|David Rees AC||Cadeirydd y Pwyllgor|
|Jane Hutt AC|
|Mark Reckless AC|
|Michelle Brown AC|
|Vikki Howells AC|
|Carwyn Jones AC||Y Prif Weinidog|
|The First Minister|
|Ed Sherriff||Llywodraeth Cymru|
|Piers Bisson||Llywodraeth Cymru|
|Elisabeth Jones||Cynghorydd Cyfreithiol|
|Yan Thomas||Dirprwy Glerc|
|1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau||1. Introductions, apologies, substitutions and declarations of interest|
|2. Sesiwn graffu gyda Phrif Weinidog Cymru||2. Scrutiny session with the First Minister of Wales|
|3. Papurau i’w nodi||3. Papers to note|
|4. Cynnig o dan Reol Sefydlog 17.42 (vi) i benderfynu gwahardd y cyhoedd o weddill y cyfarfod||4. Motion under Standing Order 17.42(vi) to resolve to exclude the public from the remainder of the meeting|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Dechreuodd y cyfarfod am 14:30.
The meeting began at 14:30.
Good afternoon. Can I welcome everyone to this afternoon's session of the External Affairs and Additional Legislation Committee? Before we continue with our agenda, can I remind Members that, if you have mobile phones, please put them on silent or switch them off during the session so they don't interfere with the broadcasting equipment? Also, this meeting is bilingual. If you require simultaneous translation from Welsh to English, that is available on the headphone sets via channel 1. If you require amplification, that's also available on the headphones via channel 0.
We are not scheduled for a fire alarm, so if one does take place, please follow the directions of the ushers to a safe place. We have received apologies from David Melding, Steffan Lewis and Joyce Watson, and there are no substitutes for them.
We move on to agenda item 2, and can we welcome the First Minister to this afternoon's session? We will ask questions relating to the progress of Brexit negotiations and other matters relating to Brexit. First Minister, would you like to introduce your officials for the record, please?
I'll ask them to introduce themselves, if I could, Chair.
Piers Bisson, director of European transition.
Ed Sherriff, deputy director of negotiations in the European transition team.
Thank you very much. Can I also thank the First Minister, obviously, for the correspondence we've had since our last meeting, which has given us some help in understanding some of the processes that have been following on? Clearly, they also lead to questions that we want to explore. Perhaps I'll start off with the simplest ones in the sense that the negotiation process is at a point where it seems to be changing on a daily basis. We hear stories that we're almost there, we're 95 per cent there—I'm sure it'll be 96 per cent tomorrow morning. Can I just ask: in relation to the current position and the fluctuations we tend to have, how often are you updated by the UK Government?
Well, it's as and when, really. At the moment, we have no real understanding of what the final deal might look like. We've been proactive in putting forward our own policy positions. We've done that, of course, with the different White Papers that we have published. There is involvement in the negotiations in the sense that we have pressurised the UK Government to make sure that we are involved. We have the ministerial forum, and that's met now five times. We know that there have been discussions to look at how we move on to agreeing the future relationship with the EU in the future. The engagement has improved since March of last year, no question about that; at that point it was very, very difficult indeed. We do need greater involvement.
I think one of the issues that needs to be resolved is that the UK Government sometimes takes the view that international relations are not devolved and that, therefore, we don't need to be consulted on issues that are international issues but which nevertheless have an effect on devolved areas—health being one, for example. Any reciprocal agreement, for example, with another country or countries over health cover is an international agreement but nevertheless has to be implemented by devolved administrations, with the cost that may come with it. So, even where something is not strictly devolved, nevertheless there can be a direct effect on devolved areas, without there being a proper level of consultation. So, it's improved, but it's always difficult to get the full picture. With the withdrawal agreement Bill, for example, it's very difficult to understand what the overall structure of that will be because we just have snippets.
So, could it be better? Yes. Has it improved? I think it's also fair to say 'yes' as well.
Can I ask another question? You say it has improved but it could be better, but how much notification, how much involvement was there with the Welsh Government up to the October Council meeting? Clearly, that was a very crucial meeting. It was going to be where originally everyone thought a deal would be done. We're still not there yet, but were you involved in preparatory discussions for that meeting?
No. We get little notice. We obviously give our input in terms of what we think should happen, but the reality is that we don't know beforehand what the UK Government is going to do in terms of any future deal. So, we have read in the newspapers what might come out of the negotiations this week, but the UK's position has not been shared with us, so we don't know what exactly the UK's position is.
But surely that's then putting you at a disadvantage because if you are preparing for various scenarios, as we know—we've asked you very many times—the closer we get to an end date of 29 March, then it's going to be far more difficult for you to actually put in place schemes or projects to ensure that you're able to deliver and continue operation post 29 March.
Yes. Obviously, we have the EU transition fund, which we've put in place, which is there regardless of the type of Brexit that we will get. We've been working in other areas, for example over the issue of the ports, but, yes, it is very—. We don't know whether it'll be a 'no deal' Brexit, we don't know what the nature of the deal will be, if there is a deal, and some of the work that we do will apply to all scenarios—the transition fund is part of that, but clearly it's very difficult to put in place a comprehensive set of measures to deal with Brexit until we know what Brexit will actually look like.
It's a bit worrying in a sense that here we have a Welsh Government that's trying to put together plans for Brexit and is not necessarily being told exactly what the UK Government's position is going to be. As you've highlighted now, we're hearing that the next Council meeting might be on 21 November—it's pencilled in for the twenty-first of this month—and we're less than three weeks away from that. Does it give you confidence, post the withdrawal agreement—and let's assume there is one—that you will have a bigger say in trade discussions? Because when George Hollingbery came here, to us it became quite clear that you wouldn't.
I've always said that a Brexit done badly carries with it the seed of the UK's own disintegration. If there is a feeling that Scotland and Wales and Northern Ireland are not being consulted properly, I think that has implications for the union, and it doesn't have to be that way. Of course, trade is not devolved, but nevertheless we have a significant interest in what trade agreements might mean. Let's say, for example, a trade deal was done with a country with a significant steel industry—well, clearly, we'd have a very strong view on how that would operate, even though it's not actually devolved. I always think that, in order for agreements to last, it's best to get the widest possible buy-in. So, even though, again, this is not a devolved issue, it's hugely important from a practical perspective to be able to come forward with an agreement that's supported by all.
Yes, I think your response today confirms our concerns about the fitness of inter-governmental structures, and of course we have asked many questions, and indeed there is a review, a Joint Ministerial Committee plenary review, of existing inter-governmental structures that was initiated last March. Do you feel the Welsh Government has any traction in being able to influence this review, and what do you expect the review to deliver? Clearly, this is crucial for us, not only in terms of leading up to this position we're in today, but in terms of the authority and credibility and the respect that the UK Government has for the devolved nations.
Well, there is a review that's ongoing into inter-governmental relations. It was commissioned last March. We have been involved at official level in the work streams of that review. There are three aspects that are being looked at. The first is the development of a new set of more robust principles for the conduct of inter-governmental relations. Secondly, a better dispute resolution mechanism. And, thirdly, how things will work in the future on internal governance and international engagement.
Now, the current system is clearly unsatisfactory. Part of the problem is that I think it's very difficult for the UK Government to acknowledge the Scottish and Welsh Governments as equals in devolved areas. I think that's a difficult step for them to take, and so as a result we have this dispute resolution process, which I think I've mentioned to Members before, where, if there is a dispute between the UK Government and a devolved administration, the dispute is resolved by the UK Government. The £1 billion that was given to Northern Ireland—both ourselves and the Scots raised the issue as part of the dispute resolution process, the formal process that exists within the JMC, only to be told, 'Well, there is no dispute. We don't accept that there is a dispute at all, so therefore we can't even start the process, because what you're suggesting exists doesn't actually exist in the first place.' Clearly, that's not a satisfactory way to conduct things in the future.
