let's do lots of trade agreements and what we've seen in recent years with the trans specific partnership the t-tip potential EU US agreement and frankly even a UK US agreement is the large number of people are saying well hang on a minute maybe trade isn't that great because uh you know we have to put up with it with us food standards that we don't want or you know it means that job jobs leave the country or whatever some of the criticisms are fair some of the criticisms are less than fair but clearly you see from the US in their objectives for a UK trade agreement or an EU trade agreement they are very much US first in fact they're pretty much US first and only we want this and we're not really prepared to give anything it's pretty much the the US objectives um you know the wto is best is under strain there's no sign of new anything new new agreements at the wto the apple up body that that that hears appeals to disputes is kind of pretty pretty much on the on the on the verge because it doesn't have uh the the US is vetoing new new new members so there's a problem there and yet this comes against the fact that our production including of services and services embedded in in manufacturing was pretty important now are now increasingly on uh maybe not so much of a global value chain approach so typically regional though that the production you know a supplier in scotland will be supplying things to germany and then pit parts will come back to i don't know somewhere in england and you've got parts you know moving around europe or around around the globe in ways that um are hard to understand and no one's really sort of fully researched this so the UK at this moment moving outside of that um yes it's going to have a pretty pretty unpredictable and we don't really know you know if president trump is reelected what's the you know the wto is you know best survival is probably the the goal it's hard to see it thriving in the next in the next four to five years so there's a there's clearly a lot of a lot of tensions in the system and we're adding to them yeah i mean not a huge amount to add on that maybe to start working backwards a little bit um the the US problems with the wto predate trump the appellate body blockade so the the US refusal to appoint new judges to the the supreme court of the wto so to speak has been is an obama i think era policy if not even before that um so this isn't necessarily uh you know a a short term thing that is very tied up in in one particular individual administration this is a longer run problem i do draw some solace from the fact that you know we uh there was a financial crisis a global financial crisis and while protectionism worldwide ticked up in terms of the indices of non-tariff barriers what you didn't see was a global movement to uh shrug off the wto rules and simply raise tariffs as you had in the 1930s um so so in a way in the face of um probably the economic downturn of of the early part of the 21st century the global trading system actually withstood that test better than some of the more pessimistic people thought it would which gives some some cause for hope that there will be a push back against this protectionism even current US attempts at protectionism in steel aluminum and the way they're engaging with china are facing a lot of domestic pushback the steel industry is happy with them but no one else in the country appears to be um and the threatened tariffs on on EU cars haven't materialized the trade spat with china doesn't appear to be going very well so so in a way the um there has been a kind of reaching for protectionism and getting singed on the part of a very protectionist US administration which hopefully has given has given others worldwide pause but i definitely agree with david that the temptation is going to be there um trade policy hates nothing more than haste and lack of preparation uh by necessity the brexit process forces a lot of haste and cuts down on the amount of preparation and when that happens protectionism is often the easiest lever to pull to get a friendly headline that is simply the nature of protectionist policy and so that temptation is certainly going to be there um and it's uh it's going to be interesting to see how well the the government can resist that temptation where that temptation doesn't lead down a constructive it's just one question to david specifically we have very going over times if we could have um succinct answers it would be very helpful it's just a brief one it's just that in david's paper he talks he says it's disappointing there are so few areas in which the UK government appears to be ready to openly discuss trade policy is a prelude to deployment and this is larger reflection of continued secrecy given how little is being revealed in terms of policy goals or even why priorities have been chosen and that's very much what we've been talking about already that you know lots of preparatory work has been done very little shed we don't know anything about what the government thinks about defensive or offensive interests in particular we're having to guess quite a lot under the tunnel on that uh not as far as i can see the change of leadership soon thanks thanks very much and before we move on i know that uh professor winters has to leave to catch a flight which we understand so if you had wanted to come in first with the next questions that would be welcome uh annabelle ewing uh thank you good morning gentlemen um it's running to the no deal scenario which sadly is still very much uh out there uh and looking at the approach that the UK government has adopted thus far on the tariff regime for a no deal Brexit uh i mean just picking up on professor winters point there i mean that this change of um pm apparently that's coming maybe if the conditions are met at some point date unspecified at replaced by whom