3. Statement by the First Minister: 'Trade Policy: the Issues for Wales'

– in the Senedd at 2:45 pm on 6 February 2018.

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Photo of Elin Jones Elin Jones Plaid Cymru 2:45, 6 February 2018

We'll now move on to the statement by the First Minister on trade policy for Wales. I call on the First Minister, Carwyn Jones.

Photo of Carwyn Jones Carwyn Jones Labour 2:46, 6 February 2018

Thank you, Llywydd. We have published a new document in our series of Brexit policy position papers entitled 'Trade Policy: the issues for Wales'. This is the fifth in our series of papers, which sets out how we believe we in Wales, and the UK as a whole, should respond to the very significant challenges posed by the UK's decision to leave the European Union. The paper sets out our trade policy ambitions and reflects the analytical and practical work we are doing in preparation for our exit from the European Union.

Llywydd, this paper illustrates the importance of trade to Wales. Wales is an outward-facing, globally trading nation, and we are committed to internationalism. However, we can't lose sight of the fact that a clear majority—61 per cent—of Welsh goods exports goes straight to the European Union and that our strong record of attracting inward investment reflects our historic position offering a business-friendly environment within the European single market.

The work we have undertaken over the last 12 months, including the research commissioned from the Cardiff Business School—also published last week—has only strengthened our conviction that the position we set out in last year's White Paper 'Securing Wales' Future', authored jointly with Plaid Cymru, is the right one. Continued full and unfettered access to the single market is vital to Wales's forward economic interests, as is continued participation in a customs union with the EU. We have seen no sound economic arguments to the contrary, and the recent leaks of the UK Government's analysis of our economic future outside the EU suggest that this is because there are none.

Can I just emphasise here the strong commitment of the Welsh Government to evidence-based policy? Of course, we have limited resources and, of course, we can't predict the future with any precision. But we can, and have, gathered evidence about what practical issues our larger businesses are facing as a result of the vote to leave the EU, and we will continue with further research focused on smaller businesses. We can and do listen intently to the evidence from stakeholders in Wales and beyond about the implications of different scenarios for their capacity to operate effectively in future.

It is on the basis, Llywydd, of listening to the evidence, not some ideological zealotry, that we have arrived at our position supporting the closest possible relationship with the single market and the customs union, one which is completely compatible with fulfilling the mandate from the referendum of ceasing to be a member state of the EU—a position that is also broadly in line with that of all the main business organisations as well as the TUC.

What a contrast, then, to UK Government Ministers, seemingly attacking their own civil servants for failing to come up with the right answers and simply holding their hands over their ears to blot out the rising clamour for a sensible Brexit; a Brexit that puts the interests of our economy first, not one dictated by the arbitrary red lines set out by the Prime Minister in her Lancaster House speech.  

Of course, we fully accept that there are also significant trading opportunities outside of Europe, but we don't believe that the UK Government should pursue free trade agreements at the expense of our trading relationship with our closest and most economically integrated neighbours. Building new trading relationships with other countries around the world should be seen as a complement to the relationship with the EU and not as a substitute.

Brexit poses huge challenges to our economy, but, as we set out in our paper 'Brexit and Devolution', it also raises questions about the way in which we manage inter-governmental relationships within the UK. Over the last 45 years, the European Union has had exclusive competence to manage customs and the common commercial policy—the negotiation and agreement of international trade agreements—on behalf of the UK. Once we leave the EU, although international trade will remain a reserved matter in terms of our devolution settlement, we will need deeper and more sustained co-operation between devolved administrations and the UK Government over these issues. Because trade policy will have a significant intersection with devolved powers, such as environmental standards, economic development, agriculture and fisheries, and skills and qualifications. The UK Government can't develop a trade policy fit for purpose for the whole of the UK in isolation—something that the UK Government itself recognises.

I'm not used to finding myself in agreement with Dr Liam Fox, but the trade White Paper ‘Preparing for our future UK Trade Policy’, which the UK Government published last autumn, is quite clear about this. It says,

‘The devolved administrations will have a direct interest in our future trade agreements. We will work closely with them to deliver an approach that works for the whole of the UK, reflecting the needs and individual circumstances of England, Scotland, Wales and Northern Ireland, and drawing on their essential knowledge and expertise’.

For our part, we have called for the establishment of a United Kingdom council of Ministers, which brings together devolved Ministers with UK Ministers, who should be fully engaged at all stages of the development and implementation of our future trade policy. In the shorter term, a new joint ministerial committee on international trade should be established to agree joint approaches on trade.

I commend, then, this paper to the Assembly and welcome any questions.

