Welcome to today’s session of the Business and Trade Committee, as we kick off our programme on export-led growth with this panel session on trade principles and trade strategy. Thank you so much to our witnesses for joining us and for making time to be here this afternoon. Lord Hannan, if you do not mind, I will start with you. The Prime Minister is off to Washington a little bit later on this week. What does he need to say to safeguard our country against the peril of American tariffs?

Thank you very much, Mr Chairman. It is nice to be here. This is terribly important to us. If you count the size of national economies, the US is not just our single biggest export market. It is bigger than our second, third and fourth put together, so getting this right matters a great deal. We are the single biggest investor in the US. It is the single biggest investor here. The first thing is not to get drawn—and the Prime Minister has been absolutely right about this—into the false logic of retaliation. The British economist Joan Robinson, nearly a century ago, says that if another country has rocky coasts, you do not put rocks in your harbours. If the US pursues this mistaken policy of impoverishing its consumers, the worst thing to do is to respond by threatening to impoverish our own consumers. We should be positive about the opportunities we have.

Let us just crystallise this. The last language that we have from the President is that the 20% or 21% tariff, which is potentially a retaliation for value added tax, will not exempt the UK. He said that it is going to apply to everybody. You do not think that we should retaliate with tariffs of our own on American goods and services.

No, because you are retaliating against yourself, chiefly. A tariff is a tax on yourself. It works like a suicide bomb. It may incidentally damage other people; it is certain to damage you. Most politicians understand this, but they get driven by public opinion and the emotion of retaliation into doing things that they know are harmful, as we are seeing in Canada.

Let me pause you there and see where the rest of our panel are. Marley, should the Prime Minister retaliate if tariffs were imposed by the American President?

It depends exactly what the tariffs are. If they are tariffs focused on steel and aluminium, I can see the case for perhaps not retaliating. If they are broad tariffs, along the lines you suggested of responding to VAT, there is a stronger case for doing so. I appreciate the argument that you have made that there will be economic impacts of imposing tariffs, but you have to think of the mindset of the US. In order to manage our geopolitical relations, we have to look like we are taking this negotiation seriously. If we do not respond at all, it sends a strange message, in a way, to countries. They will impose tariffs on us, but we will not do anything at all in response. By responding, we can then put ourselves in a better position to negotiate the removal of those tariffs in future. If we do not do anything, we lose our leverage.

What tariffs would you propose to the Prime Minister? Let us say that it is an American across-the-board 20% or 21% tariff on all UK exports to the US. What should the Prime Minister do?

There were tariffs that were imposed by the EU in the past. There were the 232 tariffs after the US imposed tariffs on steel and aluminium. We could resurrect those types of tariffs. They were targeted things such as Harley-Davidson, particular whiskies and so on. You could follow that approach, targeting those types of tariffs. That would be an easy way to do it, because we have those types of tariffs.

So strategic strikes, as it were.

Yes, exactly. That would be the obvious starting point, but you would have to investigate exactly what the impacts would be. I am sure that the Government are considering this.

Tom Brufatto, what is your view?

That is a very complicated question to answer, because we do not know exactly what sectors any tariffs would affect. How to respond is probably an even more complicated question to answer on the grounds of our shared geostrategic interests in both the European Union and the United States. It might be even better, perhaps, to put in place a plan to cope with any eventuality of what US tariffs may or may not include at any point during Trump’s second tenure. We recently commissioned Frontier Economics to analyse different scenarios of regulatory alignment between the United Kingdom and the European Union. This included estimating the impact of US tariffs on the UK and the EU economies. We found that, because we are slightly more services intensive as an economy when it comes to trade with the United States, on aggregate, the US tariffs would not have a huge impact on the UK economy, but they would have a devastating impact on regions outside of London and the south-east, so the more industry-intensive regions. On the European Union, they would have a much harder economic impact on the grounds that German cars, for example, would lead the negative impact on the European economy.

Let us take this basic question: if there is a US across-the-board tariff, do you think the UK should retaliate?

What would be better than retaliating is pursuing a trade policy that brings us into close alignment in goods and services with the European Union. In that way we could recoup any lost trade or damage done to the UK and the EU economies through increasing our trade flows with the European Union. Effectively, for the UK’s case, that would more than offset the effects of any US tariffs. In the EU’s case, we could effectively reduce the effect of US tariffs on its economy by roughly a third. That is what the calculation shows.

Go over that again. Crystallise that, because this is a really significant point.

The best way to mitigate the possibility of US tariffs is for the United Kingdom and the European Union to enter an agreement that is close alignment as applied to the SPS chapter and the technical barriers to trade chapter of the TCA in particular. If we can go further than that, it should include the services chapters of the TCA as well.

