|Alun Davies AC|
|Dai Lloyd AC|
|David Melding AC|
|David Rees AC||Cadeirydd y Pwyllgor|
|Huw Irranca-Davies AC|
|Mandy Jones AC|
|Eluned Morgan AC||Gweinidog y Gymraeg a Chysylltiadau Rhyngwladol|
|Minister for International Relations and the Welsh Language|
|Emma Edworthy||Llywodraeth Cymru|
|Claire Fiddes||Dirprwy Glerc|
|Rhiannon Lewis||Cynghorydd Cyfreithiol|
|1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau||1. Introductions, apologies, substitutions and declarations of interest|
|2. Sesiwn graffu gyda Gweinidog y Gymraeg a Chysylltiadau Rhyngwladol||2. Scrutiny session with the Minister for International Relations and the Welsh Language|
|3. Papurau i’w nodi||3. Papers to note|
|4. Cynnig o dan Reol Sefydlog 17.42(vi) a (ix) i benderfynu gwahardd y cyhoedd o weddill y cyfarfod||4. Motion under Standing Order 17.42(vi) and (ix) 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 13:32.
The meeting began at 13:32.
Good afternoon. Can I welcome members of the public and Members to this afternoon's meeting of the External Affairs and Additional Legislation Committee? Before we go into business, can I remind a few people of the housekeeping? If you have a phone on, can you please either turn it off or on silent so that it does not interfere with the broadcasting equipment? It is a bilingual meeting, therefore, if you require simultaneous translation from Welsh to English, please use the headphones on channel 1. If you require amplification, then please use the headphones on channel 0. There is no scheduled fire alarm this afternoon, so if one does take place, please follow the directions of the ushers to a safe location. We've received apologies from Dai Lloyd; he may be late this afternoon. Do any Members wish to declare an interest at this point in time? No. Thank you. Then, we'll move on.
Item 2 on our agenda this afternoon is a scrutiny session with the Minister for International Relations and the Welsh Language with a focus being on the trade negotiations between the UK and the US, though there may be some questions that may link to other trade negotiations that may exist on similar lines. Can I welcome Eluned Morgan this afternoon, the Minister for International Relations and the Welsh Language? Minister, would you like to introduce your official for the Record, please?
This is Emma Edworthy, who's the deputy director in the department of international trade and international relations.
Thank you for that. Welcome. We'll go straight into questions, if that's okay. Alun first.
I'd be grateful if the Minister could put on the record her response to the UK's approach to securing a free trade agreement with the United States of America.
I think we are keen to see a relationship developing with the United States of America, but it's absolutely not a priority for us. So, we have to look at this in the context of the EU agreement, which is very much a priority for Wales—60 per cent of our trade is with the EU in terms of goods. And I think it's worth noting the impact assessment that has been produced by the UK Government in terms of the difference that it will potentially make to the economy. So, the difference, the best case scenario, is about 0.16 per cent increase in terms of our economy over a period of 15 years, whereas if we get it wrong with the EU, we could lose 9 per cent. So, we've got to remember the context that we're talking about. If we were looking at other agreements, I think we'd probably put Japan further ahead of this one.
But in terms of the broad negotiating mandate, it is not far from where we would like it to be, so our general response is a positive one. The key thing for us is that I think we shouldn't be rushing these negotiations, because if we make an agreement on this, the impact on the EU one will be significant, so we have to get this right. And on the speed of negotiations, if people rush, then they maybe miss out on—they miss things. And one of the things that happened in the Canada agreement recently was that they just didn’t have time to do the kind of analysis and they signed up for some things that, perhaps, they regretted later.
So, the key thing for us is that Welsh interests have got to be included. We’ve been generally fairly pleased with the kind of engagement we’ve had. That has got to be really contrasted with the engagement that the other European Union negotiating team has had—it has been significantly different. So, ours has been really quite positive and the engagement has been quite strong.