Photo of Mark Isherwood Mark Isherwood Conservative 2:51, 6 February 2018

Yesterday, EU negotiator Michel Barnier said he respected the UK's decision to rule out any form of long-term customs union, but he did add—and I'm sure the First Minister will be alluding to this—that, without a customs union and outside the single market, 

'barriers to trade in goods and services are unavoidable', which, of course, is exactly the position we would expect at the start of negotiations towards an agreed deal and just as apparently uncompromising as the position taken at the start of negotiations on the stage 1 discussions [Correction: 'deal'], which were successfully concluded with compromise on both sides before Christmas.

In response, the Secretary of State for Exiting the European Union in the UK Government, David Davis, yesterday said that he wanted a free trade deal with the EU, but also the freedom to strike deals with other countries where trade opportunities are growing. Well, given that the First Minister has repeatedly stated that he accepts the outcome of the referendum and believes this was more a protest vote than about control of borders, laws, trade and money, will he confirm to the people of Wales that continued membership of the single market and customs union would mean that the UK could not strike trade deals with countries outside the EU, other than through the EU?

According to both Her Majesty's Revenue and Customs and the Office for National Statistics figures and subject to small adjustments for finance, travel and transport, some 90 per cent of the UK economy and 85 per cent of the Welsh economy is not involved in exporting to the EU. The UK does more trade with the rest of the world than the EU. I know that, in Wales, the position is fractionally different, but we're talking about negotiations into the UK single market, which Wales is key to. That trade with the rest of the world is growing faster than UK trade with the EU, and because the EU sells some £80 billion more to the UK than the UK to the EU, clearly, it would not be in their interests to stop that trading.

When the External Affairs and Additional Legislation Committee met the Flemish Government, they told us that they were reliant on access to the UK and Welsh markets and were working with similar regions and sectors across the EU that needed a deal that enabled them to continue frictionless access to the UK market. So, what engagement have you had with regions and sectors across the EU that need a deal that enables them to continue to have free trade with Wales and the UK?

Of course, HMRC published details of changes to how regional trade statistics are calculated in May 2016, the result of which, under the old methodology, were that Welsh EU exports accounted for 39.2 per cent of all exports in the four quarters ending in June 2016, but, at the stroke of a pen, that rose to 67.4 per cent of all Welsh exports. So, in practice, not a lot had changed. Now, in his statement today and in the document published last Friday, the First Minister talks about 61 per cent of identifiable Welsh goods exports being traded with the EU single market. Why has that figure, therefore, already apparently fallen from 67 per cent to 61 per cent?

He talks about his belief that continued full and unfettered access to Europe’s single market is vital to Wales's forward economic interests, and says,

'We remain to be convinced that leaving a customs union with the EU is in our interests, at least for the foreseeable future.'

What do you mean by 'at least for the foreseeable future'? I'd be grateful if you could clarify. Is that simply a transition period, or do you have something else in mind? As you indicate, you,

'welcome the UK Government’s recognition in their White Paper, Preparing for our Future UK Trade policy, that Devolved Governments (and...legislatures) have an important role in shaping future trade policy'.

But, in evidence, as we heard earlier from the leader of Plaid Cymru, yesterday from you to the House of Commons Public Administration and Constitutional Affairs Committee, you said you 'don't think we should have a veto—it's hugely important that we have consultation'. And, of course, in your seven years in office, you have fostered the least diverse export economy in the UK, leaving Wales more reliant than any other nation on EU trade. So, what discussions is the Welsh Government, official to official, having with the UK Government, which I know are going on in detail, regarding frameworks, regarding a UK single market with agreed approaches on a range of matters, of course, including trade? Perhaps you could provide us with a progress report on discussions that are clearly already happening. Thank you.

Photo of Carwyn Jones Carwyn Jones Labour 2:57, 6 February 2018

Time is running out, and we still have no idea what UK Government's endgame is. We don't know in what position they want to be. We have, on the one hand, the Jacob Rees-Moggs of this world saying it doesn't matter about tariffs, it doesn't matter if we lose manufacturing jobs, because they'll be made up for in some unspecified way, and then we have another branch of the Conservative Party demanding that Jacob Rees-Mogg should be expelled. This gives you some idea of the chaos that sits at the heart of the UK Government.

If he talks about a free trade agreement with the EU, the EU will look to have alignment with a market that it has a free trade agreement with. What's the difference in terms of where we are now compared to a free trade agreement? Some will say free trade agreements give us the opportunity to have free trade agreements with other countries. Which ones? Which ones? Everyone talks about New Zealand—what for? Countries such as China—goodbye, steel industry. We need to be very, very careful in terms of what kinds of free trade agreements we should have, and this is a false promise. If we cannot come to an agreement with our closest, biggest, most aligned market, we have no hope of free trade agreements that take six or seven years to negotiate, on average, with any other economy, and why would we want to? One of the things I hear from Brexiteers is this suggestion that, somehow, Europe is not important, 'Forget about that, look at other economies instead'. I disagree; Europe is our most important market. It's bigger than the US, it's on our doorstep, it's not 3,500 miles away. To ignore our single most important market, I think, is folly.