What would the uplift on UK economy be in your analysis?

We would offset the impact of the tariffs pretty much completely. For the European Union it would recoup a third of the lost trade that its economy would suffer. We can provide the detailed figures afterwards if you want.

Lord Hannan, you may have a different view about what the strategy for trade might need to look like.

I do not think that we should assume the worst. There is a great potential here and I think both Governments are seized of the advantages, potentially. You will remember that Donald Trump came in, in 2017, saying, “I am pulling out of NAFTA”, and then he discovered that it was not as straightforward as he had made out in opposition, so he slightly downgraded it to the USMCA. Because Canada and Mexico were both members of the trans-Pacific partnership, most of that downgrading just went to taking the clauses that had been prepared by US negotiators as part of the trans-Pacific partnership deal. Britain became a full member of the CPTPP, as it now is, in December. In terms of the obligations that we have with external trade, we and the US are already doing remarkably similar things. I always thought that the whole issue of chlorinated chicken was bogus, in the sense that there is more chlorine in a bag of washed salad, but the issue does not arise because CPTPP and USMCA do not require a participating country to change its domestic food standards laws. All of that is much more straightforward than is sometimes suggested. I was on the Board of Trade under the last Government. We were further advanced than is often realised with the talks that began before Joe Biden came in and cancelled them. I think that there is a deal to be done probably quite early. The easiest way of avoiding these tariffs is, if there are talks underway, to insist that tariffs or other retaliatory measures be suspended pending the outcome of those talks. There is a really big prize here. As I say, the US is by far our single biggest trading partner. It is true that the bits that we had not concluded under the last Government are the most contentious bits, but do not mistake uncontentious for unimportant. In the stuff that was broadly already agreed is the lifting of tariffs on manufactured and industrial goods and cars, and a lot of mutual recognition of professional qualifications, so an awful lot of stuff there where a lot of the work has already been done. If I were the Prime Minister, I would be saying, “We can both get a win here”. I would like to be able to go home and say, “I have delivered what the useless Tory Government never did, which is simultaneous trade deals with the US and the EU”.

Do you think that that is possible?

Yes, absolutely.

The Prime Minister has made it pretty clear that it is a mission of this Government to see the highest levels of growth in the G7. What do you think the trade strategy needs to focus on in order to make that a reality?

The Government are going to publish their industrial strategy in the next few months. That will set out some of the areas of the UK’s current strengths and potential strengths going forward. In order for the trade strategy to deliver on growth—and we have said that it should be growth that is both inclusive and green—it will need to align closely with the Government’s industrial strategy, identifying those particular sectors where we think we can grow our exports and ensuring that, for instance, any export promotion is aligned with that and our trade negotiations are aligned to ensure that our offensive interests focus on those sectors where there is the highest potential for growth. That is the broad outline. The other consideration that is important when considering this is the importance of economic resilience. We know that the current trade picture is extremely precarious. There have been, in recent years, significant supply chain disruptions. There are huge geopolitical challenges. That means that, in order to ensure the UK’s long-term economic prosperity, we will need to think quite carefully about ensuring that we have diversified our imports and are not relying too much on any one country. That could expose us down the line if there are future trade disruptions, which could have an impact on growth. We need to have the short-term focus on growth, but also that long-term focus on economic resilience.

The most impactful policy proposal that there is around at the moment to help the Government achieve its target of fastest economic growth in the G7 is using the relationship reset to extract some significant improvements to the TCA. Namely, as part of this report that I mentioned earlier, we analysed what the impact would be of getting a better relationship when it comes to trade in goods, so targeting SPS and technical barriers to trade chapters of the TCA. We estimated that deep goods alignment across those two chapters could benefit the UK economy to the tune of between 1% and 1.5% GDP growth in the long term. That is effectively clawing back up to a third of the GDP that we are estimated to have lost as a result of moving from European Union membership, or single market membership, to the TCA. This is achievable within the negotiating red lines of no return to the single market and the customs union. If we include improvements to the services chapters of the TCA as well, that number increases to 2.2%, effectively clawing back roughly half of what we are estimated to have lost as a result of the TCA. I would like to put this into a bit of context as well, because I agree with Dan that it is not a binary choice between improved relations with the European Union and a free trade agreement with the US. That is not what the debate should be about; it should be about priorities. When it comes to priorities, if the target is the fastest growth in the G7, we should follow the biggest number. The previous Administration’s own estimations, even optimistic estimations, of the effect of an improved US-UK FTA puts the growth from that FTA at roughly 0.16% GDP in the long run, which, if you compare it to between 1.5% and 2.2%, should instruct the Government as to where the priorities should lie. That does not preclude negotiating a US FTA as well, but we should put most of our efforts into that EU relationship reset one, because it will bring the biggest benefit to the UK economy. Lastly, I would like to add that, when it comes to closer trade in goods with the European Union, that is when we get a real and significant redistributive effect of that GDP growth. The industrialised areas, such as the midlands, Yorkshire and the north-east, will benefit the most when it comes to GVA increases compared to where we are now.