So, before we go on to the objectives themselves, let’s focus on that process that you’ve just described as being reasonably positive. Can you describe, Minister, the role that the Welsh Government played in shaping the negotiating objectives? Was it at official level? Was it at ministerial level? To what extent did you propose and discuss the objectives before they were agreed?
We've had extensive discussions with them at ministerial level and at official level. So, there has been quite a comprehensive discussion, I think it’s fair to say, certainly at ministerial level. We made a written statement, once the negotiating mandate came out. Although the UK Government didn’t actually place that in front of the Parliament, we made sure that we did place that in front of this Assembly.
We’ve discussed the priorities, not just with the previous Secretary of State, Liam Fox, but I’ve had extensive consultations with Conor Burns, who’s been very engaged in making sure that the devolved administrations have actually had a say.
What we’ve got at the moment are very much high-level objectives, and the real proof of the pudding will be when we get to the more detailed negotiations: is that something that we will be able to stand by? So, I think we’ve been very clear, in particular on things like drug pricing and on the NHS, on climate change—that those are things that are very much a priority for us, and I think that they have been strengthened as a result of our input.
Well, certainly, for example, climate change was not mentioned in the way that we wanted it to be mentioned. So, that’s certainly something that has been strengthened. And the language on the NHS, you’ll see, is very, very strong now, which I think probably has been strengthened.
So, just for our own clarity, you did see the negotiating objectives and you were able to work with working copies of those objectives prior to publication.
We saw them about three weeks prior to publication, so we were able to feed in.
In terms of where you're going now—and, thank you, that was very useful—in terms of the objectives themselves, to some extent, it's motherhood and apple pie, isn't it? It's, 'We want everything and we want to have these tariff-free deals and regulatory issues resolved'. I think the Secretary of State said that she was going to drive a hard bargain with the United State of America—we all look forward to that.
So, where are your red lines—where are the Welsh key objectives? Where would you say—what parts of those objectives would you say are critical for Wales and which, where there are points where there could be significant issues for Wales—both positive and negatives ones?
So, I think the NHS is obviously very much a red line for us, and medicine prices; environmental standards; labour standards—I think those are very much issues that are of concern to us, and would constitute red lines as well. I think that the devolved administrations are right to regulate in areas where we have devolved responsibilities—that's certainly something that we want to see respected. And one of the issues there is the investor dispute mechanism. So, if that's in the wrong place, then that could influence our ability to do things that we might like to do in future.
I think the positive side of things—I think there are opportunities, in particular for the automotive sector, where, I think, that's an opportunity; it's a really big industry for us. I think that opportunities on the services side is where the real win could be for us, in particular in relation to the creative sectors, cybersecurity and some of those areas, so that could free things up for us to be able to compete a bit more internationally.
Yes, thank you, I will. Following on from Alun's question and your response there in terms of the investor-state dispute settlement, what are your views on how that should now factor within all of this? What if it is actually included within a UK-US trade agreement? What are your views on that?
Well, remember that this was one of the things that foundered the discussions with the EU that we're involved with, and we're very clear that we want our courts to be respected rather than for it to be a situation where there is some kind of private approach to compensation mechanisms. If we were to bring it in a new law—. So, for example, if we were to say, 'In future, we want to privatise the rail industry', or whatever, these things do exist in the EU, so those mechanisms do exist. It's the recourse to law is the issue, and we want our courts to be respected, and that system to be respected.
That is something—there is a precedent now with the agreement between the US and Mexico and Canada, where, actually, they have understood that it's through the court system in that domestic legislation; that's the area that needs to be respected, rather than an alternative mechanism.
That's really helpful. From what you're saying there, that's clearly what you would define as one of your red-line areas, from a Welsh Government perspective.
I think it's really important for us to know that, if we wanted to do something in a legislative context here, that it wouldn't—
Can I turn from that to something that has caused a lot of media angst and also by environmental groups and animal welfare groups as well, which is the issue of poultry products? And I won't refer to some of the lurid headlines that have been out there, but the simple fact is that, over decades, European—in which I include our own— chicken poultry producers have been held to increasingly high standards of animal welfare, whether it's on cage modifications—large costs involved with that—or general husbandry of poultry. They take a different approach in the US, so their approach is different in terms of slightly, I would argue, lower levels of animal welfare, but then, dealing with the issues of infection by chlorine dipping.