Now, in terms of the timescale, the final report is expected to be given to JMC plenary in March of next year. There will be a progress report before then. I don't know whether it will be for me or my successor, but there will be one before then. It would help if we had an additional JMC plenary before the end of the year, bluntly, just to see where progress is being made, because my great fear is that we'll end up with a kind of system of a beefed-up memorandum of understanding—a system where the UK Government still retains, effectively, a veto when it comes to the dispute resolution process. So, we need something quite fundamental to change, not just tinkering at the edges. And, of course, Members will know I've suggested a council of Ministers that looks something like a mini version of the European Council of Ministers, and particularly a council where decisions can be taken. The JMC doesn't take decisions, but we do need a forum if we're going to preserve the internal market of the UK and be fair to the devolved nations of having a system where decisions can be taken jointly. And that, really, is what the inter-governmental agreement recognises: there will be some powers that will be held in the larder, or freezer, according to your preference, that no Government in the UK will touch until such time as all are agreed how they'll be implemented. That is, to me, a sign that it is, implicitly at least, accepted by the UK Government that there needs to be a council of Ministers that will take those decisions jointly.
You've just mentioned the JMC plenary for March, and you think there might be one before that, but you're not sure when; have you been given any notification that there might be a JMC plenary if a deal is struck, because, clearly, if a deal is struck, I would have expected the UK Government to call a JMC plenary?
No, we haven't. I suspect that they will prefer to deal with the issue on a bilateral basis, in having discussions with each individual—well, both of the individual administrations separately. There's nothing wrong with that, but I don't think that should take the place of a formal JMC. Now, we have a British-Irish Council this week; that's very different. There will be meetings in the margins of that council, but it's not the same as having a formal JMC plenary. But nothing is pencilled in as yet.
Is that concerning you, because everything we've talked about—? All the times we've talked about this, it's always been as if discussions with the devolved nations are a secondary thought of the UK Government.
Well, the JMC plenary doesn't meet that often anyway. It's usually been annual. It's nowhere near frequent enough, there's no question about that, and it's tended to be a forum where complaints are raised. Now, that, to me, is not the most effective way of conducting inter-governmental relations. I'd like to see a JMC plenary meeting, probably, twice a year, I'd say. BIC meets three times a year, I think it is, but more frequently, certainly, than annually. And we need to have—if we're going to move to a system where we have a formal council of Ministers, that's going to have to be quarterly or at least every six months. An annual meeting just won't do.
Okay. I just wondered because, again, we are in a situation where we are approaching a possible deal, a possible withdrawal vote—a vote in Parliament on a withdrawal deal. How has—the UK Government's position, has it moved more towards the Welsh Government's? In 2017, you published the paper 'Securing Wales' Future'—how much has it now moved towards that and are you more satisfied that you can see a better situation for Wales than you would have seen 18 months or two years ago?
Well, I would argue the position that we outlined last year was more coherent than anything we saw at that point, or perhaps since, from Whitehall. The UK Government has moved to our position, but it hasn't adopted our position, so there's still work to do. They've recognised the importance of ensuring that we can access the people that we need to keep our economy going. They've acknowledged the position in terms of a migration policy for the future. They've understood the need for the fullest possible access to the single market. They've, it is said, gone some way to looking at the possibility of a temporary customs union. But none of these things have been confirmed. We have to wait and see what the final agreement looks like.
Thank you, Chair. Looking at Brexit legislation, on 11 October we took some evidence from Robin Walker MP, who said he estimated there were about 800 statutory instruments overall that the UK Parliament will need to look at, and about a quarter of those are relevant to the devolved administrations. With figures like that, First Minister, are you confident, or is the Welsh Government confident, that all Brexit legislation, including UK and Welsh legislation, can in fact be passed in time?
Well, I can't give any guarantees regarding UK legislation—that will be a matter for the UK Government to deal with. It's challenging, as far as Wales is concerned—no question about that—extremely challenging, in fact. Now, at the beginning of this process, we knew there would be hundreds of SIs that would need to be dealt with. The decision that I took was to reverse the normal course of events, which would mean that, usually, if there is an SI proposed on an England-and-Wales basis, I've always said, 'No, no, you do it on a Wales basis—England-and-Wales is going to disappear over time.' However, because these circumstances are exceptional, the decision that I took was that we would be content to allow the UK Government to legislate in devolved areas—with our consent, obviously—if we were talking about highly technical and non-controversial matters. Where there was no policy divergence and no likelihood of one, and where the matters being dealt with were exceptionally technical, then we have said to the UK Government then they can take forward legislation on Wales's behalf.
Now, in terms of figures, we think there'll be around about 55 SIs made by Welsh Ministers; 150 will be laid by the UK Government in Parliament in areas that are devolved. The question might be: 'Well, why are there three times as many that will be dealt with in Westminster?' Quite simply, they're technical and non-controversial. For us to do them ourselves would simply replicate what's already happening in Whitehall, and would eat up valuable legal time and policy time when, in fact, there was no policy objective involved. So, we've had to be pretty ruthless in terms of the way that we've approached this, and that's why I've reversed the normal approach that I've always taken—that we should make our own legislation unless there are exceptional circumstances that dictate otherwise; these are exceptional circumstances. But anything where we will see that there is or might be a policy divergence, anything that needs to have a specific Welsh approach, then we will take that approach.
Agriculture is—. A lot of it's technical, and so we will be happy for the UK Government to deal with that. There are a number of—. In agriculture, there are lots of different SIs that deal with foodstuffs from particular areas of the world, that deal with, for example, the size of fish that can be taken, where, in reality, we would be in a different position from the UK Government. But, in terms of us being able to dictate our own agricultural policy within a common framework, a common UK framework, then, as far as those SIs are concerned, we would make them ourselves. And we have to, because the reality is that the payments system in Wales is different anyway, so the UK Government couldn't legislate for either England and Wales or the whole of the UK for agricultural payments, because there are four different systems in place.
Thank you. How do you respond to the fact that the Assembly will not be able to scrutinise statutory instruments passed by the UK Government in devolved areas?
True. It would mean, of course, that the Assembly wouldn't have the ability to scrutinise that it would normally have. That's why we've tried to strike a balance between what the Assembly would certainly want to have a view on—namely a policy that will be different, or policy divergence in the future—and the completely technical legislation that really, I suspect, wouldn't need scrutiny as far as the Assembly is concerned. I remember a time—. Jane Hutt is here; she will remember that back in 1999 we used to scrutinise all manner of things that would come to the floor of the Assembly that, really, were not controversial at all but, nevertheless, they had to come to the floor of the Assembly.
But it is important that Members are aware of what is happening. The Assembly can, of course, hold Welsh Ministers to account for the approach that we take to SIs being made by the UK Government. The Constitutional and Legislative Affairs Committee is reporting, I understand, on these matters anyway and, of course, we have worked with the Business Committee to put new procedures in place to deal with UK SIs that amend devolved legislation. And, of course, consent—. To use the constitutional phrase, consent will be normally needed when it comes—and, so far, it's been sought anyway—to amending SIs that impinge on devolved areas.
One more thing: where a UK SI amends primary legislation within the Assembly's competence, there will, of course, be a consent memorandum laid in accordance with Standing Orders.
Thank you, and one final question from me on this section. In the event of a 'no deal' Brexit, what further legislation would we need in Wales, and do you believe the Welsh Government has the resource and capacity to undertake that work?
We haven't identified any new legislation that would be needed in the event of a ‘no deal’ Brexit beyond what we're already aware of as a result of Brexit as it stands. Bear in mind, of course, that existing legislation will continue, regardless of where it originally came from. If it's on the Welsh statute book, it's on the Welsh statute book, and it's a matter for the Assembly to decide what it wants to do next. There's no doubt that the quicker we can understand what a deal looks like then the easier it will be to get all the legislation passed that needs to be passed, but, as far as we can see at the moment, the deficiencies in law that will need to be corrected are true whether there is a deal or whether there's no deal.
First Minister, I believe you said that we should have a vote in the Assembly on any Brexit deal. Can I ask what you envisage and what the procedure for that would be?
There will be a vote. I think that's hugely important. The question of what such a motion would look like I think would need further discussion, but I've always taken the view that the agreement should be scrutinised as part of the Assembly in Plenary. The Member will have heard me say this before; I always took the view that any agreement should be confirmed by the Parliaments, plural, of the UK and not just Westminster, because there are so many devolved areas that are affected. So, yes, there will have to be a debate.