In a large economy such as this, we should not expect trade to do all the heavy lifting. Most of our economy is internal. If we really want the fastest growth in the G7, we need cheaper energy, lower taxes, lighter regulations et cetera, but that is beyond the scope of this Committee. In terms of trade, we should look at the barriers that can be most easily and painlessly lifted. To make a really uncontroversial point, what about the things we do not produce ourselves? There is a spike in the price of olives and olive oil caused by climatic conditions. To my knowledge, we do not grow olives in this country. The Telegraph is always saying that someone in Cornwall has managed to grow tea or something, so they may have somewhere. Apologies if there are any olive growers watching.

Not everything you read in the Telegraph is true.

Yes, exactly, although, as I think George Orwell said, just because the Daily Telegraph says that today is 25 February does not mean that it is not. How extraordinary that we still have tariffs on non-EU olives and olive oil. We still have tariffs on imports from Tunisia or Turkey. We still have tariffs on Moroccan tomatoes when we had that tomato shortage 18 months ago. We should be looking to get rid of the easiest trade barriers. We do not find those vis-à-vis the EU. We have the most comprehensive trade agreement with the EU that any country has that is not in the process of joining or already a member. In terms of where the biggest changes and improvements are to be made, they are not with the EU, which we already have. They are with India, the US and the rest of the world, where there are still substantial barriers that we could remove.

Here is one idea: the idea of CANZUK, of a complete market among Australia, New Zealand, Canada and the UK, because we have such interoperable regulations. Whether it is lawyers or doctors, they have studied the same curriculums, often at the same places. Why not begin by saying—and it would cover about half the areas that you just listed there as the Government’s industrial aims—that whatever is legal in any of those four countries is automatically legal in the other four? This applies to goods, services and professional qualifications. Would that not be an immediate way of doubling the size of our market and getting strong growth? It would also serve to make that bloc stronger in a world where the democracies are beleaguered and where we should be looking to the countries that have the strongest commitment to liberal values and an open society.

I am saying that we can go much further. We have trade deals with all of those. We missed out on getting an even better one with Canada because of Canadian protectionism on dairy and British protectionism on beef. Instead of saying, as we have done with our other trade deals, “Here is a list of where we are now. What can we improve?”, why don’t we flip it around, as Australia and New Zealand do with each other, and say that there is an automatic assumption of reciprocity unless we have taken it off. In other words, it would be a negative list approach that anything legal in your country is legal in mine, unless somebody goes through the following procedure to take it off the list, which has happened once or twice between Australia and New Zealand. Would that not be a very practical way, especially with the nervousness in Canada now about US tariffs, of extending our market opportunities?

You would deepen the trade agreements that we have with those countries that we have trade agreements with.

All four of us are in the trans-Pacific partnership. The CPTPP is wide, but not as deep as it might be, for understandable reasons given the differences in GDP per head and standards. I mentioned those countries simply because their regulations are the closest to ours of anywhere in the world.

As I mentioned, the Government need to focus on these areas when they think about trade promotion and our trade negotiations. When it comes to trade promotion, we have advocated for a locally led programme of export support provided to businesses. The idea would be that we would provide additional support to those businesses where we think that there is a clear priority, say in advanced manufacturing or clean energy. Where we think that there are particular opportunities globally, that support would be provided to help people make use of trade agreements that we currently have. One issue we have is that trade agreements might be negotiated but businesses are not aware that they exist or do not know how to use them. Providing that support locally, with trusted experts, is a really important part of the picture. Through the trade negotiations that we want to pursue, part of that is with the EU. There are clearly opportunities that we will come on to, I think. There are some, for instance, on goods manufacturing, where you could simplify the current regime for trading between the UK and the EU, as I am sure Tom will talk about, which would help those particular industries. On creative industries, we know that the Government have talked about pursuing an arrangement for musicians, and touring musicians in particular. More widely, with India, the US and other countries, there are opportunities for professional services and financial services, which is clearly a really important area for UK exports. There, we have said that there needs to be more thinking about how you have regulatory co-operation agreements with other countries. Often the challenge with FTAs is that there is a big focus on tariffs on goods, but we need to work much harder on exporting our services. That requires closer collaboration between regulatory agencies in the UK and other countries, so that we can manage any changes to regulations in those particular services.

Do you mean like the deal with Switzerland on financial services?