Now, Mark Isherwood talks about gaining control of money. I wasn't aware that the UK was in the euro, and so I don't understand what he means by control of money. In terms of laws, well, that must apply, of course, to this place as well as to the UK Parliament. In terms of trade, well, one of the things he said later on was that our economy was weak because it relied on EU trade. What on earth is wrong with relying on trade with Europe? We're not an autarky, and it's hugely important that we trade with other countries and other economies like Europe.

Finally, on borders, let's nail this myth once again. The UK will not and cannot control its own borders. It just isn't going to happen. Why? Because the UK has a land border with the Republic of Ireland that will be an open border. So, let's nail this now: this idea that the UK will control its borders in some way with controls on borders is just simply untrue, and that is something that needs to be emphasised over and over again.

In terms of what he said about trade deals, yes, of course we want to see the best trading relationships possible with other economies. We do look at other countries. If we look at Welsh lamb, for example, that is sold in the United Arab Emirates, but we cannot ignore the fact that we have a large economy and a large market on our doorstep. There is no market—there is no market—that will replace the market for Welsh sheep meat exports in the European single market. It does not exist. It does not exist. And when I hear Brexiteers, like Jacob Rees-Mogg and others, say, 'It'll mean we have cheaper food,' what they mean is, that food will be imported and our farmers will be shafted. That's what they mean. So, let's be quite clear about it: they are willing to sell the agriculture industry down the river in order for there to be cheap imports, and they will do the same for other industries. Why? Why? Because it doesn't matter to them. If you listen to some economists, it doesn't matter: 'So what if we lose manufacturing jobs, because they'll be made up for in some way in service industries?' So, goodbye, steel industry; you don't count. Aeronautics, automobile—don't count. 'Economics without human beings', I call that, but that's what is advocated by the hard Brexiteers. If we look, for example, at—[Interruption.]

Photo of Carwyn Jones Carwyn Jones Labour

He talks about the Flemish Government. Of course the UK is an important market, but the integrity of the European single market is far more important to any country or any manufacturer than anything else. We were told that the German car manufacturers would drive—they would probably drive—to our rescue. They've said quite clearly that, 'The UK is an important market, but the integrity of the European single market is far more important to us, and we're not going to do anything to disrupt that.' So, that was untrue, and that is something that was found to be wrong.

In terms of our exports, the figure varies, in terms of the 60s—sometimes up, sometimes down. But what is absolutely clear is that the vast majority of our exports go to the single market. Does that mean we can't sell there in the future? No, of course it doesn't. It doesn't mean we can't trade and sell in the European single market. All it means is that what we produce will be subject to barriers that don't currently exist, whether they are financial barriers or non-tariff barriers—paperwork, bureaucracy. People say about reducing bureaucracy; this is a vast raft of bureaucracy that's going to be imposed on business as a result of Brexit, and those barriers are important, because it would mean that we are less competitive in those markets. We already know that some countries in Europe are looking at producing light hill lambs, because they think that our products will be more expensive on the European market and they will be able to compete against us. And we must be absolutely clear about that.

He mentioned how long membership of the customs union should be. Well, until there are better alternatives, frankly. A transitional period, yes, but I'm not wedded to the idea that the transitional period should be for a specified amount of time. Surely the transitional period should be for as long as is good for the UK and is good for Wales.

And then, finally, in terms of frameworks—he asked about frameworks. Progress is being made on frameworks. Discussions are happening. They are without prejudice, of course, to an agreement being reached on clause 11, and the other clauses of the withdrawal Bill that impinge on the devolution settlement, but those discussions are ongoing. And I can see from the Conservative front bench that the hard Brexiters have already been expelled. [Laughter.]

Photo of Adam Price Adam Price Plaid Cymru 3:02, 6 February 2018

(Translated)

I do welcome this important statement and if I may also say, I also welcome the apology that I received from the First Minister earlier this afternoon.

You mentioned in your statement the evidence base for the Government’s policy, and I agree entirely with that, and the research that you’ve commissioned from Cardiff Business School is useful and interesting. What we don’t have so far, though, is a full impact assessment showing the difference between the various different scenarios. That’s the kind of study that the Scottish Government has published, as has the mayor of London, and of course it’s now been revealed that the UK Government had such an assessment, and you referred to that and other studies across the UK too. Wouldn’t it be useful for us in Wales to have such a study, so that we can put a figure on this gulf in terms of the impact of the various scenarios, so that we can make the case even more strongly?

The Wales Centre for Public Policy published, last week, I believe, a paper that deals with this question of the role of sub-state Governments in terms of trade policy. The report made a number of recommendations to the Welsh Government in terms of recruiting negotiators, a team of influential negotiators, and also developing almost a para-diplomatic service, if you would like to describe it in that way, in terms of Wales having influence at various levels internationally, both pre Brexit and post Brexit. So, do you intend to implement some of these recommendations?