we don't know will that person be elected not it seems by us in any event um so if there's a new pm presumably they can just change their mind and have another approach to tariffs could they legally so yes the um the structure under which tariffs are settled is but basically legislative but the level at which tariffs are settled is an administrative issue so the government would be able to um uh change its tariff structure if it was so moved um i don't know that i would predict that that would be some the first thing that would get changed um the tariff schedule for no deal that was announced uh two three weeks ago you know is only announced for a year um and so there will be i think pressure to consider changes to it um but my honest guess is that we will tend to we will find that the UK will tend to be a bit more liberal than the EU is currently on tariffs at least so far as sort of the regular most favoured nation tariffs concerned we might not be so liberal when it comes to anti dumping duties i think we might find quite a spate of them certainly to pick up on my previous point the the level of secrecy that has been associated with the last two or three years uh yes government's quite like being secret but it is it has gone to levels that i hadn't previously seen and there is no requirement for trade policy to be really quite quite as secret as it has been in fact if anything until we've been arguing all morning pretty much the opposite the one point i'd make is that if you if you talk to business they will sometimes even prefer a higher tariff that's set and locked in stone for the next 10 years to a lower tariff that might change every six months so i think the government is going to face a lot of pressure from business groups um even over this kind of this is what the tariffs are for a year if they start also changing it every time the winds inside west minster start blowing in a different direction you're going to have business groups tearing their hair out because sometimes these tariffs and the tariff levels determine where one makes an investment in say factory construction or a long-term contract that are measured in terms of decades when you're talking about returns of investment if you're constantly switching that around um you make it very very difficult to make those long-term bets okay um as we've heard already this morning and there has been some discussion about general trade policy and how you know the the unitary state decides what the priorities are even if that's to the detriment of component parts of the unitary state as we have heard with regard to the dairy sector in scotland but i mean what would have informed the UK government's approach i mean because i understand there still are some in a no deal scenario there still are some uh uh tariffs proposed but by and large it is to be a sort of free for all uh how did what inform their approach to how they divvied up the list what what what do you think informed their approach i mean i think this was done you know on a wet Thursday afternoon by a couple of 30 year olds um it it was it was i'm allowed to say that at my age um um i i mean i think that it was it it's a sort of balance between two conflicting forces one is competitive pressure on British firms and the other something which has figured large in the rhetoric of some brexit is and in particular of dr fox is that tariffs raise the cost of living they increase the cost of consumers um no deal brexit is certainly going to be greeted by a decline in the value of the pound so prices of imports will be going up anyway and by removing some of the tariffs you ease a bit of the pain so i think that was the trade-off and very broadly speaking and at least until you come to talk about specific sectors it maybe they called that a bit right if you look at the sectors that maintain protection they are very sensitive sectors in agriculture parts of agriculture one or two bits cut loose but not all of them cars is the most obvious of the industrial products and i think you just recognise those as being in a sense the big players politically in our processes the society of motor manufacturers and traders extremely well organised lobby the national farmers union is an extremely well organised lobby so i think that was just a very broad trade-off and um it was you know in a sense it was what works something out that conforms to these broad parameters and that was the answer they got even the tariffs that we've got i've mentioned already they actually are still set in euro which is perverse uh they actually have been basically sort of uh uh the the reduction in our tariffs relative to the european uh union tariff is not um as it were something that shows signs of very careful calculation in pork it's a decline of 13% in other sectors it's a decline of 40% across the whole sort of set of sub areas so i think we shouldn't try to read a great deal of rationality uh sort of into the basic structure the basic idea that tariffs lowering tariffs will reduce the cost of living and reduce the cost of inputs is a legitimate one and economists do believe that tariffs in general don't help economic efficiency um but beyond that broad statement i don't think i wouldn't overinterpret it so i think that there were i think that the process started with us with with various government ministers you can guess who saying what if we have no tariffs whatsoever and then and then which people are going to yell most if if that's not the case and we found that the people who yelled most were many of the people that that alan already mentioned i think you should also mention the the developing development lobby developing countries because developing countries at the moment have preferences this is often wilfully ignored by those who suggest that we go zero tariff they complain that uh developing countries pay