I was going to mention that. That goes even further. That ensures mutual recognition, so that would help to simplify and help to export currently. What I was talking about was that, if in future there were regulatory changes in one country but there were not in the UK, by having that regulatory cooperation you would be able to pre-empt that and help businesses to manage those changes over time. Switzerland is the idea where you have that mutual recognition agreement, and that really helps to simplify and reduce barriers.

I will build on what Marley has said. When it comes to these industrial sectors, they are absolutely the correct ones, as identified in the industrial strategy, and that is great. We need any upcoming trade strategy to be complementary to them and so ensure that we are able to boost these sectors through our trade strategy as well. I would argue that that is especially true when it comes to our relationship with the European Union. There are two things that we can do to improve that. Number one is to reduce the technical barriers to trade, make exporting and importing a lot easier, and improve trade flows. The second thing, which is almost equally important, is providing a significant amount of regulatory certainty so that we can attract the foreign direct investment and grow these sectors significantly. That implies almost what Dan was saying at the beginning in relation to CANZUK, where we can effectively apply that to the European Union, because we have a very solid foundation on that, given that we were members for so long. We can go ahead and pursue a policy of regulatory alignment with some sectors, where we identify them to be beneficial to our interests, and then build on those, whether through mutual recognition of conformity assessments or just doing mutual recognition of conformity assessments independently of the regulatory alignment, in order to reduce those checks and the duplication for certification and conformity, and start getting our businesses, especially SMEs, growing again, bringing that wealth and spreading it across the UK.

Lord Hannan, which aspects of that do you disagree with?

I am strongly in favour of mutual recognition deals with the EU. I do not think that anyone involved with the negotiation was against that. If we could get one on agriculture of the kind that New Zealand has with the EU, I think that that would be uncontroversial. As Tom says, it would be very easy to do that because our standards have been identical for the better part of half a century. The obstacles, though, have not been on our side. If you look at financial services, Britain was very happy to grant equivalence to EU firms and has done ever since. The EU does not return the favour, although it grants equivalence to firms from as far afield as Mexico and China. When you look at checks on physical goods at the border, again, we were quite happy to carry on admitting EU goods for a long time without checks. In my view, it was a mistake to start imposing checks at all, but it was not my decision. That was never reciprocated. When we look at touring artists, EU artists can tour here visa free up to a certain amount of time and then with a simple visa if they want to start earning money. The problem is on the other side. When you look at where these obstacles are, they are usually not in our gift to take down. A symbol of them is the passport e-gates. Britain, quite rightly, makes it easy for EU citizens to come through our airports. Why would we want to make ourselves a less attractive destination? It might make life easier if the EU reciprocated, but that is not fundamentally our decision. It is the EU’s.

I wanted to point out that what Dan has said is true, but it is also something that happened 10 years ago. It was a consequence of the inability of the UK to effectively commit to a regulatory alignment or policies that were conducive to a stable regulatory environment—i.e. there was a constant threat of potential and quite drastic unilateral divergence. That came about, arguably, with the attempt at ripping up the Northern Ireland protocol and breaching agreements that we had agreed to previously. That meant that lots of this was politically impossible. I would argue that the politics has changed quite fundamentally and the geopolitics has changed even more now. There are real threats that we share and real opportunities that we can reap together. I would suggest that the fact that something was rejected under the previous Administration does not mean that it should not be pursued under this one.

The “it” that we are talking about matters a great deal here. I was talking about mutual recognition à la New Zealand-EU. That is very different from something that no serious democracy does, which is to say to another country, “We will follow whatever you do in future”. Imagine if we were asking the EU to do that. Imagine if we were asking the EU to commit unilaterally to follow every statute in certain fields passed by this Parliament. It would be a ridiculous proposition and it should be equally ridiculous the other way around, because it would inhibit our ability to regulate in our own interests and sign trade deals with other countries in return for very limited benefit.

I am talking about the regulatory stability, not the following of EU regulation out of hand. That is not what we are discussing.

For instance, on SPS, there could be harmonisation of regulation. I do not think that it is a particularly controversial area. You mentioned earlier the possibility of a deal with the US even if we maintained our current food standards regime. Your own argument made the suggestion that it is compatible.

But not with dynamic alignment.

We could harmonise with EU regulations.

I am going to allow Mr Maynard to insert a question into this.

I refer Members to my list of interests. Dan, I want to cross-check on facts. The US is 15.3% of UK goods exports. You said that the next three were smaller than that. As per at least my phone now, Germany is at 7%, Ireland is at 6.4% and the Netherlands is at 6.2%. That is 19.6%. Total exports to the EU collectively are 41%. Imports from the EU are 51%.

You were citing just goods figures, not the total.