How will the Northern Ireland Assembly be able to approve that, given it's not there currently? But also if it needs bipartisan support from both—
It can't, is the simple answer. At the moment, Northern Ireland is under direct rule. So, it's right to say that, while the Assembly is not in existence, the people of Northern Ireland don't have a say, unfortunately. We all hope that that situation will be resolved at some point in the future, but, no, it would be Scotland and Wales at the moment because they're the only two Parliaments that are in existence outside of Westminster.
You said before that the United Kingdom could—I don't want to exaggerate what you said—break apart or at least there'd be issues about the future unity of the UK if devolved administrations weren't consulted. What about if different nations are treated differently, as is currently proposed for Northern Ireland? Does that not raise issues for Scotland or potentially Wales within the UK?
Northern Ireland's always been different, in the sense that it has a land border—always has. Devolution occurred first in Northern Ireland. Some have suggested, for example, that Scotland can have a similar deal to Northern Ireland—that just shifts the problem to the border between England and Scotland; it doesn't deal with the issue of the border in Ireland. I think we have to be flexible as far as Northern Ireland is concerned. When it comes to biosecurity, for example, Northern Ireland is different; it's part of the island of Ireland in terms of biosecurity. Therefore, there are checks on animals and food moving into Northern Ireland from GB. Similarly, the energy market is an island-wide market on the island of Ireland, so Northern Ireland is a little detached from GB in any event.
For me, what's hugely important is we move pretty swiftly to a situation where there is no room for grievance. What does that mean? Well, there needs to be set up, as I mentioned before, a council of Ministers where we all have a voice. It can't be an equal voice in terms of voting, and I know that Mark Drakeford has suggested a weighted voting system to reflect the size of England, which I think is perfectly sensible. But if there's any suggestion that Westminster is accreting powers to itself or running over the smaller nations, I think there are dangers there. At the end of the day, the UK is a union, just like the EU is a union. It's older, no question about that, but it's still in many ways a multi-national union. It's a union of support. That's why I think it's hugely important that this is done—that we recognise that the UK has to change in order to reflect its constituent parts and in order for people to feel that they're being listened to.
The vote here on the deal, do you envisage that happening before or after the meaningful vote in the UK Parliament?
We'll have to look at the timing. It'll certainly have to happen before Royal Assent—no question about that. The timing in Parliament is pretty tight, but I would anticipate—. There's no reason why—
Yes. There would have to be a vote before then. Now, for me—
Well, it's in the Bill. The problem is we've only seen small bits of the Bill so we don't know yet the extent of what we're being asked to agree to. Well, to my mind, once the agreement is known, I see no reason why there can't be a debate on the agreement. It may well be then of course that there would have to be a debate on the Bill as well, if the Bill contains issues that weren't anticipated at the time of the agreement. But it is hugely important that the Assembly is able to have its say.
So, are you envisaging two votes, or may it be that we have an LCM on the withdrawal agreement Bill and that constitutes our vote on the deal?
Well, I think what's most likely, and this is not really something for the Government to do alone, but what is most likely is that, once the details of the agreement are known, Members might feel that there's a need, at that point, for a debate. There will then also have to be, of course, an LCM debate on the Bill itself. So, inevitably, there will be two debates, one of which would be a formal debate on the LCM, and the other, I'm sure, would give Members the opportunity to express a view on the withdrawal agreement when it's known.
And if there is a withdrawal agreement and a withdrawal agreement Bill in Westminster, what involvement do you envisage Welsh Government or you personally having with that process?
Well, it's a shame in many ways we haven't been part of that process as fully as we would want. Now, I can understand—we know the way that politics works; I can understand the UK Government being reluctant to share confidential information on its negotiating position, even though there's no way we would share that with anyone else, because do that once and you won't get anything else in the future. But it's also meant that the input and, I believe, expertise that we have hasn't been fully utilised in the way that it might have done. And so we've been informed of what's going on, but we've not been given the opportunity to influence discussions beforehand. Being told afterwards what's happened is not the same thing. It's not consultation, it's not the same thing as being offered the opportunity to express a view on something that's proposed. I think the danger then is, of course, if there is a deal, and the deal's acceptable, there will be a need to build a coalition of agreement around that deal. But it's not helped if the deal's presented as a fait accompli at the end of a process that we should have been involved in from the start, in a more meaningful way.
And is the Labour Party's position that it will only support a deal that gives the exact same benefits as the current single market and customs union arrangements?
I can't speak for the UK Labour Party, but I can say, as First Minister of Wales, we've always said that we'd like to see a deal that gives us full and unfettered access to the single market and, to us, a deal that sees us remaining in the customs union.
Well, I—. I can't see a better alternative. From my perspective, if there were to be a temporary customs union without a date set, well I think you could live with that. Because I think what's important is that the UK takes a decision to, if it wants to, leave the customs union at a time that's right for the UK and not at a time that's just dictated by a particular timescale. You asked me my opinion. I would stay in a customs union on an indefinite basis at the moment, because I can't see what the better alternative would be.
So, those of us who don't wish to stay in a customs union indefinitely—. Doesn't that imply that such people would be wiser not to support an agreement that would keep us in temporarily, in a way you and others on your side of the fence might wish to then make permanent?
That's a matter for them. I can't advise those in other parties and one or two of my own which way they should vote. I think we have to see what the agreement says, first of all. We will be open to the agreement; we'll see what the agreement says. But, clearly, we would want any agreement to reflect the principles that we've outlined now for nearly two years.
I'm not. I just see what I read in the papers, which suggests that there will be. I'm very wary when people say, 'Well, 95 per cent of the way there.' The reality is that you have to be 100 per cent of the way there. There's no point saying, 'Well, we're going to fly to Germany, but we'll get 95 per cent there and then we'll land.' It's not the same.
So, I suspect—I don't know, but I suspect—that the issue that has caused the greatest amount of difficulty is Ireland, which I've mentioned many, many times over the years, and I think it's trying to finesse a solution around the Irish border—or, if you're Irish, the British border—that will be acceptable to both sides. I suspect everything else is probably easier. But it's that issue and that, of course, is where a proposal for a—call it what you want—customs partnership, temporary customs union comes from, to allow more time for that issue to be resolved, at the very least.
Yes. Isn't what—? My last question, Chair. To resolve it, isn't what's really required with that goodwill and co-operation on both sides? And, initially, after the Brexit vote, there was quite good discussion between UK Government and the Republic Government at a technical and official level as well to try and seek solutions. But the backstop and the involvement of that in the withdrawal agreement, rather than the future trade agreement—that seems to have stopped. Would you be happier seeing this issue addressed in the future trade negotiations, with goodwill on both sides, rather than trying to bottom it out now?
I don't think it can be. I think that you have a real problem while you have a completely open border. It's not a border with Ireland, as it were; it's a border with the EU. And certainly, the indications I've had in discussions with Brussels is that the EU sees Ireland as a back door to the EU. I think their greatest fear is that the UK has some kind of agreement with other countries that allows products that are not manufactured to EU standards to leak into the EU via Ireland. That's where they come from. It's hugely difficult and not obvious to me how you can have an open, unpatrolled border but have different customs arrangements on either side of that border. I don't know of anywhere else in the world where that scenario exists. Every other country where there is a difference of that magnitude has a border where there are checks—of various different levels of magnitude, but they're still there.
But we manage it now with different value added tax rates, different excise rates, different immigration arrangements.
Yes, but we're in the same trading zone. For example, let's take the oft-used example of hormone-reared beef from America—not allowed into the EU. Let's say, for example, the UK took the decision in the future to allow it into the UK, well, how then can you stop it coming into the EU via Ireland? The EU will say, 'Well, how do we stop that happening?' Of course, at the moment, it's not going to happen, because the rules are the same on both sides of that border. That's the difficult bit. I mean, you could do it on a—. People say, 'Well, you could do it through checks, and paperwork and intelligence', but the reality is, there's no real way of stopping it without there being some kind of control on that border, if you have such different arrangements.
But isn't the reality that they're not concerned so much, or solely, about it coming into Northern Ireland, but want to prevent it coming into Britain so we continue to have to buy that beef at a higher price from the EU, and largely Ireland, as we do now, rather than being able to buy it more cheaply from overseas? Isn't that actually the self-interested economic argument that Ireland and the EU have in this debate, as well as the issues we've discussed around that?