tariffs to for their products going into the EU which is not true most developing countries most of their exports are tariff free but in order for that to mean something others have to pay tariffs so on some of the key areas like textiles bananas and sugar tariffs tariffs were maintained so that was certainly an interest that was in there alan already mentioned the the produce the produce level but i think the most important thing i would say is this was all done at really big sort of macro level we we keep talking about this detail detail detail did somebody go through the sort of individual lines or the individual segments and say what's the impact going to be on this individual segment while i'm still waiting for the official impact assessment and i expect to be waiting for a farewell the i tend to be very cynical about how these these mandates are formed and i think it's impossible to dismiss the impact of what is in the news on stuff like this you look at the sectors that retain the highest protection areas like lamb the fact that cars were essentially unmoved these are these are product lines that aren't inherently more sensitive than some of the others why was the egg tariff eliminated entirely and the lamb tariff reduced the least out of the agricultural products i don't necessarily know given that the nfu have said how little consultation there was with them and with farmers that this was a as david said a deep analysis of you know competitiveness in those two sectors versus the fact that perhaps lamb and cars have been making headlines non-stop for a year and a half and eggs haven't now i'm not saying that that is actually what motivated it but in the absence of those impact assessments it's it's hard not to draw the conclusion that that would have been an important that would have been an important factor i would also add i think economists will say that tariffs have a have an have a dampening effect on on efficiency but i think there's a misconception in the general public when we talk about cutting tariffs and cutting prices they picture cutting prices at the supermarket when except in exceptionally high except in areas of exceptionally high tariffs where there aren't free trade agreements and preference preferences customers in supermarkets are very unlikely to see decreases in prices due to tariff cuts because of the the structures of production and where the tariff comes in at the value chain in terms of prices where economists tend to point to efficiency gains is in gains for business this is why for example steel and aluminum tariffs which are thousands of businesses need as inputs are much much more inefficient than a tariff on a on a final product and much more felt by the economy so it's important to set expectations for consumers realistically about what they're likely to see at sainsbury's after a tariff cut okay i ask the do you think the UK government has rather tied its hands going forwards having started with a zero tariff deal sorry i didn't catch the question sorry so in terms of the future trade deals being negotiated could it be argued that the UK has rather tied its hand having set the base level at zero where does it go from zero yes indeed the um a trade agreement negotiation is i give you something and you give me something back and if we haven't got anything to offer that makes the trade agreement more difficult we have retained a number of tariffs you know japan for instance is going to be extremely interested in the tariff on vehicles and you know america or australia are interested in the tariffs on agriculture so in a sense we haven't got rid of all our ammunition and yeah so but it is clearly is it clearly is not helpful towards negotiating trade agreements um but um you know i said that that is one consideration in general um i think we have actually rather two high expectations of what trade agreements might deliver anyway and therefore for the slightly weakening our bargaining hand is not that much of a you know of a problem um but yes it the clearly is a trade off exactly as you say um i just just to add that what it does remove from our trade agreements is the ability to offer not very painful things in trade agreements so there's a whole load of industrial tariffs that the EU has that are between 0 and 5 percent which they are basically only too happy to remove in trade agreements because it doesn't really cost them very much and produces very much to actually do it now if we don't have those tariffs to start with we're going straight for the painful ones to us and therefore trade agreements there you know allen's point is right of course we expect too much of trade agreements but if we're going to do them it's helpful to have something easy to offer if we have to go straight into right um you know let's talk let's talk about lamb tariffs or whatever that's that's going to be more difficult with that said if i as a trade negotiator if you are offering me things that are easy um and you are asking of me to give you things that are hard for me i'm not going to be ready to make that trade in part because i know that every free trade agreement you do the first thing you're going to do is here are these easy five percent tariffs so i recognize that every single discussion you have from now on in will undercut whatever advantage i went through this free trade agreement so did it does it tie the UK's hand somewhat what it does is as you say if you want something hard from the US if there is an offensive interest you want that they don't want to move on you should expect that you're not going to get away with being able to give five percent tariffs back they're going to come after the things that you don't want to move on because that for them is an equivalent trade so it won't necessarily bind the UK's hands any more than they would already be bound by