Finally, in providing evidence yesterday to the Public Administration and Constitutional Affairs Committee, you said that it wasn't possible to be entirely clear as to what sort of Brexit people had voted for. Isn't there an opportunity here for us in Wales to use the powers that we have as a Parliament to hold an advisory referendum, and to ask the people of Wales what kind of Brexit they want to see? Do they agree with us that the best option for the Welsh economy is membership of the single market and the customs union?

Photo of Carwyn Jones Carwyn Jones Labour 3:05, 6 February 2018

(Translated)

Work has been done by Cardiff Business School, looking at the impact on businesses, and we are, of course, considering evidence that has come before us from other assessments about different scenarios. We know what's going to happen with a hard Brexit. That's clear from what Cardiff Business School have said and, of course, it's not a story that provides any sort of assistance to us.

One of the things that we have done as a Government is to ensure that a few White Papers have been published. We have been completely clear about the kind of direction that Brexit should take, as a Government. He asked a question about para-diplomatic powers and whether those are important. Yes, they are. I have met with Michel Barnier already, I have been meeting with other leaders and, of course, we have an office in Brussels that will remain whatever happens—that's going to be vital—and, of course, we have opened offices, or are preparing to open offices, in a number of cities, not only in Europe but across the world. Why? It's vital that we ensure that we have a presence in many new cities so that we can secure investment and are able to export to those markets. It was clear to me, after Brexit, that it was vital to ensure that we had offices, for example, in Germany and in those economies that are vital to the Welsh economy. So, that is important to ensure that we know the views of Wales. Every time I have been in Brussels, they had a White Paper before them, and they knew what the view of the Government of Wales was, and they could see sensibly what was in the paper itself.

Referendum—interesting. One of the things, of course, that we would have to consider—. First of all, there is a cost, but without that, with any sort of advisory referendum, are we talking about something that has many questions? In what way then can you know what exactly people's views are if there's a split in terms of answers? So, there are things such as those to consider. For me, what I think is vital—and I've said this on many an occasion—is that this Parliament should have the power to permit, or not permit, the Brexit settlement that we will have at the end of the day. It's vital to me that there is permission from, or at least the blessing of, every Parliament in the UK before Brexit moves forward.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP 3:08, 6 February 2018

Well, this is quite an interesting document that's been produced by the Welsh Government, but only for the statistics it includes. There seems to be very little, if anything, that is new in terms of policy development. It's very disappointing, I think, that the same kind of pessimistic refrain that we've heard at any time in the last two years nearly, now, since the referendum, is coming from the mouth of the First Minister. Oscar Wilde once said,

'The optimist sees the doughnut, the pessimist sees the hole.'

I'm afraid that the First Minister is the man who is constantly looking into a hole. He sees a difficulty in every opportunity whereas the alternative view is to look at the opportunities that are in every difficulty, and that's what business people do.

Anybody who has ever run a business knows that the world is constantly changing and you adapt to it. If you constantly pretend that there are no alternatives to what we currently know, then you will never keep up with what's happening in the real world. All the academic studies in the world are merely projections of assumptions that are plugged into a computer. If those assumptions don't turn out to be consistent with what happens in due course, then those forecasts are always wrong, which is why most economic forecasts are wrong, and most specifically those that have come out of Her Majesty's Treasury in Whitehall. So, I wouldn't advise the First Minister to pay too great attention to academic studies of any kind, whether they suit his view of the world, or indeed mine.

The point about a second referendum, which has been raised by Adam Price, is that in the referendum—the real referendum that we had nearly two years ago—people were only asked one simple question: do you want to leave the EU or stay in the EU? There were no ifs or buts. It's not about, you know, 'What sort of trade deal do you want to see as a result of leaving the EU?' We could have a referendum on different kinds of trade deal, no doubt, but that wouldn't affect the real question, which is the right to recover control of our own borders, and the right to make our own laws in parliamentary institutions such as this. Staying inside the single market and customs union is not consistent with leaving the European Union because we would then actually be in a worse legislative position than we were before: outside the EU, but subject to the rules that they make and we would have no formal role in the development of policy and the laws that we would have to obey.

I do counsel the First Minister to keep things in perspective. Yes, as a result of leaving the EU, even if it's not possible to do a deal with the EU because they are too intransigent and they see—. They are the ideological zealots in this, as the First Minister pointed out. In relation to the spokesman for the German car industry, he said that they are much more interested in keeping the single market together as a political unit than in the economic damage that would be done to Germany if we were to leave the EU without a trade deal. One in five of all passenger cars that are made in Germany—that's 820,000 vehicles—is exported to the United Kingdom every year. They have a £20 billion a year deficit on trading account in cars alone. The United Kingdom has a trade deficit with the EU of over £60 billion. There is enormous opportunity here for import substitution, for example.