But bear in mind that's in our interests as well. If we're saying what we want to do is to import cheaper foodstuffs from other countries without any restriction, well, our farmers aren't going to compete with that. Our agriculture industry is in the same position as agriculture everywhere else in the EU. It's no different. It's no more sustainable. It's not less sustainable. And if we were to allow unrestricted flows of food—quite often of a far lower quality, produced to far lower standards at lower cost—into our market, our farmers wouldn't compete with that. They couldn't possibly do it. So, we have to consider that very, very carefully. I don't think it is a case of inferior products coming into the UK and then into the EU that's the issue here. I think it's more a case of the UK avoiding being in that position in the first place, and I've always been very, very wary of the argument—. If you read the 1983 Labour Party manifesto for the general election, it says,
We will pull out of the European Community and we will buy our food on the world market where it's cheaper.
But you do that and you create immense problems for your own agricultural industry, because they'll never be able to compete on price; it's not possible. The price of land in the UK is far higher than in many other countries. Environmental regulations in other markets are non-existent, and their climates are different. Take lamb in New Zealand, on the north island, the grass grows all year round, they don't have to worry about providing feed in the winter. If you look at the animals' growth, they're far bigger, and it takes as much to process a larger animal as it does a smaller animal. And they operate without subsidy, because the price of land is also very low. We can never replicate that in the UK, and we should think very carefully about opening our markets in such a way that will lead to a detrimental effect on the rural areas.
Can I take you back to the withdrawal agreement Bill, which you mentioned in your earlier answers? You also highlighted what I consider to be perhaps a lack of trust by the UK Government, because it wouldn't provide confidential information to you. Do you have, therefore, confidence that if a legislative consent motion is passed or not passed here—whichever way—that the consideration of this Assembly would be taken into account by the UK Government, based particularly on the fact that they actually ignored the Scottish LCM on the withdrawal Bill?
Well, it should, but I can't guarantee it. We know, at the moment, of course, the Supreme Court is considering this issue as part of the discussion over Scotland, and Scotland's reluctance to give consent—as we have done—to the inter-governmental agreement. Of course, constitutionally, the UK Government can do what it wants, which is not, I'd suggest, the best and most sustainable way of dealing with things in the future. So, I don't know. Nobody can know that answer as to whether they would take the notice of an LCM that we would want them to, because, constitutionally, we know that they can—well, legally, rather—legally, we know they can ignore it.
And we have not yet repealed the Law Derived from the European Union (Wales) Act 2018. Are we still waiting for the decision of the Supreme Court for any actions on this?
No. I would argue we've actually protected ourselves because we have an agreement in place. We could have not agreed; we could have ended up in the Supreme Court. But what happens if the Supreme Court then says, 'Well, actually, the UK Government can do this'? The Scots have no agreement. We have an agreement. I suppose the UK Government could terminate the agreement, but that's a sign of bad faith straight away, and I've said before that we have an agreement and the UK Government and ourselves have to live up to the terms of that agreement. So, in Scotland, if the UK Government is successful in the case—. And it's made different arguments. The Advocate General for Scotland suggested that anything to do with the EU was automatically reserved and outside of devolved competence, which would be a massive restriction on the competence of the Assembly, and, indeed, of the Welsh Government. That isn't the view of UK Government Ministers, but that's one of the arguments that were advanced in the Supreme Court. But we will have that agreement, and if the UK Government was to pull out of that agreement, again, that would be something that—. I think it would be seen as a sign of extreme bad faith.
Okay. And before we leave the issue of law, at this point, if there is a deal, or whichever, we leave on 29 March. If we have a deal, there's a transition period during which we'll be abiding by EU law, and EU laws that are made during that transition period. Have you yet established a strategy as to how Wales may have some form of influence in relation to how EU law will apply, in the sense of implications for Wales?
It is true to say that in the transition period we will be subject to legislation that will be made in Brussels, over which we have no say, but then, that's going to be true whatever happens, because Europe is our biggest market, and, as I said before, 60 per cent of our exports from Wales go there, and 90 per cent of our food and drink exports. If you want to sell into a market, you have to play by its rules. And so, it is inevitable that exporters to the European single market will have to follow the rules of the European single market, in the same way as people would expect those who want to access the UK market to follow the rules of the UK market, the difference being, of course, that we'll have no influence over those rules as we do now.
In terms of what we will do, we have our office in Brussels. It'll stay there, obviously, because it's hugely important for us to have a presence in one of the world's biggest markets, and we'll seek to use our influence—we've done it in the past—to see what can be done to ensure that legislation's passed that isn't inimical to Wales's interests. In some ways, actually, we'll have a little bit more freedom, because, at the moment, we make the case for Wales in Brussels, but we have an agreement with the UK Government and with the UK representation to the EU that we don't do anything that directly undermines the UK. That won't apply in the future because UKRep won't be there in the form that it is now, but we will continue to have a presence in Brussels.
Does that mean you might actually make representations that are not in line with the UK Government's position?
We've done that in the past—not directly contradictory to the UK's position, but taking a slightly different position. We've not had public rows with the UK in Brussels, but we have gone to the Commission in the past, particularly with agriculture, and said, 'Look, this is the situation in Wales. This is why we need to have a little bit more flexibility to do things differently.' Well, there's no reason why we can't continue to do that because the reality is, of course, that the Commission is not obliged to listen to us at all because we're not a member state, but it does, and it has had meetings. I've met with Michel Barnier twice. It will meet with us, and I hope to see that situation continue in the future, where our officials are able to meet with Commission officials.
And you're in the process of making sure that position is strengthened in Brussels. Because, as you say, no matter what happens, come 30 March, there's going to be a different sort of position of the UK to the EU 27.
Yes. We would expect to have a presence in the world's major markets as we do with the US, as we do with India, as we do with China, and as it will be with Europe. Even if we're not a functioning part of that market in terms of its operation, it's still going to be a huge market, and it'll still be an important market, which is why we need to have representation there.
Okay. Moving on to preparedness now. As I said earlier this afternoon, thank you for your letters of 1 and 2 November in relation to preparedness. One of the questions I want to raise is about the technical notes, which we know came from the UK Government—four tranches of technical notes. Last time we met, you were talking about how perhaps you would be looking at supplementing some of those. Have you now supplemented any of those technical notes and, if so, how are you then cascading that information out to organisations?
The first thing I have to say is that the 'no deal' scenario cannot be guarded against. There can be an element of mitigation, but that mitigation can't be total. We've seen from the technical notes that there are—. When I read them, it made me feel as though I was looking at preparations for war, such were the things that were being dealt with: the shortages that might be created; the inability of goods—. It was almost as though we were going to be at war in the next few months and we had to batten down the hatches.
We have worked with the UK Government on those notes. What have we done? We have the transition fund, of course, which we've already announced—£50 million. That's helped businesses and other organisations to help to make the transition. We also have the Brexit business portal. About 100 businesses have become involved with that portal and used it to take advice and prepare for the future. So, the structure is there, but, of course, the difficulty is that, because we don't know yet what Brexit will look like, businesses are saying, 'Well, okay, we can try and plan for different scenarios, but we don't yet know which one will be the scenario we have to plan to.' So, those are two examples of what we've put in place already to help businesses to adapt, particularly those, of course, who either sell into the European single market or source materials from the single market, and they're equally as concerned at the moment because there's a lack of certainty around it.
We appreciate that lack of certainty and the 'no deal' scenario, and I also appreciate the Welsh Government position is it doesn't wish to see a 'no deal' scenario because it's the worst of all cases, but, for the last few months, clearly it's been a dominant thought in many people's minds as we're not yet reaching a deal on a date by which we were told we would reach a deal. So, it is important we clarify the Welsh Government's preparedness if that does arise and how you can help businesses, as you say, mitigate to make the best possible of the 'no deal' situation. Again, I didn't get an answer, I think: have you supplemented any of those 'no deal' technical notes and, if so, how are you cascading them down?
Well, I think I gave two examples. They are the transition fund—
How are we—? When you say 'cascading down', do you mean—
I think many people already know. I mean, they're UK Government notes, they've been very well covered in the media, and people have seen some of the doomsday scenarios that those notes have included. What have we done as a Government? Well, we are obviously working very closely with stakeholders to understand from them what problems particularly they've identified. We have reviewed and sought to improve the UK Government's technical notices. Some of them don't provide much information on what the outcome would be of a 'no deal' Brexit, so we've tried to draw on other sources of information, particularly from sources within the EU, about what no deal might look like.