the fact that asks from other countries are probably going to be in areas where the UK doesn't want to move interesting one last brief brief question computer professor winter referred to the possibility of the UK having greater well having recourse because it's a dg1 matter of the commission to anti-dumping charges i had i've actually practised anti-dumping law some years ago in Brussels and i had thought that anti-dumping was kind of not on its way out but it was seen as a bit of a clumsy international trade tool so are you anticipating that i mean there's a question as to whether anybody in the UK government has the expertise to actually deal with anti-dumping work but leaving that to one side are you anticipating that this would become the norm for the UK government i mean obviously the product has to be dumped so it has to be sold below cost but is this going to be the norm with the could this apply to former to EU member states could this apply to to EEA countries is this what the UK government is going to do to foster good relations with its international partner i mean if you've practised anti-dumping law you'll know that anti-dumping law is moderately elastic there are there's room for interpretation that's why there's room for lawyers so no i don't i don't think the technicalities are going to stop us from pursuing quite a lot of anti-dumping duties if we wish to look i think the question about it is i think lawyers are certainly economists feel yeah this is a pretty crude tool and by and large not terribly helpful it ends up basically protecting less efficient incumbent firms but it's great politics it's fabulous politics it's absolutely targeted at the people who are crying that they're being murdered and it seems that all you're doing is imposing the cost on a bunch of foreigners who are cheating anyway it's perfect politics and tries to negotiate a deal with EU 27 going forward in this break no deal scenario this is going to be helpful to that deal being concluded on favorable terms if we sign if we were to sign a customs union we clearly clearly would agree that we know anti-dumping duties some free trade agreements also have constraints on the imposition of anti-dumping duties and it is possible that that is a place that we would end up with but remember that anti-dumping duties are applied and removing competitive pressure isn't just a matter of the European Union they have economies rather like ours the real in a sense the real concern is whether we as an inexperienced and smaller market with a rather fractured political system can commit ourselves as it were not to abuse anti-dumping duties and you would not have to be as cynical as I often am to believe that there's a danger there I think that's all I would say thank you that was very interesting we'll have to move on Alexander Stewart this has really been quite a fascinating session so much from the informative of you gentlemen but a number of treaties already have been signed and those that have you know in places like the Faroe Islands or the Pacific Island Switzerland and we've talked about you know Norway and Iceland coming into that scenario so can I ask the arrangements for individuals being signed how were they selected and what made them sign now rather than later so that's an interesting question we don't know why they've signed but if we look at a number of the country's concerned so Chile the Faroe Islands Israel Palestinian territories all of them are quite significant agriculture exporters and we've already heard that agriculture is a sector typically protected by high tariffs so there's a real incentive on those countries if you're exporting agriculture there's a real incentive to actually make sure that that is it that is in place I think that also applies to one or two of the economic partnership agreements with with developing countries as well so you can see an agriculture thing going through that and I can see why in those situations you'd say look you know actually I'll I'll I'll I'll do this I you know I really I really need to do this Chile and Israel I imagine for both of them there's also quite a strong political impetus for different reasons Chile likes to say that they are the best country to deal with in terms of trade agreements so they like that as their reputation is Israel you know there are other political facts about making sure you don't retaining friendships Switzerland and Norway are just more significant trade wise for their trade as well so there's something in it for them so arguably you can see what's in it for the countries that have that have signed and with many of the other countries that have yet to sign and we don't quite know where the status is it's harder to see what's in it for them some of these countries don't like the agreements that they had signed with the EU they think the EU bullied them or whatever with reason by the way sometimes I think that they can get a better deal from the from the UK some of them don't like the UK terms that that are that are being offered some of them are saying you know we can roll this over but only if you promise a new trade agreement so there are varying reasons why other countries haven't yet reached it some of them I think have just not had that much attention because resources just ran out various reasons why they didn't happen but but as I say you can see the incentive on those signed none of them have come as a great surprise I would probably divide it into kind of three categories the calculus of these countries in considering whether to sign something now I would say there is the question of how much they value stability how much do they how much do they perceive the potential gains are of rolling the dice on pushing for greater concessions in the future on kind of what happens if we take this down to the wire and then the third one