The First Minister concentrated very heavily on lamb. The document itself shows how small the market is that we are talking about there: £402 million a year are our exports of lamb—or agricultural products, rather. But, we import £600 million-worth of agricultural products, so 60 per cent of all the food that is eaten in Wales every year is imported. So there is—[Interruption.] I'm going on the figure that appears in the document. [Interruption.] In the document. I'm sorry, Llywydd, I thought that was you.

Photo of Elin Jones Elin Jones Plaid Cymru 3:12, 6 February 2018

No, it wasn't me, but it is me now, and you do need to ask questions. This is your opportunity to question the First Minister.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP

Yes, exactly. I'm asking the First Minister if he will not keep this matter in perspective. As 90 per cent of the growth in trade in the next 15 years is forecast by the European Commission itself to be outside the European Union, the global market for what we produce in Wales is going to grow, whereas the market in Europe is stagnant. That's why, as Mark Isherwood pointed out earlier on, the proportion of our trade that we are doing with the EU is now declining, not least because of problems with the eurozone.

So, what I'm saying to the First Minister is that he should be doing far more—and going back to what I said in First Minister's questions this afternoon—he should be doing far more to help Welsh business cope with the inevitable changes that are going to be necessary in the transitional period that will follow immediately upon our leaving the European Union. There's no point in carrying on banging your head against a brick wall. The United Kingdom Government is resolved to leave the European Union, leave the single market, leave the customs union. Let us now work together to produce a practical set of proposals on how to make that process much more palatable, even to those who are against leaving the European Union, and a practical way forward for the businesses that will have to cope with extra changes. Nobody denies that there are extra changes that are going to come about, but they're all easily manageable.

Photo of Carwyn Jones Carwyn Jones Labour 3:13, 6 February 2018

Wishful thinking again. Can I remind him, I have actually run a business?Successfully, thanks, so I do know how it operates. Secondly, can I remind him that the European economy is growing faster than the UK economy? So, it's hardly hidebound in some way by the euro or by anything else. Can I express surprise at his wilful dismissal of evidence—something that is, of course, highly inconvenient to those who love to see wishful thinking? He says, 'Well, you know, people voted to leave the EU. That much is true.' Actually, we don't know what they voted for beyond that. There are some people who have a more extreme interpretation than others. Norway is not in the EU. The Norwegian model was offered by members of his own party, and now we are told it is not properly leaving the EU. Norway isn't in the EU, and yet it has the kind of beneficial trade arrangements that it wants with the European single market. If Norway can do it, then why can't the UK? Again, he repeats this mantra, and I invite the Brexiteers in this Chamber to answer this question at some point: the UK will not control its borders. It will not control its borders; it will have an open border with the European Union in Ireland. So, this idea that the UK will control its borders is simply a myth and never was true, and it was something upon which people were misled, bluntly, in the European referendum. So, forget about that; the UK cannot control its own borders in that way.

He mentions the irrational foreigners—the irrational foreigners that exist in Europe who are so irrational they will not bend to the will of the UK. How awful that is that they will simply not agree with what the UK is actually saying. Well, of course they’re not going to do that; they have their own corners to fight.

And he mentions the German car industry. The German car industry sees the single market is more important than anything else, more important than the UK market. And why? Well, they’ve calculated that people will still buy BMWs, they'll still buy Mercedes-Benz, they’ll still buy Audis, and pay the extra, but it's not the same for other car manufacturers when they try to export cars that don’t have the same sort of premium marque in the future.

He talks of lamb. Lamb is a tiny market. It doesn’t matter about lamb—something we can sacrifice. It’s only a few hundred million pounds. The reality is that the Welsh lamb industry needs exports to survive, because the UK consumer does not tend to buy it in the numbers that are required.

Then he says that we import £600 million; we need to have import substitution. We tried that in the war, and we had rationing. Is that what he’s suggesting? Because what he’s suggesting is this: it is a bad thing that the UK imports food. So, in other words, if you want to buy apples in January, tough. If you want to buy leeks in December, tough. If you want to buy strawberries out of season, in May, tough. So, what he’s saying to the consumer is: actually, what we want is to stop those imports coming in, so you can’t buy what you want to buy. Well, try that one to get past consumers in the future.

So, my advice to him is this: open your eyes and look at the evidence, don’t be blinded by ideology or nationalism, and start saying that we can have a Brexit that actually is sensible to the UK, not one that is costly in terms of bureaucracy, not one that destroys our farming industry, not one that destroys our steel industry, not one that makes it more difficult for us to attract investment from other countries because we're not part of the single market, and let’s have common sense, a commonsense Brexit, and not one driven by sheer zealotry.

Photo of David Rees David Rees Labour 3:17, 6 February 2018

First Minister, I welcome your statement. I'll try and keep my contribution to the questions and to the topic, which is the trade policy, and not repeat referendum discussions, as we seem to be hearing elsewhere.