Well, no, we're not going to publish separate notices. I don't see what purpose that would serve, because I think we'd be doing that for the sake of it, and I think, at the moment, people need to understand clearly what is at stake here but, where that's been necessary, we have supported stakeholders with additional guidance that supplements the UK Government's notices. For example, we've done it in relation to health, we've done it in relation to the Welsh European Funding Office stakeholders as well, and we'll continue to do that as and when we need to do that.
I'd argue that more important than producing notes is the dialogue we are having with different groups as part of the work on Brexit. For example, there's the environment and rural affairs round-table stakeholder group that was convened soon after the referendum itself. There's a health Brexit group as well. Rather than saying, 'Look, here's a set of notes that are different to the UK Government's', or identical, what we're saying is, 'Let's sit around the table on a regular basis and then work through the issues so that you're aware of what might happen and what problems might result.'
Before I bring Mark in with some questions, you've mentioned the two—the health one would have been set up in September, I think, wouldn't it?
The health Brexit group? Yes, recently—September. That's right.
It's good to hear that, for some stakeholders, you are engaging in providing supplementary guidance. But if I've understood you correctly, that guidance is not published, and will presumably rely on you having contact details and being engaged with particular stakeholders who have a need to have knowledge. The UK notes, though, have been published and are available for everyone to look at, but in devolved areas those technical notes are having the UK Government saying what to do, either explicitly or implicitly, for England. For people who are interested in what to do in Wales and aren't one of the stakeholders you happen to have spoken to, are you simply saying, 'Look at the UK notes, and for "Wales", see "England"'?
No. I think that's the scenario I identified earlier on, where we need, in devolved areas, to produce our own additional guidance. If a technical note is in an area that's not devolved or where there's no policy divergence, there's no need to reiterate that. But, indeed, in areas that are devolved, that's the sort of work that we're doing. If we look, as I mentioned, at the environment and rural affairs, that's been running for some time, working with stakeholders, and the same thing now will happen with health.
You did ask a question about what can be published. Piers, any comment?
So, where we have put some things out, I'm happy to take that back to colleagues and check whether those things will be put more into the public domain as well. Obviously we've tried to communicate directly with those parts of either the health service or stakeholders and WEFO, who were running the projects themselves. We're more than happy to consider, back with colleagues, as to whether there are any things that are sensitive or would preclude them being made more publicly available.
Thank you. If I move on to ports, obviously we've discussed ports for a long time, and the First Minister's fully aware of the issues of the Irish sea becoming a border, and the consequences on Welsh ports, particularly the capacity within Welsh ports. I visited Northern Ireland last week, and perhaps it was something simple, but it came to light that, of course, a lot of the traffic across Welsh ports goes on to Northern Ireland. It's not just purely to the Republic of Ireland; it goes through Dublin and then to Northern Ireland as well. As such, there may be a lot of problems, possibly, at our ports if we do not have some form of deal that allows that smooth flow. Have you now as a Government with responsibility for ports worked with the UK Government, particularly HMRC, in relation to customs arrangements and border arrangements in the situation of a 'no deal'? Are you now ready to be in a position where you can actually not have a problem on 30 March?
Well, the difficulty is we don't know what the scale of the problem might be. In terms of what has been done in terms of discussions, yes, it's true to say as far as Holyhead is concerned that we're responsible for the port, but border control and customs is the responsibility of the UK Government. Now, what the UK Government said to us is there would be no increase in checks for incoming traffic on day one. That will help to smooth the situation. So, we know that it won't happen from the first date. We have been working with the UK Government, particularly through the border delivery group, to develop an approach in what are difficult circumstances, no question about that.
The difficulty for us is, of course, that this would be a situation created by the UK Government that the Welsh Government would have to pay for, if there is a need—and it is an 'if' at the moment—for extra capacity in Holyhead. Now, what would that look like? We know the common travel area would be maintained, so passport control, immigration control wouldn't be needed. There might be, on a 'no deal' Brexit, the need for customs checks. Now, we've been there before, in the sense there were customs checks in the Welsh ports before. They were random, they weren't checks that were carried out for every single vehicle, as they are in airports. Customs checks are carried out on an intelligence basis. So, there's no need, even if, for example, the worst scenario was to be realised, and there would need to be some kind of customs boundary in place, for every single good to be checked, to my mind. It will still be done on a random basis, in the same way that no airport can possibly check every single passenger that comes in through that particular airport. I don't anticipate, certainly in the early stages, that there would be a traffic problem. It's more difficult in Dover than it would be with the Irish ports, but these discussions have taken place with the border delivery group.
Why should we be treated differently from Dover, because if there is a border in Dover, there is surely a border between the EU and Holyhead?
But Dover would have immigration control, which Holyhead wouldn't, because of the common travel area. All right, it's probably right to say that most of the delay would be caused to goods rather than to people, but Dover inevitably would have a higher level of checking than Holyhead would. Also, of course, we know that there is a history of people using Dover and the channel ports to enter the UK in a way that hasn't happened to anything like the same extent in Holyhead. So, the potential for checks in Dover is much, much greater, I'd argue, than it would be in Holyhead.
I understand the immigration question, but you could have the same level of checks on goods in Dover and Holyhead effectively.
If it is the case that there is a customs boundary between Britain and Ireland, and between Britain and France, then I'd expect the approach to be the same. You can't check every single vehicle; it's impossible. So, I would expect the approach in Dover to be the same as the approach in Holyhead, namely that there would be random checks, there would be intelligence-based checks. That's been the situation in the past, and there's no reason why that shouldn't happen in the future. I don't think we'll see a situation where every single individual will be checked to make sure they haven't got two bottles of whisky rather than one. That's just not physically possible. It wasn't physically possible even before the days when the single market was actually created, in the 1990s.
First Minister, you are saying that, essentially, for goods, we should go back to how things were in 1992 in terms of just taking up and applying what the process was back then, both in Holyhead and in Dover.
Well, I'd rather see us stay in the customs union, of course. That would resolve the issue and resolve the issue of the border in Ireland. If that isn't going to happen—and it may or may not—then, I wouldn't anticipate going to a situation where there were physical checks on every single vehicle entering the UK. They weren't there before; there'd be no reason why that should happen in the future. What's difficult to quantify, of course, is what effect that might have on the flow of traffic through Holyhead. It didn't cause huge problems in the early 1990s because of the randomness of those checks. We simply have to wait and see what approach the border agency might take and what approach HMRC might take.
How much benefit is there to the economy of north Wales of the traffic through Holyhead? Are drivers stopping and spending money? Are businesses locating there to benefit from the port, or is traffic largely coming through without spending associated with it?
It's both. I mean, 70 per cent of the traffic between Britain and Ireland goes through Welsh ports. Holyhead is the busiest, with significant amounts of freight and people. Fishguard tends to be the movement of people. Pembroke Dock has a strong business in terms of freight. So, there will be some operators who are based near Holyhead—transport operators particularly because it's easy for them to get to Holyhead. There will be some operators who will be based elsewhere but will nevertheless come down the A55 and use Holyhead. But, of course, what they do is that they stop on the way and, at a micro level, they will buy diesel, they will spend money in garages—they will all add in their way to the local economy, in the same way as there will be people travelling across to Ireland who will stay overnight in Wales before they travel across. So, if Holyhead is seen as more difficult to go through, then there is a chance that that might have a negative impact on the economy. But, of course, if it was the case that people saw it as easier to go through the Scottish ports into Northern Ireland, and if, I suppose, people lived closer to those ports, they'd use them. But there is still a deterrent in terms of having to drive all the way to Scotland to cross into Northern Ireland rather than going through a Welsh port if you live in the southern part of Britain.
And on the third Menai crossing proposals, the cost of that will be borne by the Welsh Government, yet what proportion of the benefit would you expect to accrue to Ireland rather than the UK if there were—?