is capability so I think that for some of the countries that have signed on from Faroe Islands for Avonford Norway and Switzerland the most critical thing was to as quickly as possible lock in stability the things the day after brexit would be as close to the way things are now they looked at what they could potentially gain down the track in a bilateral with the UK in the absence of it and thought the gains here probably aren't worth potentially not having the stability on day one of brexit disrupting what we have now not worth it I think some of the others your Japan definitely I suspect Korea as well have looked at it and gone well actually this is a more traditional FDA where we're we're not so much making things together through supply chains but selling things to one another there is there are potential gains here because we will be negotiating with a market significantly smaller than the one we negotiated with to get the EU Japan FDA for example and we'll be able to push for more and then some like Turkey there's a capability issue in terms of any absence of a deal with the EU it's just really unclear how a turkey UK arrangement would work if it was a rollover and I mean I mean the gains you've talked about in comparison for the UK economy for our exporters for our consumers how do you see that coming through the process I mean for the existing agreements I haven't seen great evidence that that's been a big a big factor because I think that again it was done at a really high level of saying I'll trade agreements are generally good we need them all that we're going to do them all let's do them all I am not aware of analysis that says it's really important that we do this one this one and this one I mean obviously there is a size you know I think there was roughly by size you know let's try and do Canada, Korea, Japan they're the they're the biggest ones but they're obviously going to be the the toughest ones as well and you know for some of the other countries in terms of size wise some of these countries are thought of as relatively small trading partners actually pretty significant I mean Egypt for example is an example I often use that political relations are a little tricky but it's a pretty significant trade relationship there but I don't think that was really picked up and analysed and said actually we should make Egypt a priority I don't think I've certainly never seen anything from government that says here's our priority list and perhaps I wouldn't expect perhaps I wouldn't expect to see that because that would give important information to the other side but I'd certainly expect to see some sign that of prioritisation and I haven't obviously seen any sign of prioritisation and business friends who talk to the department for international trade on a regular basis don't ever report that being asked you know well if it's between Egypt and Chile which one's more important to you I don't recall anyone saying they were asked that question I would probably add trade statistics can be really misleading when you talk about size of markets and even size of trade your biggest trading partner could be one where you sell them natural gas and they sell you iron ore those two things will probably have zero percent tariffs so even though they are your largest trading partner on paper doing an fta with them would not necessarily have any impact on the economy because those are already two thirds of UK Norway trade is natural natural gas from Norway and that is often a lot of what makes up like a trade balance in terms of like billions of dollars will be raw commodities that are already they're almost like a part from the trading system because sometimes they're even you know being shipped into their own ports with entirely different systems but at that sectoral level once you break it down into kind of a think I can't remember if it was David or Alan was talking about legal services into Korea they're on a sectoral level on a firm level there can be really there can be really significant losses and gains um and in terms of the rollovers if you allow basically if the UK drops out and then eventually rebuilds it the EU will be able to steal a march on them establish themselves in the market build a brand and then it'll just make it harder for the UK even if it eventually does renegotiate access to um to gain a foothold in a market that already has a kind of european presence thank you thank you very much Tavish Scott I just wanted to ask one supplementary to Kenny Gibson's earlier question about international trade and the international context of the remarks you've been making this morning how can you be so confident that those international rules the international rule book on trade will survive another six years of trump in the white house because he's pretty keen to rip up every international order going I'm more confident than I was a couple of years ago how can you be so confident I don't think I was that confident um I mean I think the you know I think what's happened at a global level is that clearly there was there has been an attack by trump to me to is right there was to a certain degree some of this was existing you us policy trump kind of amplified it quite considerably but I think the system I think people have realised that the system is input is important enough to retain and defend and I think there's a lot of work going on to kind of you know trump proof it to a degree make sure that if there is another six years of trump those wto will survive that six years um I mean certainly talking to countries who had signed the trans specific partnership one of their motivations was look this is defense in case the wto ever ceases to exist um I think they're probably more confident now that you know trump's not going to destroy it that there are enough countries that will prevent that happening