Now, what is our stance on that at the moment from a Welsh Government perspective and access of that sort of foodstuff into our market? Because it's not only the hygiene element, which can be argued about, but it is the issue of undercutting significant investment over decades from farmers throughout the UK, not just Wales.
Well, we have real concerns in this area as well, and obviously, our approach is one that is consistent with the European Union approach, which is to follow the precautionary principle, and there could be a fundamental disagreement between the UK Government approach and the US approach, where they like to follow the science and you prove the science, whereas, we say, 'Look, we're not sure where science is taking us here; if there's not a clear answer, then we're going to err on the side of caution, and we're going to go with the precautionary principle.'
And our approach, in particular to poultry, is that we make sure that there are welfare standards throughout the system, right from the word go. Whereas the approach in the United States is that you sort it out at the end of the process, and there's a shift—at the moment, they use chlorine wash, but there's a shift now to use peracetic acid wash. So, they may be using a different kind of mechanism, but the principle is still the same, and that is that you deal with the problem at the end of the process, whereas we're interested in the whole system. So that is going to be a problem for us. It isn't going to be an area where we would want the UK Government to be pushing, and, obviously, that has implications also for our ability to export into the EU, which, again, is our primary market. So, if we're in the wrong place on this, then how do we export to the market? How can they be sure, if we're importing chickens and poultry into Britain, that it doesn't leak into the EU market? So, there's a real concern on that.
Okay. I would suggest to you, Minister, that—you rightly say it's to do with that whole-system approach to dealing with the hygiene and the sanitary aspects of it and the food safety aspects of it, but it's certainly to do with that whole lifestyle to do with animal welfare. It is to do with exports. It'll also be, if we weaken on this, I would say, a real kick in the teeth to all of those poultry farmers who for years have had to absorb additional costs in order to do the right thing with this and are now—. So, if that helps strengthen your backbone, which, I can see, is very—you've got strong resolve on this. But I think this is not something that we should just weaken over and say, 'That's worth trading'. There are reasons why this has been put in place.
Could I—? You mentioned there the precautionary approach. Now, this, for years, again has been a real difference of approach between US and EU. The EU has predominantly used, across a range of areas—whether it's animal welfare, environmental, farming, et cetera—the precautionary principle. In the US, they've tended to go for the risk-based approach. Now, there is science behind both approaches, but I'm just wondering how that factors in now to UK-US negotiations, because I suspect they'd have a range of areas where they will say, 'Let's take a more risk-based approach. We don't need blanket precautionary approaches to this anymore. That's an old EU style of doing things'.
I think that's a danger, but, certainly, from the mandate that's been given in terms of the high-level objectives, that's not where the UK Government is setting its stall at the moment. So, we're pleased to see that. But, as you say, there will be trade-offs at some point in this negotiation. We need to make sure that those trade-offs are not made in some of those areas. I think, certainly on the—. You mentioned the poultry side; there have been massive investments in Wales in this space. So, there is a huge market for us now. But I think it's not just about the sanitary and phytosanitary measures. It's also about the broader areas, things like chemical regulation. So, you think of the fact that Registration, Evaluation, Authorisation and Restriction of Chemicals, for example—we had currently come under the European umbrella. Now, the UK Government have said that we're going to leave that because they don't want to be subject to the European court. So, that means that there is a little bit of flexibility there, which is also concerning for us.
So, if you look at that precautionary approach, the EU, for example, they've banned more than 1,300 chemicals in terms of cosmetics. The US has only banned 10. So, you can see that difference in the precautionary approach makes a huge difference to the numbers that we're talking about. If you look at pesticides, it's the same thing. So, there are 460 pesticides that are allowed for use in the EU. Seven hundred are allowed in the US. So, you can see that it does make a significant difference.