The first bit was goods and then I said that total UK exports were 41% EU and it is 51% of the imports.

I do not have the figures in front of me, but I looked them up quite recently. In terms of total exports, the order is the same as for goods. The US accounts for more than 2, 3 and 4 put together, and almost as much as 2, 3, 4 and 5 put together, which is, I think, Germany, France, Ireland and the Netherlands.

I will check that while we are talking, but thank you for that. I think that you take the point that, on goods, which is where the frictions have come in, the US is nowhere near the top three in Europe. I find it bizarre that you are talking about Australia, New Zealand and Canada, which might make up 5% of our goods exports or something like that, if we are lucky, when we are talking about the EU at 41%. It feels like wilful blindness to the big number. To your point about looking to get rid of the easiest trade barriers, surely the biggest trade barriers are the single market and the customs union, and that is why our goods exports have taken such a hit, which is hitting our manufacturing bases horrendously. Do you recognise any of that, or is that all false narrative to you?

No, I am afraid that I see that as results‑driven motivated reasoning. If you start from the idea that Brexit was a calamity, you will find a way.

Is that true or not? None of that is true.

In the following sense it is not true. We have a TCA with the EU, which is the most ambitious deal that the EU has ever done with anyone. There are zero tariffs and zero quotas on any of our traded goods. That is not the case when you look at our trade vis-à-vis the US, India, Brazil or any of the other large economies. There is something paradoxical about taking, yes, a big number—although in proportionate terms a declining one—where we already have an extremely comprehensive trade agreement, rather than the areas where there is very low-hanging fruit, because we still have things as basic as high tariffs to get rid of on it when it comes to things such as car sales in the US.

When we have this massive dropout of small traders who are no longer trading with the European Union, why do you think that is?

A whole bunch of things have happened in this country, most obviously the lockdown and the effects of it. If you compare us to the European Union, we have done pretty well. Look at our growth figures.

I am talking trade here and why so many traders in the UK have given up trading with the European Union. I would posit that it is because it has become much harder. Bureaucracy is much worse. Do you agree that bureaucracy is much worse? I think you do, yes?

There were initially quite a lot of problems with things such as sending parcels and small businesses. Most of those, though, have been ironed through and so we should not look at only the immediate fall. People have now adapted to the new regime.

If I may, what have we gained?

Democracy, freedom and sovereignty. You ladies and gentlemen are now making the law in a sovereign country. The rest of us hire and fire our own lawmakers.

Let us get into some of the trade-offs and where they may be.

We know that the Government are resetting their relationship with Europe and there is a summit in May. If we are honest, there is a little bit of vagueness about what our ask is there. I am not entirely sure what the Prime Minister is going to go over there and ask for. Conversely, the EU seems very clear that it wants to talk about fishing, youth movement and some realignment on SPS. What do you think are the quick fixes? What should the Prime Minister have in his top pocket in terms of areas that most urgently need reform and to reduce friction and improve business confidence? Tom, you are obviously a fan of this reset. Can I start with you?

All the negotiating proposals have to be taken in the round. We are talking trade specifically here. Youth mobility is a key conduit to trade, says the European Union, and improving our trading relationship. We have defence and security as well. We definitely need something on defence. We need something on security to be high up on the agenda because of the geopolitical pressures that we are facing as a continent, not least because of Russia’s hot war of aggression in Ukraine. When it comes to trade, we need to be ambitious and go for, yes, the SPS agreement, as the Government are already doing. We need to go for regulatory alignment and/or mutual recognition of conformity assessments on the technical barriers to trade chapter, whether that is mutual recognition of conformity assessment irrespective of alignment or not. That is for the negotiations, but they can be achieved without regulatory alignment as well. We also need to be more ambitious when it comes to services. We know that we have a stated UK Government ambition for mutual recognition of the professional qualifications agreement as applied to architects. We could go further than that as well. I would also argue that we should absolutely be willing to negotiate on a youth mobility visa scheme as part of this.

Marley, do you think there are any quick fixes?

I agree with all of what Tom has said. The only thing I would add is a deal to link the UK’s and the EU’s emissions trading systems.

It matters who the demandeur is here. There are things that you should be prepared to concede in negotiations and then things that you actively want. The Government, in so far as I can understand, are actually taking a quite sensible line on things such as the youth mobility scheme and the idea that we might join the pan‑Euro‑Mediterranean customs deal. In other words, they are saying, “This is not something we particularly want, but it may be something you can trade in the negotiations for”. I do not understand why we are not taking a similar attitude on defence. It seems to me that the EU is much more of a demandeur than we are. We are not in immediate danger. Yes, we have an interest in defending our friends and allies on the continent, but we should not be paying a price for the right to be allowed to do that. It is a very bad negotiating strategy to go in with that as your attitude. What would I have at the top of my list? First is lifting of the goods checks in Northern Ireland and second is agreement of mutual recognition on SPS.