and that um you know now he's a kind of he's he's something we're just going to have to put up with for however long we're going to have to put up with him that actually he's probably not going to break the whole system he's going to put it under a great deal of strain but he's not going to break it but that's my view to make sure you may have a different one yeah so I would say firstly the um in some ways that David is is entirely correct the the trumpian assault on the system has reinforced in the minds of especially middle income countries and I use that term very broadly to basically mean everyone under china china the us and ndu are of the importance of having a predictable rules based system where they can collectively kind of challenge the decisions by the big players um it's actually seen a resurgence of engagement in the system that frankly during my time there was really waning um you know you couldn't get uh you couldn't get ministers to care about the wto at gunpoint um at some point and now it's much more prevalent it's much more in the news and they're much more engaged because they they've they've looked into the darkness and didn't care for what they saw so from that sense it's been helpful the wto also in a way here it's its weakness is its strength in that for example the security exemption that the trump administration is in my view abusing or threatening to abuse in the case of car tariffs to do all sorts of things allows them to break the system without shattering it they are able essentially the system does allow you to do whatever you want without pulling out of it entirely um and other countries may not like that but the benefit of a us in the wto will generally make them hold their nose enough to kind of put out with it and ride out the storm trump essentially doesn't need to pull the us out of the wto in order to do what he needs to do and that gives us some hope that eventually karma heads will occupy the white house fair and do you did you read or what did you read into the chinese premier's visit to paris this week where he met the senior european leaders who still hold the european union together should we read much into that in terms of trade policy over the future years i tend to be fairly cautious when it comes to the chinese engagement in the global trading system um the story there is that china joined the wto through an accession process uh essentially i think it was at the time about 140 way negotiation where the chinese feel like they have made they were made to make commitments in excess of what is fair and reasonable now i mean that is actually it's not uh it's not an entirely unfair right they did have to pay a lot to join the system and so their position has generally since then been that we are done pain that future rules should not apply to us because we have we have given of ourselves as much as we can be reasonably expected to give therefore when the trump administration began making threatening noises about the system the chinese uh including the chinese premier but at at every level started making a lot of noises about being the champions of the system stepping up to fill the the leadership void they were going to be responsible but when push came to shove and it's like that was a great speech in davos premier is china prepared to move in terms of making commitments in any of the areas where members have substantial concerns about chinese practice when it comes to trade suddenly that conviction wasn't so rock solid whether it's on the issue of differentiation between different types of developing countries chinese state capitalism subsidisation ip the chinese willingness to match rhetoric with commitments hasn't so far materialised so much so i tend to say it's fantastic that they still see it as a soft power win and a goal to engage i think that that's great it's a fantastic system but i would wait to see whether any pudding comes with the promises thank you thank you very much a quick supplementary from ross thanks community i'd like to get your thoughts on something that one of the trade lawyers who spoke to last week brought up and they were talking about the the sequence of the future relationship agreements that the uk negotiates and they essentially made the point that it would be in the interest of the us to get their deal in ahead of the uk eu future relationship agreement because it would lock in a lot of the regulatory standards that the us would want to see i'm interested in your take on both that specific issue of the the order between the us and the eu but also the broader issue of the the sequence of trade agreements and what impact that has certainly from a us point of view that would be correct that you know they they really they really does a regulatory battle um to meet you alluded to this earlier between the us and the eu the eu has been winning because uh and the reason it's been winning is it's partly structural in the us because the us federal level can't always regulate for the for the states the eu will just regulate for more of the global economy than the than the us will and then and then businesses want to to to kind of stick with this and and start um you know other countries start to follow um so the eu's been winning the us spies the uk as a chance to uh you know strike back if you like uh so you know if if you don't mind us being a pawn in the uh in a battle between the the eu and the us it would make sense for the us to to get to get in first and to make sure that we don't have geographical indications eu standards on on food generally uh european european voluntary standards um but there would be that would be hugely controversial if they if they were to do that because essentially what you'd be doing is you would be putting barriers to uk eu trade which is 50 percent of our trade to support 20 percent of our