Well, I agree entirely, and one of the issues that this has played out over the last 10 years is over the issue of neonicotinoids and the debate over whether we should approach those on a precautionary principle or whether it should be on a risk base, and Monsanto and others will argue that it's risk based—there's no evidence to show categorically that neonics are the cause of the devastation of pollinators. Actually, the precautionary approach would say that the lack of evidence does not mean it's not responsible, and the evidence is now starting to grow. So, again, I would suggest, Minister—and it's good to see the UK Government in tune with this at the moment as well—that you hold firm on the precautionary basis, because that increasingly shows its worth, sometimes a few years down the line, than a risk-based and sometimes commercially-driven, profit-driven approach towards, 'Let's bring to the market these new products that are wonder products'.
Could I just turn to the issue of the SME sector? I wonder whether you've assessed the risks and opportunities for the SME—. For the—. Sorry, whether you've assessed—. Sorry, the Welsh services sector—whether you've assessed the risks and opportunities for the services sector of a UK-US agreement.
Yes, and I think there are opportunities in terms of services, and I've mentioned a couple of them already. I think, certainly when we're talking about the fact that the Welsh system, in particular, the link between goods and services—. So, if you're going to re-engine an aircraft or something, you sometimes send people out to make sure that it's working properly, and that relationship is quite important, that mode 5 approach. So, there are opportunities there, I think, but, in order to make that happen, you maybe need to make sure you have recognised qualifications and things like that. So, there are opportunities there.
The UK actually already has quite a liberalised economy in relation to services, including financial services, and I think what's important is that we recognise that financial services are really important to Wales. So, the UK economy, 11 per cent of our GDP comes from financial services, and we get a proportion of that through Barnett and whatever, through our block grant, so it's really important that that service industry is something that is protected.
I think the key thing for us is we don't want to see services traded for goods. So, if we've already got a pretty open market in services, but we open the door to goods, then that would be a problem for us. So, we don't want to see any kind of trade-off in relation to that.
It's interesting, then, thinking where the trade-offs actually might be, if not within some of those things. If there are clear red lines on some areas, where are the trade-offs going to be, if not in things like services? But I'm interested in what you're saying.
Chair, do you mind if I ask just on SMEs here? Just a couple of questions on SMEs. The first one is just fairly straightforward—if Emma or your officials attend meetings of the UK-US SME dialogue.
We haven't attended a meeting. I think we're really pleased to see that SMEs are taken very, very seriously. If you look at—you know, 90 per cent of our industries are SMEs, but only 10 per cent of them export, so there's a real opportunity here for us and we need to get rid of their barriers to trade. We were asked to send representatives from Wales to a meeting that was held in Bristol, so we tried to identify some people for that, but it is an area—. But that was way before this whole thing, the relationship, started in earnest with the department, so I think we'd be much more confident that we'll be invited to those kinds of things in future.
And, clearly, from what you're saying, you'd intend to take up any such invitations.
Okay, thank you. And, secondly on SMEs—just for your views on the inclusion of an SME chapter in a UK-US agreement and, if there is such a chapter, what provisions it should include.
So, I think we've got to take SMEs seriously. That's what we're trying to do in the Welsh Government. Now, we're doing a review of our export opportunities, so I've been meeting with SMEs to discuss what is it that works or doesn't work, what are the barriers to trade. And I think the real win here is in removing those barriers to trade—the technical approach, the difficulties. And so I think there were some quite interesting things, again, that happened with the Canada agreement, the US-Canada-Mexico agreement, so there are lessons we can learn from there, in terms of picking up some of those and putting them into an agreement between us and the US.
Okay. A couple of questions from me, because I think my colleague's let you off the hook a little bit on one or two points. Trade-offs— you've mentioned trade-offs. What are the red lines for Welsh Government in trade-offs? Where do you see a position where Welsh Government has said, 'This is not an acceptable trade-off'?
Well, I guess we go back to the red lines that we talked about earlier. So, if they said, 'Right, we'll let you have access to this if we get access to your NHS,' we'd say, 'Well, no, that's not acceptable.' But we can't really know where the trade-offs are likely to come until later on in the process.