Touching on that SPS area, we are told that a veterinary agreement with the EU could increase agrifood exports by up to 22.5%, but what level of regulatory alignment would that require? How realistic is it that we could achieve that? Crucially, how would it impact on UK trade negotiations with non-EU partners? You are very clear that you think that this is not binary. We could do a deal with Europe and with other partners. However, dynamic alignment with Europe might impact elsewhere.

It definitely would, because how could a third country negotiate a trade deal with us when we have said in advance that we do not control our SPS? It may in the future go in a direction that none of us can now envisage. I do not think that there is anything that we would gain from adopting EU rules that we would not gain by the simple mechanism of saying that any firm in the UK can follow either EU or UK SPS standards. We would have all the benefits that are cited in these surveys without any of the negative impact on future trade deals.

EFTA countries and Switzerland negotiate deals with third countries and they have harmonisation with the EU, so why would it be impossible?

Marley, come through the Chair if that is okay. Say that again, please.

EFTA countries and Switzerland align. Switzerland of course has a deal. It is maybe not EFTA countries actually, but Switzerland certainly has a deal with the EU harmonising on food standards but can also have deals with third countries and negotiates independently with third countries. It is not impossible to negotiate deals with third countries and harmonise our food standards with the EU, because other countries do it.

Switzerland is busy diversifying its trade agreements left, right and centre at the moment.

Yes. It is slightly restricted in doing so, but I was pro a Swiss deal before, during and after the referendum. It struck me as an obvious way of easing the transition. I go back to asking what the advantage is of promising to follow somebody else’s standards, as against just saying that those standards will be legal here, but companies that do not export to the EU, that either do their trade wholly domestically or export only outside the EU, can follow British standards. By the way, I would do that way beyond the narrow field of veterinary standards in SPS. It would be great. You would have competitive downward pressure on regulations.

The best answer to the original question is that, largely speaking, already, right now, our SPS regime is that of the European Union. We have not diverged significantly from it since the TCA has come in, so it largely is in place and our regulatory framework continues to be, broadly, the European Union’s one. That did not prevent us from, say, negotiating a trade deal post Brexit with Australia or New Zealand, for example. We have done that. It did, however, as Dan pointed out at the beginning, upset lots of the beef farmers, particularly in Canada when it came to the Canada FTA. When it came to negotiating with the US, the chlorinated chicken and the hormone‑treated beef were also hurdles, but that was because we refused to reduce our standards to maintain them as part of the EU’s regulatory framework. With all trade deals, it is about trade-offs and choices, but it does not necessarily preclude us being able to sign other trade deals, because it is up to us whether we want to keep those standards as they are or not.

If you address Lord Hannan’s point about what one gains from a commitment to align with future regulation, what is the prize here that we are seeking?

It is reduced checks, increased FDI and more regulatory stability. It is more business decisions being taken more smoothly and higher trade flows.

Lord Hannan, that prize sounds very attractive, no?

I still have not heard an answer to why we would not get that if we allowed EU regulations in parallel to our own.

This is slightly like tennis, but go on, Tom.

Effectively, our regulations are our own already. We are not members of the European Union. We are not in the single market or the customs union. We are not here, I do not think, discussing a return to either the single market or the customs union. All the numbers that I mentioned earlier from our Frontier Economics report apply to a situation that is outside of the single market and the customs union. That includes SPS too. Ultimately, if we were to decide that it was within that sector’s interest to maintain a high level of regulatory alignment, say with the European Union, that is our choice to make. That is okay and it would not affect any other trade negotiations that we were to embark on in the future. I would also like to point out that this is quite a common-sense approach. It is an approach that was in fact taken, for example, by the former Secretary of State for Business and Trade, Kemi Badenoch, when she decided to extend the application of the CE mark indefinitely, instead of imposing a UKCA. It is another example of where you can make your rules as you want them to. If you want to align, you can do that.

It is a regime of what you might call compatible regulation.

Yes.

The Centre for European Reform says that the EU reset and trade improvements could increase GDP by 0.7% over a decade. Those numbers are not enormous. You mentioned CPTPP earlier on, Dan. We have heard evidence that CPTPP might increase GDP in the UK by about a per cent, which again seems remarkably low. That is based on previous figures. There has never been a deal like this one. Perhaps they may be proved wrong. Are those figures enough? Where else should the UK Government look to lower trade barriers? Should we look outwith Europe? Let us put it that way.