trade which is with the which is with the us uh but that's that's a battle that may we may see depending on our relationship with the uh with the eu um in terms of other sequencing there's nothing there's nothing really like that that's that's the unique one us and eu nobody else really expects that we're going to change our uh standards or regulations to uh to to suit them so in terms of the other sequencing arguably what you wanting to do is to start with one or two more straightforward that probably don't have much economic benefit but allow you to get your kind of model of what you want to do first before moving on to the more complicated ones and i think that's a big question we talk a lot about a us trade deal and very little about a china or india or brazil mainly because those countries are much harder frankly to do trade agreements with but there is a question as to whether we can realistically gain much more from a us trade agreement when trade is already strong and whether if you were going to do this properly and look at the potential growth areas you would actually go for a more challenging market because after all in a in a way wasn't you know if you have control you know it's almost sort of depressingly sort of adult to sort of go with oh well let's go with the the us that's kind of that's a pretty lazy approach actually you know okay china yet incredibly horribly difficult to get a good trade agreement but there's got to be more new opportunities that we haven't exploited in terms of trade with china than there are with the us which is often a company's first thought in terms of expansion is the us dimitri will have views always um so so first i think uh it's it's important not to think of this uh the sequencing issue as an inevitable problem a us fta could be a problem for e for an fta with the e u if the uk makes commitments in areas that are contradictory with the commitments they would need to make in the e u now as david very correctly points out the us is going to push for a lot of those commitments as part of this larger strategy but also for commercial reasons but they can't make the uk adopt a commitment it doesn't want to adopt there is the australia has an fta with the us um and is going is negotiating one now with the e u it is possible to have an fta with both um provider but you need to not have those internal contradictions so first it's important not to think about the not to think about is an inevitable if you see in a us fta first it doesn't necessarily mean that the uk has given up on having an e u fta it's it's about the content um but there will be a lot of pressure um the second point i make on sequencing is that um trade negotiations can be slightly presonential in a sense that when i am negotiating with uh my counterparts uh the strongest argument i can make when they are making a demand of me is that it is simply something i cannot do it is simple i cannot accommodate this if i have given if i have given ground on that in a different free trade agreement then their response to me will will be well yes you can you gave chili access to your beef market why can't we have that too so in a way the sequencing can matter which is because if you rushed into free trade agreements early that made a range of commitments to to various players those commitments will be used by subsequent partners to determine your actual level of flexibility and where your actual red red lines might be thanks very much just to conclude to to bring us back to scotland's situation and to drill down on the question that kennis gibson asked earlier about public procurement in our previous panel last week we talked about public markets as well now the scotland's NHS is independent of the NHS in england and wales and i think it's fair to say there's been less marketisation in the Scottish NHS than there has been in NHS in england and wales um i know that you're not experts in the UK constitution you're clearly experts in international trade deals but what could we do if anything to protect our NHS here in scotland from being opened up in an international trade deal negotiated at UK level so part of that will depend on whether you know to the extent to which it already already has been and i don't and i'm afraid i don't know what access what commitments are part of our government procurement agreement so that's that we've given a baseline i can't couldn't honestly tell you but you know that would be the first question what's in what's in our baseline the the second question and i think the most important thing is that public it is widely recognised by many countries and this has always been the case in the EU that public services are different the countries can if they want open them up but it is not considered to be a great surprise if they choose to protect them to to a degree and even um yeah there was there was a report by some extreme extreme free market um think tanks on an ideal UK us free trade agreement and even they recognise that the UK might want to exclude the NHS from such an agreement so it's widely recognised that this can that that is a fair thing to do then in terms of the actual agreements there's two or three things that one can do so in some trade agreements there is um what's what's known as uh i think it's the the ratchet that it always stands still anyway in some trade agreements there is the the concept that once you've opened up you can't take you can't sort of take it back so avoid that you know you could you could you know make sure that if you are opening up it is just very specifically in a particular instance and you can it can be reversed in the future and you can do that um and also in terms of services you can say there's a difference between a positive what's known as a positive list and what's known as a negative list a negative list says everything is open