Well, it would be our cost; it's our road, in the same way as other cross-border routes have to operate. For example, the UK Government might say, 'The Severn bridge is a bridge that enables people to travel to England and Wales, so you've got to pay half the cost of it'. They haven't done that. So, in the same way as the Irish might argue, 'Well, if we're building infrastructure in Ireland, that's to the benefit of the UK because so much freight goes into the UK', I think we just have to say, 'Well, yes, the third Menai crossing is going to be important; we'll have to pay for it.' We are looking at whether it's possible to talk to the National Grid to see if they will put their cables over the bridge, which will help in terms of the cost, but, of course, there's also a huge benefit to people who cross that bridge every day between Anglesey and Bangor, for example. We do know that the A55 is a major artery not just for north Wales, but the whole of Wales, and to have it go down to a single section, which is what it does as it crosses the Britannia bridge, is not going to be sustainable for the future.
I want to take a five-minute recess, if that's okay with the First Minister. Therefore, I'll go for a break for five minutes.
Gohiriwyd y cyfarfod rhwng 15:25 a 15:31.
The meeting adjourned between 15:25 and 15:31.
Can I welcome Members back to this afternoon's session? We continue our evidence session with the First Minister. Mark, did you want to continue your questions?
It's been reported that, in the EU's contingency planning for no deal, there are proposals for Irish traffic crossing from Dover to Calais to have priority arrangements and be waved through in front of traffic from the UK. If that were to be the case, would it be in our interest to be spending this money on an additional Menai crossing in order to allow that Irish traffic to come through and get priority over UK trade?
I don't think there should be a priority anyway. I think the way to resolve that is simply to say that nobody has priority at Dover. I know that there are plans in Ireland to put on more sailings between Ireland and continental Europe, but it's not easy to replace the capacity that the land bridge to GB gives, because you'd have to have some very, very big ships indeed and, of course, it takes a far longer time to travel into the French ports than to drive across GB from Ireland. But, no, to me the answer to that question is: no-one should have priority.
Thank you, Chair. First Minister, the manufacturing sector is obviously a key employer in Wales, and one could argue that some of the big players in that sector, such as Airbus, Ford—the steel industry as well—could be uniquely vulnerable to Brexit, and I bear in mind your previous answers, where you've said it's impossible to completely guard against what could happen in a 'no deal' scenario, but what actions are being taken by the Welsh Government to try and avoid disruption to our manufacturing sector as much as possible if there was a 'no deal'?
We have put in a place a business resilience funding package; it's cross-sectoral, not just limited to manufacturing. What that has done is, firstly, enhance export support services through assisting businesses as they adapt to the new business environment and help them to develop the expertise to support business continuity and to explore new growth opportunities; second, enhanced online export resource—in other words, providing access to web-based information, tools and resources that empower businesses to respond to a changing trading environment; thirdly, a Brexit resilience grant that will provide access to grant funding that will support businesses to overcome immediate challenges; fourthly, we've facilitated businesses to explore new forms of collaboration, joint ventures, innovation and collective capacity building so that they can remain competitive; fifthly, we've looked to sell Wales to the world alongside strengthening Wales's visibility as a destination for trade and investment—that's shown, of course, in the new offices that we've opened up in the latest phase of office openings; and then, finally, we've looked to enhance our overall understanding of trade flows between Wales and the rest of the UK and beyond, so that we can understand precisely what we will need to do in the future in order to protect those trade flows.
If we have to revert to World Trade Organization tariffs, how would that affect the manufacturing sector practically?
Well, it would be a barrier that would be put up where none previously existed. There are several sectors that are vulnerable. Automotive is the most obvious one at the moment. We're seeing, of course, what BMW have said, Jaguar Land Rover have said it with their shutdown, and the JLR shutdown has affected Ford. So, there's a domino effect through the automotive industry. Their major concern is being able to source parts. It's not simply a question of tariff barriers, but non-tariff barriers as well. Basically, it means putting a wall up where there wasn't one before, which surely wouldn't be in the interests of trade.
For some companies, they won't be affected. For other companies, it's their lifeblood. And if anything interferes with their ability to import or export, they won't prosper in the future.
And the grant packages that you just talked about would come in there to assist those companies.
Yes, but what we can't do is provide them with a market. You can provide a business with as much support as you want, but if they can't sell what they produce at a sufficient rate, then they won't survive. Which is why avoiding tariffs and avoiding barriers must be paramount amongst our considerations.
Thank you. And, finally from me, I know you've already talked about the fact that 100 businesses have engaged with the Welsh Government's Brexit portal, and I understand that the idea behind that is to further strengthen Welsh Government's understanding of the level of Brexit preparedness among businesses and where Welsh Government intervention and support can add the greatest value. So, how useful has that data been that you've been able to gather so far, and how far has it influenced Welsh Government planning?
It's early days yet, because we have 100 businesses, as I've said, who have completed a diagnostic report, I think, is the phrase that you'd use, in terms of giving us an understanding of what they need. More than 3,000 people have visited the site, so I think we'll see a lot more information coming in in the future. Much of it will be fairly familiar. Where do I source my parts from? Where will I be able to sell? Where will I get my people from? Big, big, big issue. We're at full employment in reality in Wales. It's not easy to recruit the right people into the right jobs, and that has been raised as a concern by a number of businesses, certainly personally with me: 'We can't recruit locally. Where are we going to get people from? And how much bother will it be to get those people?' For some businesses, the temptation will be to move elsewhere, but many of these businesses are small—they're not going to move elsewhere, they are where they are. Moving to another country is not an option for them. But that, increasingly, is an issue they're beginning to worry about.
You've mentioned the transition fund and you've already highlighted the funding going into various sectors, including manufacturing, and in your response to us on 2 November, you identified £6 million for training and upskilling the workforce in Wales's automotive and aerospace sectors. I'm assuming that's including the £3 million given to Airbus that was announced last month.
But also in the same letter you then go on to say:
'Our direct skills support programme requires a 50% matched contribution, and our support for Airbus for example will in turn result in further investment'.
So, is that £3 million being matched by Airbus?
We would expect it to be matched by an equivalent investment, but that tends to be the situation anyway. For example, when the recession first hit at the end of the last decade, we put in place schemes to help businesses to keep people on. The deal was that we would provide them with money if they trained their people. And that worked very well. It meant that they didn't have to make people redundant and they still had them on their books when the upturn actually happened. So, we know that the companies that we have supported will make significant investment as well in the future.
But, again, they will have their concerns about where they will be able to export and under what conditions and how they will be able to bring people in, particularly Airbus, who bring people in from Toulouse on a regular basis. If it becomes more difficult, or if there's a need for border control at the airfield, actually, in Broughton—that's one issue that's not been looked at in any great length recently—all these things are barriers that don't help Wales or the UK to appear open for business.
What I'm trying to work out is whether the transition fund is purely a transition fund to support businesses or whether there's also expected to be match funding from businesses. So, how's the transition fund working effectively?
There is an expectation about match funding included within that as part of that package that was announced, yes.
But that's not applicable to all the packages that are announced from the transition fund.
No. The transition fund takes all forms of different support. Some of it will be grants to businesses, which, as the First Minister said, will link with a match funding requirement; other ones are just direct support for organisations.
And how is this decided? Because, let me say, there's £6 million for training and upskilling of the workforce that I've identified—I understand that—but when it comes to local government, there's £150,000. Clearly, local government is going to suffer hugely as a consequence of a loss of possible funding from the European funds, plus local government is facing difficult times ahead anyway because of the austerity measures that are coming through. How does the transition fund identify who needs the money and how much money they need?
There's a process around inviting bids in. So, organisations were asked to invite—we asked them to put bids in, so bids came in from organisations. We didn't tell them what scale or size those bids needed to be. There was guidance on what the fund could be used for. There was then a process of assessing the bids, and then ministerial oversight in terms of whether those bids went through the process or not.
Just out of curiosity, is WEFO involved in the assessment, or is it just purely Welsh Government?
I think there might be WEFO officials on the internal panel; I'd have to double check that, though.
We are undertaking an inquiry, as you know, First Minister, into future relationships with Europe and the world, and it would be helpful to know how the Welsh Government is approaching this in terms of prioritising future relationships.
Yes, and it would help, I think, if I gave just a brief history of how we've arrived at where we're at. I took over responsibility for the overseas offices in 2011. It was clear at that stage that everything was very disjointed. Reports would be prepared by those offices and they'd go to various different officials in different departments. No-one really knew what they were doing, there was no co-ordination within those countries. I restructured all that. All the reports that all the offices produce now come straight to me, so they know that I've noticed what they're doing and I know what they're doing. We restructured North America so that we had a clearly defined headquarters in Washington, and we then have, of course, New York, Chicago, Atlanta, San Francisco, and we have an office in Canada, in Montréal, and they are well integrated.