First, I have an uncontroversial point. Can we now stop calling it CPTPP? We did that purely, as far as I understand it, to humour Justin Trudeau, who is now retiring. Can we come up with a snappier name for it? That figure is unambitious. First, it does not allow for the possibility that companies will change their behaviour where a trade deal is in place. Secondly, it does not allow for the expansion of CPTPP. The accession of South Korea alone would increase the benefits to Britain by about a third. There are a lot of other countries that have indicated interest in joining: Philippines, Indonesia, Ecuador, Panama, Uruguay.

China has also expressed an interest.

Let us leave China to one side.

You would draw the line at China.

That brings other complications. We are just at the beginning. The good thing about a trade deal such as this is that it is like compound interest. It grows. It accrues over time. No, we could be much more ambitious. I would like us to have a template trade deal to offer all Commonwealth countries. We have bandwidth issues. There are only so many officials we have working on this. In the normal scheme of things, it will be a long time before we get around to Bangladesh, let alone to Malawi or the Solomon Islands. Would it not be good if we had a basic deal saying “insert name of country here” that can be tweaked slightly and offered it as a concrete advantage of Commonwealth membership? We are not allowed a complete Commonwealth deal because, under WTO rules, you cannot have non‑contiguous trade associations. We could have a voluntary deal that is on offer for any small Commonwealth country that wants it. That would be politically, as well as economically, in our interest.

Let me tease out one thing. If there is a closer SPS agreement with the European Union, how is that going to be compatible with an all-singing, all‑dancing free trade agreement with the United States?

In terms of compatibility, to my knowledge there is nothing that would prevent us from agreeing an FTA with the US. The problem with that is that the US has very different, and arguably much lower, food standards than we have in the UK. Therefore, whether that is desirable is a political decision of the Government if they want to enter into such negotiations. I note that that was part of the reason why they failed under the previous Conservative Administration, because they could not stomach those low standards either. My suggestion would be that the British public values British food standards as they are right now. We should not try to reduce them in any shape or form. If anything, we want a race to the top on our food standards. That is the main hurdle when it comes to agreeing a trade agreement with the United States, if indeed it presses access to the beef market like it did last time.

It is much more of an obstacle in the public imagination than in reality. Take the chlorinated chicken. My late father traded in poultry in South America. About the only thing I had any real technical knowledge of before I became a politician, outside politics, was the poultry trade. I know enough about it to know that there is not going to be any significant volume of US poultry here. The economics do not make sense. We buy our cheaper chicken from Thailand, Brazil, Ukraine previous to the war and now from Poland, and we produce a lot of it ourselves. Beef is potentially an issue. When you talk to the producers in the US, the beef cattlemen association and so on, they are not pushing for a change in our food safety laws. All they want is equality, so, in other words, that non-hormone treated beef imported from the US should not be subject to any disadvantage vis-à-vis equivalent domestic beef, which is a very simple thing for us to agree to. It is worth reminding everyone that we are a big net importer of beef. Even from a protectionist point of view, this is not taking business away from our beef farmers. It is about what percentage of our market is reserved for Ireland and France versus the rest of the world. I do not think that those things are impossible. As I say, our membership of CPTPP is very compatible with the American membership of USMCA. The deal is there to be done. Losing control of our future regulation and saying that we will align with whatever some body that we have no control over may decree years from now makes us a much less attractive market. That is going to be a dealbreaker from the perspective of the US.

I do not think that there is any need to speculate as to how the British public feels about this sort of stuff. There is plenty of polling surrounding food standards that is out there for people to look at, but we have also polled what the British public sees as the UK’s trading priorities and the relationship reset quite extensively. We commissioned YouGov to ask 15,000 people for their views as to who the UK should prioritise trading with. It will not be a surprise that 46% of respondents say that it is the European Union. That compares to only 20%, so less than half of that, who say that it is the United States. That is largely because people want closer regulatory alignment with the European Union. We asked that question too. Again, we find that, roughly two to one, the Brits are more likely to say that they want to be aligned with the European Union when it comes to standards and protection. Where does this come from? Over the last 10 years that we have had this public debate, it has been central to lots of the conversation we have had and lots of people have felt the economic consequences of moving to a TCA-type trade agreement. They have felt it through the inflationary pressures it has caused, whether that is through the increased cost of living crisis or otherwise. We know that this has filtered through. Cattle farmers in the US notwithstanding, the British public are slightly more aware of what is going on now. They have experienced it and expect a better trading relationship with Europe now.