First Minister, the trade policy, which I very much welcome, also reflects upon something that was raised earlier, because I was very pleased to see, on page 15, the reference to a 'no deal' situation, because at least we're starting to see now recognition that 'no deal' needs to be addressed, and it does refer to that. So, I'm very pleased at that.

But the paper that it builds upon, which is the work of the business school at Cardiff University, also discusses sectors that were very much at risk, mainly being those sectors that were deemed to be branches of global organisations, and, consequently, their supply chains as well. But what I want to know in relation to that is: what preparations are being made to develop support plans for those types of businesses and their supply chains? And it highlights that you shouldn’t focus on sectors; you should focus upon the businesses themselves, because they have different needs within it, and it’s very important that we look at that and identify those that are priorities for the Welsh economy, because—that means perhaps the ones that add value to Wales, not just simply coming in and going out again, where it doesn’t add much value to the product and, therefore, the economy doesn’t grow by much. So, can you tell me what you’re doing to look at those sectors, those businesses, and are preparing to help them in a situation where we may now end up in a 'no deal'?

Also, we talk about the transition period in your paper. Now, Dr Tobias Lock from Edinburgh University has given talks and written a paper on the legal challenges that arise during the transition period. Can you tell me what analysis the Welsh Government has done on the legalities that may be changing during transition and what you’re going to do to ensure that Welsh businesses and the Welsh economy do not have to face additional challenges because no-one’s thought of them in this legal situation?

Also, you talked about, in the paper, divergence of regulations. Now, yesterday, we attended a roundtable session as a committee, and one of the issues that came up was certification beyond the EU. What they didn’t want was a duplication of certification in the UK, where they have to get UK certification and EU certification because discussions haven’t taken place between the UK and EU on how they can actually represent one another and accept each other’s certification. So, can you tell me what discussions the Welsh Government's having with the UK Government to ensure that our businesses don't face increased bureaucracy and duplication of certification because no-one has got together to say, 'Let's ensure that this is equal across the EU'? They actually want it across the world, equal certification, but at least what we've got now is an EU certification. We want to ensure that we don't increase and have to duplicate that as a consequence.

Finally, First Minister, the Trade Bill. It wasn't mentioned, really, in your paper. We do know the Trade Bill refers to changes to existing EU trade rules and how that's put into place, including the Trade Remedies Authority. Can you actually give us a little detail as to how you see the Trade Remedies Authority coming in? Because you mentioned in your own statement the issue of steel; we do know that the EU has now put trade remedies in against steel from China in particular. Obviously, it affects my constituency very much. But how are we actually going to address trade remedies post Brexit to ensure that our industries do not suffer as a consequence of a trade deal done by the UK Government with, particularly, China, that allows imported steel getting in cheap? That's just one example, let alone what goes on in America and everywhere else. So, it's important that we look at that and ensure that we have a say in trade remedies.

Photo of Carwyn Jones Carwyn Jones Labour 3:21, 6 February 2018

Can I thank my colleague David Rees for those questions? If you look at the work that's been done by Cardiff Business School, it does look at what a 'no deal' scenario would be. It is right to say that it identifies some sectors as being more at risk, for example, from tariff barriers, and others from non-tariff barriers, and we're working with those sectors to make sure that we can understand their difficulties.

There is one thing that I hear time and time and time again—I heard it again yesterday—and that is the impact on recruitment, from businesses who are saying to me, 'We recruit from other countries. What happens now if we can't recruit? We are an international organisation, we need the best people from wherever they are. What happens how?' We're not sure how that's going to work in the post-Brexit future.

In terms of the legal challenges that he—. The other thing I should've mentioned is of course we are opening offices around the world, working with the UK Government to make sure that we identify new markets to try and mitigate what a hard Brexit would look like, but let's not pretend we can actually overcome the challenges that that would create.

In terms of legal challenges, much of it depends on what happens in the transitional period. If the UK is willing to accept that the European Court of Justice would still have jurisdiction and EU laws would apply in that transitional period then there's no difficulty. But of course the difficulty arises in terms of the UK saying, 'We're not going to do that'. Who then acts as the trade court? What scope will there be for divergence? All these things are unaddressed.

There is no reason, of course, in devolved areas that a devolved Parliament and Government couldn't just accept new EU regulation and incorporate it into domestic law. There's nothing to stop us doing it, but of course that would be a matter for this Parliament. If we look, for example, at the regulatory bodies: I've mentioned the European Medicines Agency already this afternoon, Euratom, if we look at the regulation of the air industry—none of these things have been addressed. No-one knows yet, and we're only a year away. No-one knows yet how these issues will be resolved in the future, and the Member's quite right to say that nobody wants to see duplication in terms of certification. I've heard some in the UK Government say, 'Well, you see, what Brexit is all about is basically keeping the same rules as the European Union, but it's our choice as to whether we keep them or not'. I've heard some say that. I've heard others talk about a bonfire of regulation. They want a low regulation economy, one where wages are suppressed, where environmental standards are depressed, and that is the classic right-wing ideology when it comes to what Britain should look like beyond Brexit.