The Indian and Chinese offices are the same. There was a glaring gap for me in Europe, where we only had one office, and that was in Brussels, and you can't cover an entire continent from Brussels. I then took the decision that we should look to install people in our most important markets. Dublin is a massive market for Wales; it's a small country, but, in terms of investment and goods, it's a huge market. We have two people in Dublin. We've opened Berlin, we'll soon open Dusseldorf, Paris as well. We're opening an office in Doha to take advantage of the direct flight, of course, and we've beefed up the office in Dubai.
The way in which we approached this issue is: do we look to open a single-handed office somewhere, or do we look to beef up an existing office? That's always the dilemma. We've spoken to the Irish about this because they have the same problem, except they're at a far bigger scale because they're a sovereign state. They will have the same issues. The approach that I've taken is that we should open offices in our most important markets and then look to expand from there. Most of them are single handed, but they do well. Some of them have more staff—Brussels is probably the biggest at the moment—but where there's a case, we'd look to beef up the staff in existing offices as well.
In terms of where we go next, well, that'll be for somebody else, but, clearly, we need to look at expanding our presence in southern Europe, in Spain and Italy particularly, and to look at other parts of the far east, such as Hong Kong and Singapore, and look to recreate the offices we have there. We have our office in Tokyo as well. One of the things that also happens now is that, annually, all those staff will meet here in Cardiff. I talk to them, they talk to each other, and there's a sense, I think now, of having created a kind of Welsh-based trade and investment team across the world that, really, I don't think was there before. So, co-ordination has been absolutely important, and it's no accident that we've had the foreign direct investment figures that we've had—good ones—over the past few years. It's connected to the fact that now I think the offices are working well together and they've a better understanding of what they're being asked to do.
I mean, this, obviously, has developed way ahead, well beyond the 'Wales in the World' international strategy that was launched in 2015, which, of course, was pre Brexit. So, in a sense, what you're saying is, you've already developed a new international strategy in the ways you've described, in terms of particularly those offices and how they are. And that is, clearly, I'm sure, being linked to post Brexit and ways in which we can develop—Welsh Government can develop—those future relationships.
There's never been a more important time for us to develop our presence abroad. What we have always, or what we've done certainly since 2011, is to look to work with what was UKTI—or what's now the Department for International Trade—in order to draw on the far greater resources of the UK Government. So, for example, in Dublin, we have two people, they have an office—or a hotdesk, as was suggested a few weeks ago—in the embassy and, indeed, they were there before the Scots were. So, we do need to understand that if we're going to be as effective as we can be, we do need to draw on the resources of the UK, because they will always be there and why would we want to just simply duplicate what they do? So, the offices are based in parts of the world where we can add, where we need a presence and where we can work with the UK Government, but where a discrete Welsh presence is important. And the United States is a prime example of that.
Back in 2011, we had one man based in Washington. We had an office in New York, but no real understanding of what they were all being asked to do, really. When Washington became the headquarters—Gareth Morgan is the director of North America, now we see the effects of having that headquarters in Washington. We have political contacts we've never had before; there's a Welsh caucus on Capitol Hill with more than 20 members. We have a reception on Capitol Hill around about St David's Day every year, and it's attended by several hundred people by now, and that's helped to raise Wales's profile at a political level. So, for example, one of the things we've been working with the caucus on is trying to get Welsh lamb exports into the US—it's not easy now with the view of the current US administration. So, it's not just simply window dressing, or something that's nice to have, it can be very important in terms of understanding what's required for the US market, and what the direction of travel is in US politics, although, at the moment, it's difficult for anyone to try and predict that.
Also, we've been looking at getting evidence on best practice in terms of developing relationships not just with countries within the EU, but also in the wider world, to learn where Wales could benefit from those examples of best practice that, of course, are very much trade linked. But, is the Welsh Government looking to those examples? You've described how you've seen the opportunities in the important locations—countries we should be based in—but is this something where we feel we have lessons to learn about the ways in which countries have developed those relationships?
It's very difficult to find an example, because the only country to leave the EU is Greenland. So, there's no real template for what happens when you leave a trade and customs arrangement, certainly not in modern times. So, looking at other countries in terms of what they've done, there's no real comparator that I can see that would allow us to draw conclusions, certainly in modern times, in terms of how that worked. I think it'll be difficult to get trade agreements with worthwhile markets. I think the US is hugely difficult, given the fact that the Government there—. The President is very, very open in saying, 'Well, it's all America first.' I don't think it will be possible to have a reasonable deal with the US as it is at the moment. With India and China, who knows? But, of course, we must be very careful with India particularly, it's a low-wage economy at the moment; you run the risk of exporting jobs on that basis. We saw it, actually, with the accession countries back at the beginning of this century when Poland and Hungary and the former eastern bloc countries joined, we did see some visitors move there because wage rates were lower—less true now, but that's what happened.
Yes, I've no doubt that Australia and New Zealand would love to have free trade deals with the UK, but I think that's one way; Australia is 20 million people and New Zealand is not even 5 million. In no way do they replace the European market and they're a lot further away, so the costs of doing trade with Australia and New Zealand are far, far higher in any event. So, to my mind, it's always been the case that we have to get right the relationship with what will always be our closest, biggest market—geography is not going to change. We have to get that right first, because it's always going to be easier to export to France than to export to Australia; simple geography dictates that.
It's interesting you say that there are good working relations perhaps at an official level, particularly in the overseas offices, with UK Government departments. I mean, issues around UK Government engaging with Welsh Government in terms of trade—we had an interesting if not tetchy session, I think, with the Minister of State for Trade Policy, George Hollingbery, about where we fit, where Welsh Government fits, in terms of developing those trade relationships—an interesting evidence session as far as that was concerned, but I don't think he was quite converted to devolution in the way that we perhaps might have expected. But, obviously, these are crucial issues in terms of your paper 'Trade Policy: the issues for Wales', and where Welsh Government can pull its punch in terms of Welsh needs within the context of the UK.
Yes, it's not our role, obviously, to conclude trade agreements, but we need to be part of that process so that Wales's voice is understood and recognised. It is our role, though, to go round the world looking to get investment into Wales, and to sell Wales. That's firmly part of what we do, and in some ways, that's more effective, because we can see investment decisions taken by individual businesses, and they decide to come to Wales.
We are very protective of what is devolved and very sensitive to what might be seen as UK interference in devolved issues. I think the same applies in the UK Government. I think they're sensitive about what they see as reserved, and issues that we really shouldn't have a formal role in. So, we need to go beyond that and say, 'Look, we understand. We're not looking to conduct a trade deal as far as Wales is concerned, but we are part of the process.' It's in everyone's interest to have the widest buy-in, as I said earlier on, to any trade deal, and that involves involving the Welsh and Scottish Governments as part of that process in order that the agreement can be a good one for everyone.
First Minister, can you just give us an overall—? Where's your focus in terms of trade policy and fostering relationships with other states to improve trade links between Wales and other states? Is it with states in the EU or is it with states outside the EU, and what's the relative balance?
It's not a choice. The most important investor in the Welsh economy is the US, which is why we have such a significant presence in the US. Beyond that, of course, you have France, Germany, Ireland—those three are very, very important for us as a market. In fact, I think out of the top 10 markets, only two of them are outside of Europe. But it's not a choice. You look to get the best advantage you can in every market around the world. But it will always be the case that our biggest market will be the European single market, just as it is the case that our biggest single investor is the US. But I see no reason why we should have to choose, really. But it's going to be important— because, given that our biggest market is the European single market, we can't ignore that and say, 'Well, look, there are opportunities elsewhere'. Well, yes, there are opportunities elsewhere, but they're never going to make up for getting the right deal for Britain as far as the European single market is concerned.
I wasn't suggesting that we should choose, but what I was basically saying is that you've listed the current markets; what are you actually doing to foster new markets? Where are you going to look for the new markets for Wales?