So, what's the process for Welsh Government being involved in the next stages of negotiations? As the negotiations progress, what's the process for Welsh Government being involved in discussions as to where you are, where you're going? Where are we with that?
So, we're still waiting for the concordat to be signed, so that we're absolutely clear about how we can get involved in the process, but they are working on the basis that the—. We've seen a draft of the concordat, and we're actually working to that at the moment. The area where we are a little bit concerned at the moment is the fact that, actually, we've got—the negotiations were due to start with the US next week, and, at this point in time, we haven't been invited to a seat at the table, and we would like one. So, that is a problem for us, but, of course, it's still wrapped up in the broader issue of how devolved Governments get involved in this process. This needs to be seen in the light of how that is working across Government, and obviously we're a little bit further ahead, I think, than those negotiations with the EU, in terms of our involvement. So, we're concerned that the negotiation could start and we wouldn't have a seat at the table, although we are feeding in consistently and constantly.
I remember us talking about the concordat many months ago. You've said you have a draft concordat. We haven't seen that draft, obviously, because it is, I assume, between Governments at this stage for discussion. When do you believe that concordat would be agreed and we can see a copy of it?
Well, I'd love to be able to tell you that, because, every single time we meet, we ask them about when this is going to be signed. And, to be fair, I think, to the department that we're dealing with, they would like it to be—. They want to move ahead with this, but it's a part of the much broader UK Government cross-Government approach, and they don't want to sign up to that without understanding how that's going to impact across the whole of Government. So, to be fair, I think that the Ministers that we've been dealing with are keen to get on with it.
But, until we get that concordat signed, we still have no position as to what involvement devolved Governments would have in the process.
Well, we have got an involvement in the process now. We are engaged; we are feeding into the process on a constant basis. But what we won't have, at this point, is a seat at the table—and that's what we'd like.
That's the question. Because, in earlier questions to Alun—answers to Alun—you indicated that you were involved in discussions as to the negotiating position and the objectives. You saw the negotiating objectives three weeks prior to publication. In that period, did you actually identify areas where Welsh Government had been able to influence those objectives?
Yes, and I've mentioned a few of them: certainly, climate change, strengthening the language around the health service, and also making sure that devolved administrations have a say in the negotiations. And all of those things are included in the UK mandate to the US negotiations.
Can I just ask whether any—? Because of the quite rigorous involvement you've described there in that process, were there any surprises when it came forward or was it pretty much, 'No, we recognise that'?
I think because we were involved pretty much from the beginning there weren't any big surprises.
But it's still very high level, don't forget. The detail is not there, so saying you look to high standards in something is not saying you're going to conform with the European approach, which is where we'd like to get to. At the moment, the scope is—. The objectives are pretty broad.
Can I just, before I bring David in—? I appreciate that, but, clearly the UK Government has indicated it wants this, basically, deal done to the same timescale as the UK-EU type of deal. When do you expect to get to a position where you are seeing more detail? Because what we don't want to have is high levels and no detail at some point.
Well, that won't happen until the detailed negotiations start. So, I think they were planning to send about 100 people over to the states next week to start the negotiations. Well, that's clearly not going to happen anymore. So, coronavirus is going to impact on all of this, I've no doubt at all. But we will be getting feedback from that process.
Yes. Just to come back to the concordat, you described a process that functionally is quite good by the sound of it, but in the concordat you would like some sort of principle that you have a seat at the table. What does 'a seat at the table' mean? I mean, if there are 100 officials going over next week, is it a group of Welsh Government officials? Could you define what would meet that objective of 'a seat at the table'?
So, if there is any discussion that will impact on our devolved responsibilities, we would want an official in the room.
Following on from David's question there about the structures of any UK negotiating position, the Welsh Government does, of course, have offices in, I think, Washington, New York and California. Will those offices and the officials in those offices be playing any role within this negotiation?