In terms of trade remedies, it's hugely important, of course, that we have a role in shaping what that might look like in the future. We know it's a powerful tool. We've seen it in the United States in the last few weeks, and how important that can be, and the effect it can have on economies outside of the USA. That will be an important factor in terms of the discussions that we have with the UK Government as to what the trade relationships and the trade structure within the UK should be in years to come.

Photo of Mick Antoniw Mick Antoniw Labour 3:24, 6 February 2018

First Minister, I've only got a few, relatively minor points. You know my constituency well, and over the past couple of decades you'll have been aware of the impact of the closure of the mines, the closure of heavy industry. Yet over the last five years there has been significant growth and formation of new companies. A lot of that is due to a number of the projects of Welsh Government, the partnership with local government. In the last five years there have been 1,015 new businesses set up in the Pontypridd constituency, a 53 per cent increase.

I'm glad that you commented a little bit about some of the issues of regulatory frameworks in conjunction with the EU, because one of the concerns that's raised by a number of these companies that export to the European Union is that, 'We can cope with the tariffs, we can manage the tariffs; the problem is there must be no delay on the transit of goods.' The transit of goods is the fundamental point. If they cannot deliver on time then they will lose that particular market and that is their biggest concern and obstacle. And if we are not in the customs union, or something very similar to the customs union, if there is a divergence of regulatory frameworks, we will not be able to trade at all. What can the Welsh Government do in order to ensure that there's some assurance to those small companies that have set up, that have grown in difficult times, that are now facing yet another obstacle from the UK Government because of its approach, its ideological approach and obsession with the customs union?  

Photo of Carwyn Jones Carwyn Jones Labour 3:25, 6 February 2018

There is no doubt in my mind that staying in the customs union is the best way forward. I've seen no evidence of any alternative arrangement that delivers anything that is as good as the arrangements that we have now or anything that would be better in the future. If you're a business at the moment and you export to the European Union or, indeed, you supply a business that exports to the European Union, you are reliant on the free flow of trade. What Brexit has the capacity to do, although it doesn't have to do it this way, is to impose a vast bureaucracy on businesses—more form-filling, more red tape, more delay. This is particularly true and particularly acute in, for example, the fishing industry, where, of course, goods are highly perishable, they need to be moved very quickly, the industry's highly dependent on exports—sending goods to markets where people will pay the most and put more money into those who work in the fishing industry's pockets. The last thing they want is to have to fill in forms before they go, to find queues in ports such as Dover because the physical infrastructure isn't there—and no steps have been taken, to my mind, to address the issue of infrastructure. Checks at the ports—where will they be carried out? That's not been done; the work for that hasn't happened yet. All these things are barriers, let alone potential tariffs, but all those barriers will be put in place for business. The Member asked the question: what comfort can I give him? The comfort that I can give him is this, that we will continue to fight to ensure that businesses have access to our biggest single market, free of bureaucracy and part of the customs union.  

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru 3:27, 6 February 2018

(Translated)

I’m grateful to the First Minister for his statement today and for the paper published. The fact is that this paper, as well as the analysis that was released behind closed doors in Westminster, reveals that there is a cost of Brexit to the Welsh economy, whatever the scenario you follow. There is a particular cost, as has been outlined in this paper, for the sheep sector, in terms of agriculture, and that’s very grave. We must also bear in mind that, behind that sector, there is an economy, but there are also people, communities, a landscape, water management, land management, the Welsh language, and a way of life that has been on the land of Wales for over two millennia, and it’s important that we keep a focus on what is supremely important for us as a nation, as well as important to us as an economy. That is something that we should bear in mind in all of this.

Could I just ask the First Minister how he intends to proceed with this work now? Adam Price asked you about dealing with other regions and other Governments. I’m sure you will have seen that the Labour Prime Minister of Gibraltar has said the constitution of Gibraltar, in his view, gives a right for the business of tariffs to be decided by Gibraltar, within the constitution approved in a 2006 referendum. You visited Gibraltar in June of last year, I believe. Have you discussed this with the Prime Minister of Gibraltar? Secondly, are you of the view that there should be a vote in this Assembly, this Parliament, in terms of any trade deal that is done? I know that we will have a vote on the legislative consent motion as far as the European withdrawal Bill is concerned, but this is a specific question on any trade deal. Despite us perhaps having an advisory referendum or not, as Adam Price suggested, we should have a meaningful vote in the Parliament on these issues.