Okay. First of all, the middle east. Doha is a great opportunity for us; the Emirates as well, of course, through Dubai. China and India, with a growing middle class, are a good market for us. We're not commodity producers, we don't produce things in bulk, as a rule. We tend to specialise, and if we look at Welsh lamb, that is not a commodity product. That gets sold in markets where there is money to buy it, because it's a premium product. So, those markets are important.
I know there've been trade missions to China quite recently, and also to India. Those trade missions go round the world all the time. There are probably some parts of the world where we have less of an emphasis—South America will be one, where we don't have a particularly strong link with South American countries. We don't have a particularly strong trade link with African countries. So the focus has tended to be Europe, North America, the middle east and then the far east.
So, are you opening new offices in these potential new markets so that you can actually encourage Welsh entry into that market?
Yes. We've opened up in Doha, taking advantage of the direct flight. It was important for us to have offices in France and Germany, which we didn't have before, and an office in Canada, which we've recently opened. In terms of the next phase, well, that won't be for me to decide, but we need to look, for example, at some southern European countries, but also, to my mind, North America as well. We probably could do with an office in southern California to deal with creative industries. We've got San Francisco, but that's a different market, it's tech. And, of course, Hong Kong and Singapore—two hugely important powerhouses. So, to my mind, that's where we should go next, to those markets, to make sure that we've got a stronger presence there.
And what about your relationship with the Commonwealth countries? What are you doing to—
Well, the Commonwealth doesn't exist as a trading organisation. The Commonwealth is a kind of club. It doesn't really have much in terms of influence over trade, and, of course, geographically, France is always going to be closer than India—always. The Commonwealth is an unusual body in the sense that it meets, it discusses things, but there are widely different views within the Commonwealth on trade. There are some who are very, very protectionist, there are some who are far more open, and it doesn't function as a trade organisation, it functions almost as a membership club, really.
Well, with respect, First Minister, I don't think it needs to be a trade organisation for Wales to be able to utilise it to increase trade outside the EU. A lot of those Commonwealth countries are up-and-coming economies. It's foolish not to capitalise on the connections that we currently have with a lot of those Commonwealth countries. We've got blood ties, we've got historical ties, and I'm just interested to know what proportion of time your Government spends on fostering new markets outside the EU, as opposed to fostering and maintaining markets within the EU. What's the balance?
The Commonwealth—. Blood ties don't count when it comes to trade. North America is huge—
Well, North America has blood ties to the UK. They speak the same language, it is said, but of course it's a very protectionist economy. We do strike a balance, in the sense that most of our offices are outside of the European single market, and they reflect the trade flows with those countries. There are three in India, there are three in China, for example, there's one in Japan, and we have a number in North America, and that will increase in the future. I suppose the biggest single country that has the biggest presence is the US and that reflects the fact that the US is the biggest investor in the Welsh economy, although not the biggest market. That is still the European single market.
You mentioned Commonwealth countries, and we have, obviously, a presence in India, that's true, a presence in Canada as well, and Singapore, but beyond that, no, we don't have a presence in Commonwealth countries, because we have to look at their markets and how big they are, and how much opportunity there might be in those markets in the future. Australia and New Zealand are in the Commonwealth, but they don't represent big trade opportunities because they're not that big, compared to the bigger markets around the world, and they're a long way away. So, yes, there's scope for trade, but it's always going to be limited by the size of the markets in those countries and also the distance involved.
First Minister, when the Minister of State for Trade Policy was here, he identified various actions that the department had been doing—deep dives in March, engagement policies, the roundtables—he did indicate that he contacted the Wales Office for the stakeholders who should be invited to those—but also 11 rounds of consultations on future trade arrangements, agreements, strategic trade advisory groups. What involvement has the Welsh Government had in all of those?
In terms of trade? Limited. 'Not enough', is the simple answer. We've done work ourselves, clearly; you'll have seen that through the documents that we've produced. We commissioned Cardiff Business School to research trends in global trade to see what opportunities there would be for trade for Wales in the future. That report will be published. I know that the Cabinet Secretary has met with business leaders to discuss with them some of the most difficult challenges that they face, and we've shared those views with the UK Government because it's important that those views are known. For example, shortly, I'll be writing to the Secretary of State for International Trade setting out our views on the proposed trade negotiations with Australia, New Zealand, and the USA and the proposed accession to the comprehensive and progressive agreement for transpacific partnership. So, in terms of ongoing discussions, no, they're not satisfactory, but nevertheless we make representations that we feel are necessary for Wales.
I hope you get a quicker response than I had when I wrote to the Prime Minister on an issue in March. I got an answer back last week from the Secretary of State for International Trade.
It's nothing personal, don't worry. We all have that.
I suppose what I'm deeply concerned about, from my experience and the information we've been getting from the UK Government, is the lack of respect—my term and my words—from the UK Government to the Welsh Government on involvement in these issues. Where is the Welsh voice being heard, and where's the Welsh Government's Welsh voice being heard? I think that's the deep concern we have over these types of agreements.
We are represented on the senior officials group of the Department for Transport, but the problem is there's no ongoing engagement at ministerial level. It's one thing for officials to discuss things, but it's another thing for decision makers to be in the room as well, and that isn't happening at the level that it should. I'm sure that the UK Government would argue that the office of the Secretary of State for Wales is the appropriate body to take Welsh views, but it's got to go further than that, just as we take the views of bodies that are not devolved when we arrive at policy changes. Let's take, for example, the issue of banning reasonable chastisement. That involves liaising with the police and the Crown Prosecution Service. We don't say, 'They're not devolved, so we're not going to bother talking to them'. They're crucial cogs in the development of that policy, so it should be for the UK Government to look at us and say, 'Okay, trade is not devolved but the views of the Welsh and Scottish Governments is hugely important in shaping our trade negotiations'. But that's not where they are now, and it's where they should be.
My final point this afternoon: you actually mentioned that it's for you to decide where the next steps or the trade offices will be.
We haven't seen an update of the strategy since the pre-Brexit referendum strategy you put into place. Are you developing an updated strategy, or is that going to be for your successor?
Yes. For example, the latest phase of openings I discussed with officials. I indicated where I thought we should be opening those offices. Obviously, we have to consider the cost and make sure that they represent value for money. The discussions that I've had with officials have revolved around where I think the next tranche of offices should be, and that's been based on trade flows and also our important markets, but it'll be now for another First Minister to decide where the next offices go.
Okay. Thank you for your time. We've come to the end of the session. Can I also put on record the committee's thanks to you, because you've always been prepared to attend the committee in your time as First Minister and since the referendum? We've very much appreciated your input into this and we look to your successor to provide the same level of input. This is the last scheduled session we have with you.
It is. I often wonder what we'd be talking about if it wasn't for Brexit.
It would be perhaps something more enlightening and interesting. Thank you very much for your time, First Minister. You will receive a copy of the transcript, as usual. If there are any factual inaccuracies, please let the clerking team know as soon as possible.
We move on to the next item on the agenda, which is papers to note. We have several papers. The first one is the correspondence from the First Minister on the matter of Hub Cymru Africa.
I wonder if we can make sure that goes to all of the people who gave evidence. I'm sure we probably expect them to look at these things, but can we send them it directly and thank them, because it comes very much out of the evidence session?
I'm sure we can do that.
The second paper to note is correspondence from the Chair of the Public Accounts Committee regarding the Auditor General for Wales's report, 'Managing the impact of Brexit on EU Structural Funds'. Are Members content to note that, particularly the reference to the scenario we may wish to look into?
The third paper to note is correspondence from the Wales Civil Society Forum. Clearly, it's been established, and it's regarding the creation of a new Brexit forum for discussion. Are Members content to note that and, particularly, perhaps seek any advice that might come through from them on occasions?
Yes, I think they're a new body we can draw on. They have a wide range of interests.
And the fourth paper to note is what people have mentioned already in the evidence session with the First Minister, namely the letter from the First Minister updating us on how the Welsh Government is preparing for Brexit. Are Members content to note those items? They are. Thank you.
bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).
that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi).
Cynigiwyd y cynnig.
Item 4, under Standing Order 17.42(vi), is that the committee now resolves to meet in private for the remainder of the meeting. I see Members are content, so we now move into private session for the remainder of today's meeting.
Derbyniwyd y cynnig.
Daeth rhan gyhoeddus y cyfarfod i ben am 16:05.
The public part of the meeting ended at 16:05.