So, we've got to be a little bit sensitive and a bit careful here because, actually, the UK Government is playing nice with us here, so we've got to be careful to respect that. If there is an opportunity—so, if I meet the American ambassador, as I have in the past—then, obviously, we take that opportunity to say it. But we're walking a tightrope here, and what I don't want to do is to lose the good faith that we have at the moment with that department that is not being demonstrated in terms of the Brexit negotiations.
But one of the roles of any overseas appointment is to gain understanding of that country and that polity in its wider sense; that's what the FCO does. So, it would be unusual if Welsh Government officials were the only people in the British embassy in Washington who weren't doing that. So, I would anticipate that that would be a core part of what they will be doing in future years.
Well, it may be something they'll be doing in future years once the negotiations start going into some more practical role. Certainly, when I was in Canada, I met with people involved in trade negotiations there to talk about the roles and how that regional tier of Government, effectively, were able to engage with the negotiation between Canada and the US. So, we're trying to learn lessons from those, and trying to learn how they were allowed to be involved in the negotiating process. So, we're using some of those as a template for how we could be dealing with the United States as well.
Before we move on, I respect your comments that the Welsh Government needs to respect the department and work with the departments in the UK Government. I was concerned when you said that they're 'playing nice' with us at the moment, because it's really not down to a department being nice, it's down to an agreement that there's respect on both sides. And it seems to me that until we get something in writing, we are dependent upon the views of, perhaps, a Secretary of State or a departmental head, which worries me a little bit in that sense, because they may say, one day, 'We're no longer playing nice.' So, this concordat becomes critical.
Absolutely, which is why it's so important to us. So, at the moment, that relationship is quite strong. We've really built that relationship, in particular with Conor Burns, and so, the important thing is that it's not based on an individual, but it's based on a systematic approach and a respect for the devolved administrations. Just because they're doing it now doesn't mean that they have to do that in future, unless that concordat is signed. So, you're absolutely right.
And is it now being discussed, also, between the First Minister and the Prime Minister, do you know?
So, it's part of the broader piece of how we engage with the UK Government at a devolved level. So, obviously, at the moment, their priority is pushing on how they get involved in the EU negotiations, and you've seen there they've been rebuffed, to a large extent.
Right. I wanted to just talk about the impact of the UK-US trade agreement. What's your response to the UK Government's assessment of the impact of a UK-US agreement on the UK and the Welsh economy?
So, you've seen the analysis, and in terms of the figures, it's very marginal—0.9 per cent is not going to be a significant difference. I mean, there could be a longer term gain, but that's over 15 years. So, I do think it's important for us to keep perspective on how important this negotiation is and to understand that whilst there may be opportunities for certain sectors, other sectors could be open to some real threats if we get it wrong. So, obviously, agriculture is a great example of where, if the standards that we have are not respected, then obviously that could undercut markets here.
Obviously, we're concerned also in terms of social rights being respected. So, there's lots—and environmental rights. One of the key things for us has been climate change, and although there's a reference in there to climate change, there is no reference to the Paris agreement. Obviously, that's something that we in the Welsh Government would like the US to adhere to, but it doesn't look like they're likely to do that.
No, because Trump's come out of the Paris agreement, hasn't he?
Would you be able to push more on the Welsh lamb side, because there's a six-month difference between what the US will be importing from New Zealand compared to what they could be importing from Wales? Will you be pushing that?
Okay. At the moment, so it's very recent, they've just lifted the ban on beef, so there's a real opportunity on beef. The problem is, of course, that the US has a pretty extensive market in beef themselves, so how broad those opportunities are is not clear. But, at least, the principle and the opportunity are there now in a way that they haven't been. So, that's just last week that that was raised.
In relation to lamb, there is still a small, technical barrier. I think they have to get rid of a little rule, which means a legislative change in the US on small ruminants. So, although I think we've done everything that we need to do now to adhere to the kind of rules that the US wanted us to, they have a technical thing that they need to relieve, and there may be opportunities then for the market in Wales in terms of lamb. Obviously, then, the New Zealand situation is slightly different.