And, finally, I must ask you, because you’ve set out something today, as you know, there is a great deal of agreement between Plaid Cymru and the Labour Party on this issue, but you are led by a leader in Westminster, Jeremy Corbyn, who doesn’t believe in remaining in the single market, who doesn’t believe in remaining in the customs union and is doing everything within his power to stop that happening at the Westminster level. I have to say: what are you going to do as the First Minister of Wales to put the interests of Wales before the interests of your own party in these issues? Because if we continue on the current route, then it’s very possible that we will have a very hard Brexit led by the right wing of the Conservative party with some silent consent from your own party in Westminster.

Photo of Carwyn Jones Carwyn Jones Labour 3:30, 6 February 2018

(Translated)

Our view as a party and as a Government is completely clear, and I’ve made that clear of course to our neighbours in London. On what you said about the sheep industry, it’s completely true that farming is part of life in rural Wales and farming of course can affect so many things such as the environment, and to ensure that rural Wales is kept in a way that we want. The fear that I have is that it’s possible of course to give more money to farmers, but because of the fact that they would lose so many of their markets, they wouldn’t be farmers anymore and farming is not what they would do. We’d lose that tradition. There’d be fewer in number, we’d lose that tradition and the nature of the livelihoods of those living in rural areas would change and farming would not be part of their lives.

In terms of the frameworks, work is proceeding well. A lot of discussion has been taking place between governments. We’re not in a situation yet where there is agreement, but of course, as I said, this is something that has to be considered in looking at the situation with the Bill itself.

In terms of Gibraltar, it is different. We have to remember that Gibraltar is outside the customs union and therefore there is a very hard border with Gibraltar. I wouldn’t want that to happen in Wales. That of course shows what happens if you’re outside the customs union, because if anyone wants to see what exactly happens if one landscape is within the customs union and one is outside, go to Gibraltar. That is what people want to avoid with Ireland. If that happens in Gibraltar, how do you avoid that in Ireland? Of course, that’s a question that hasn’t been answered yet.

In terms of some sort of vote on the trade Bill, there’s no problem at all with that. I’ve said many a time that it’s vital that the Assembly gives its consent on what the frameworks are at the end of the day, what Brexit looks like, and of course it’s vital that the Assembly gives a view on whatever happens on any sort of trade agreement.

Photo of Jane Hutt Jane Hutt Labour 3:32, 6 February 2018

First Minister, can I welcome your statement and the Welsh Government's trade policy paper? Of course, that paper shows that the Welsh economy would be disproportionately impacted by a hard Brexit, and identifies the sectors most at risk from tariffs—automotive, chemicals, steel and electrical engineering—while the aerospace industry is more at risk from non-tariff barriers. These are the sectors that are amongst the most productive in Wales and provide a large number of highly skilled, well-paid jobs. I know the First Minister would agree that it's vital that the voice of these key businesses in Wales, and in these sectors, is heard.

Yesterday, in fact, as David Rees said, the External Affairs and Additional Legislation Committee, for a round-table discussion, visited Aston Martin in my constituency and, last week, I spoke to engineering graduates at the Aston Martin careers fair at Cardiff and Vale College. That attracted young engineering students and graduates keen to hear about the opportunities at the Aston Martin St Athan plant, amongst the 750 new jobs coming to Wales.

The Aston Martin investment, with Welsh Government support, provides new hope and prospects, but can the First Minister clarify what the Welsh Government can do, what influence it can have on the negotiations in phase 2, to provide certainty and continuity for businesses like Aston Martin, not just as David Rees said in relation to issues like certification, which is key for the automotive sector, but also for environmental standards and skills?

Photo of Carwyn Jones Carwyn Jones Labour 3:34, 6 February 2018

Can I thank the Member, my friend and colleague, for that comment? Yes, of course, these are uncertain times for Aston Martin and, indeed, other businesses, as they seek to try to guess what kind of framework the UK Government wants to put in place following Brexit. Indeed, those negotiations will continue, and we've said to the UK Government that we wish to be part of those negotiations, not in the room, as it were, but close at hand in order to offer advice and to point out what pitfalls there might be. Now, this is not as strange as it might appear, because this is exactly the model that existed when I was rural affairs Minister way back between 2000 and 2002. We would meet every month, the Ministers from across the UK, and we would agree a common line at the European Council of Ministers. I would attend the European Council of Ministers when there was relevant business as far as Wales was concerned. I was in Luxembourg when the deal was done in Luxembourg for the future of the common agricultural policy. And it was the practice of the UK Secretary of State to come out of the room with proposals, and ask our view on them, and ask us whether we were comfortable with them, and that worked exceptionally well. We were never in a position, as a result of that system, where we felt that we'd been cut out in some way, or indeed that we could not support the deal that the UK finally came to. That's a model that we've urged once again for the UK Government to adopt.

Photo of Elin Jones Elin Jones Plaid Cymru 3:35, 6 February 2018

(Translated)

Thank you, First Minister.