except what we list here a positive list says only these things that we list is open are open and the positive list tends to be if you're wanting to protect something you prefer that you can hybrid and you can do there's all manner of clever detail in there that i'm afraid i'm not the expert would that extend to mean i mean if the UK if the nhs in all parts of the UK is excluded there's no problem but would it be possible to say that only the the nhs in scotland was excluded if the UK government wished to open up the nhs in england would it be possible to say that so yes absolutely services uh this would be covered in either a procurement schedule or a or a services schedule and you can include um almost anything you want uh free free trade agreements are agreements between governments and if the UK and for example the US agree that the UK will open up parts of the nhs but not the Scottish nhs it is entirely legitimate to write that into a free trade agreement provided both sides are comfortable to answer your to answer your earlier question though i come out this from a perhaps a different angle than than david um i think in a way you're actually all much more qualified to answer this question than us because trade agreements especially when they concern things like the nhs are inherently political if you are genuinely concerned that the Scottish nhs will face a threat from potential commitments made by the UK government in the interest of securing a trade deal with whomever then the best tool you have is not clever legal instruments it is to raise the political costs of such a commitment um so my kind of my recommendation is if that's a genuine concern study the potential implications specifically what what would be what would be detrimental commitments to the Scottish nhs if they were made make sure that your constituents and the public are well informed that this is a risk and make sure that the make sure that there is in in formulating this mandate that we all spoke about at the very start of the discussion you ideally want to make sure that the political considerations around opening up the Scottish nhs are first and foremost on that list of defensive interests that's very interesting and to go back to the point that you made about the mandate at the very beginning you talked about getting a mechanism that the government was involved that the Scottish government was involved in setting that mandate and possibly through you know a joint committee or whatever but in in Europe when Europe negotiates trade deals the trade committee in the european parliament has an involvement given that you know if we're talking about the nhs for example it's a good example there's probably consensus right across this parliament that the nhs in scotland should be protected so therefore should this parliament have a degree of oversight into trade deals in addition to the Scottish government and how would you see that working i think yes you should have a degree of oversight and you use it and that would be exactly the right phrase i think is that you know again we were talking before about making sure you didn't get to any kind of veto situation and yes during i think i think professor winters actually addressed this to a degree that during a negotiation we i would expect that the Scottish parliament or this committee or another committee was able to subject uh the officials negotiating an agreement to to scrutiny if need be behind closed doors and to actually ask these questions of the people negotiating are we protecting this are we protecting that how have you made sure Scottish interests are protected what are the Scottish interests and to actually and to make sure that you have a strong um uh basically feedback loop to the the negotiators that may well not happen in public and there's bound to be there's always a degree of sort of public uh you know pressure on negotiators but behind the scenes you need to have one team uk approach i guess you know you need to have and everyone has to be on the same side because another thing is one of the few things we've mentioned so many things there's one other thing we i think we haven't mentioned is that one things we haven't done in the EU negotiation is there's never been a single team uk approach that if the if the EU came to any particular part of the UK system whether the Scottish government the UK government business they get completely different answers about what our priorities would be or what's going on when you get into trade negotiations the more people who can be on the same side and say this is what we've all agreed the stronger you're going to be and the less able another country is to sort of pick pick different parts off and sort of disagree with them and therefore it's in if it would be in the UK negotiators interest to make sure that you're all happy i'll probably add add two points to that first i would come back to this kind of local versus macro question i've i've trained d it negotiators over the last couple of months they're very bright very dedicated people who genuinely do care like they they ask me about the devolved competencies they care but are any of them experts on the way that the scottish NHS procurement differs from the great britain NHS procurement or so from from the england NHS procurement the odds of that i mean maybe that maybe but i would very much doubt it um so there's kind of a knowledge gap to bridge which isn't a slight at the negotiators it's just inevitable trade agreements cover so much you can't physically be an expert in all of it um and no i've just forgotten my second point um but i'm sure it was equally wise as it happens we've run out of time but that's really fascinating thank you very much for sharing your expertise with us today it's been very useful and i'll now move into private session thank you very much