I will ask this with a slight slant for each and then we can combine them. I am interested in what your thoughts are on a free trade agreement with the US, given how difficult that has been for the UK to negotiate. Particularly, where should that time be focused? Lord Hannan, you have mentioned low-hanging fruit and that there are some different ways that you might approach it, so perhaps you could comment on where you would suggest that strategy would be. Tom, you spoke about identifying the priority. What is the Government’s priority? Where should that focus? You mentioned that in relation to the G7 and that goal. Marley, you had spoken earlier about local businesses and whether they even use free trade agreements. I wondered, each with a slightly different slant, whether you could comment on whether we should go ahead and pursue a free trade agreement or look elsewhere. How should the Government and Department for Business and Trade prioritise their time?

If we remember the chronology here, Donald Trump offered trade talks almost immediately on acceding in January 2017. Theresa May did not respond and hid behind the argument that, until Brexit had legally taken effect, we could not even begin talks. That was an unusual interpretation of the rules, in my view, and it was not shared by Boris Johnson, who said, “This is nonsense. Let’s get on with it”. Between Boris coming in and Biden coming in was slightly less than 18 months, during which, I understand, two-thirds or so of the chapters were either completed or very close to completion. It is true that that excludes agriculture and some of the more contentious points, but, to repeat, uncontentious does not mean unimportant. In that completed two-thirds are trade liberalisations worth quite a lot of money to both parties. It is a very achievable goal. I have spoken to a number of people on both sides of the aisle in the US, and there is ambition for it there, which is very unusual in the current climate in DC. This is the one trade deal that they are keen on. We are dealing with an Administration that are mercurial. One of the more amusing bits of advice I was given was that Trump will want naming rights. He will not want it to be a free trade agreement. Okay, fine. That strikes me as a very good example of the kind of concession you can make. Call it the “royal Trump wins the deal”, or whatever he wants to call it in the end, as long as we get the kind of access to our single biggest trading partner that we have not had for the last 50 years. The only thing that would really make it impossible is us doing something that much smaller economies do not do, which is to accept somebody else’s regulation legally, rather than on a pragmatic case-by-case basis. It is one thing to say, “If we are selling widgets to Europe, of course let us copy the same standard”. It is another thing to say, “Brussels may regulate our widgets in perpetuity”. Successful small trading countries such as Singapore do not do that. They do not align to the American, Chinese or European standard. They copy them on a case-by-case basis as it suits their interest. If they can manage that, surely the sixth largest economy in the world can do that. This is a case where we should be looking to maximise our interest, and we can do that. I am very confident that this Government could end up getting an improved TCA and simultaneously a free trade agreement with the US. I am quite happy to give them the win if they do. I will be the first to congratulate the Prime Minister. He may not have envisaged this when he was in Opposition, but I am sure he will see the political advantage when he gets there, and good luck to him if he can do it.

I will start by agreeing with Dan that we can do both and should explore both where we can. The priority should be the European Union and improving that trading relationship. The reason for that is primarily twofold. We know that it can give us the biggest boost to economic growth of any free trade agreement or trade relationship that we have going. We are talking orders of magnitude bigger, so between 1.5% and 2.2%, depending on whether we align on goods or goods and services, in GDP growth long term, compared to nought point nought-something for Australia-New Zealand or 0.16% for a US-UK FTA. These are not comparable in terms of the impact that they would have to the UK as a whole and communities across it. Secondly, it is because it aligns with what the public want this Government to do and what they increasingly expect them to do. In terms of the US free trade agreement, of course we should if it is in our interest to do it. The question I pose is that that is going to be very difficult to manage. I know that Dan says that the US is keen on a UK FTA, but the problem is that the strapline is “America first”. The US has just been on a round of imposing tariffs. It may impose more of them, including on us. It has been demanding access to even rare materials from Ukraine in exchange for what is existential support for it at this point in time. I would give a good dollop of caution to any approach for a UK-US FTA, because I do not know what rare earth minerals we would have to give up in exchange for it as well. The priority should be the European Union because the economic benefits are clear to be seen. They align with what the public would like to see as well.

I agree with both that we should be pursuing both. We should be trying both. If you talk to businesses, the message is pretty clear that the challenges they are facing when it comes to trade are about export and import, particularly into the EU. We have very close, long-standing trade relationships. It is pretty clear, just from the evidence and talking to business, that trying to remove those barriers as much as possible should be the priority. The other thing to say with the US is that, as Daniel said, you have a mercurial President. We have a situation where the USMCA, which was negotiated under President Trump, is no barrier to the imposition of tariffs on both Canada and Mexico. Even if we negotiate an FTA with the US, that does not somehow protect us from facing tariffs in the future. It is not to say that we should not try. We should try, I think. Looking at the facts in front of us and what businesses are telling us, it is hard to deny that anything other than the EU is the priority.

I am afraid that the clock is against us and we are now out of time. Thank you to all of our witnesses for what has been an absolutely brilliant start to this session. That concludes this panel.