Yes. And both months apart. Can you confirm if the Welsh Government will conduct its own assessment of the UK-US agreement on the Welsh economy?
I don't think we've got the capacity to do an in-depth analysis, but we've looked at the areas where there are opportunities. So, we think automotive could probably benefit, but there are lots of things around that, so rules of origin—getting that right. If we get that wrong, then it could adversely affect the automotive industry. So, all of this is about balance, but, again, I think the place for us to concentrate is on services.
The other thing is on steel, which would be of interest to you, Chair. Although it's not part of the agreement, I think what we'd like to see is a bit of goodwill on the part of the US in getting rid of the barriers on steel that they have imposed on us at the moment, and that's what we'd like to see, almost before we start the process. But you don't really need a trade agreement for that to happen. But, obviously, they'll probably throw that into the mix in some way.
Fingers crossed on that one. And finally, can you respond to the document's claim that Wales stands to benefit from the UK-US agreement—I'm so happy that you've got some more positivity this time around—through increased market access for lamb, reduced tariffs and export burdens on the automotive sector, as you were just saying, as well as Welsh steel and our ceramics, as well?
So, as you say, those things—we were a bit intrigued by 'ceramics', because we're not aware that we have a big ceramics industry in Wales, but further investigation has proved that that's about brake systems, or something to do with brakes, isn't it? So, it's not ceramics—
No jugs. Brakes not jugs. So, that's an area that we were a little bit intrigued to see, but automotive is certainly an area where I think—. You know, we've got a very large automotive sector that could benefit if the barriers to trade were taken away.
Minister, you mentioned in your answers to Mandy Jones the question of capacity within the Welsh Government to undertake a thorough assessment of the impact of any agreement. But surely this type of agreement and other agreements are crucial to driving the Welsh economy. Will the Welsh Government be identifying or rectifying the capacity agenda, so you can do a more detailed analysis, so we can have an understanding of what the impact upon the Welsh economy is of not just this agreement, but other agreements, as well? Because, yes, we may pick on one sector, but it's not about just one sector, it's actually going to be about the whole agreement and how this does impact upon Wales, because an agreement could impact upon part of a sector in England that we feed into as part of the supply chain. So, it is important, therefore, I think that you do look carefully. Will you therefore be asking for greater capacity to ensure that can take place?
We already have increased the capacity within the department significantly. We've gone up from zero to 14 people, so that's a huge change that we've seen. But also that capacity's being developed not just within my department, but across Government as well, so each individual department now has to build up that capacity. The other thing we're doing is we're trying to get a much more granular analysis of what the trade opportunities are. So, in the transition funding that we have been allocated, we have done one of the biggest investigations and questionnaires to businesses in Wales to find out exactly what their capacity is, what they want to see in terms of trade agreements, how much they export now, and how much they import. So, we're building up our analysis as a result of that, and we're expecting that that's already finished. We've had something in—. I think there were about 8,000 businesses that were surveyed.
That were surveyed, and we've had about 1,300 responses.
Which is quite good, certainly compared to Scotland. So we're quite pleased with that. That is now being analysed, and we're hoping to be able to bring something towards the summer when that analysis will be complete. That will then be fed into our review of exports. So, we're building up that capacity constantly.
I think several of my questions have been covered in the natural flow of things, but if I could just ask: in November 2018, the then First Minister, Carwyn Jones, said that there wasn't a particular need for a free trade agreement with the US. I've been impressed, actually, by your engagement this afternoon, and how you've worked constructively with the UK Government despite the fact that not everything has been quite as regular as you would like, with the concordat and that. You emphasise that it's the EU agreement that is more important than the US, but you're prepared to acknowledge that the US agreement could be a significant benefit. So, does this describe the Government's new approach to these things, that it will be engaging as deeply as capacity allows in the various free trade agreements that are likely to be negotiated with the major exporting and importing nations around the globe?
Yes. I think we have got to recognise our capacity issues, and therefore we do need to prioritise where we're going to put our attention as a department. So, the EU negotiation is obviously the most important one, but the next one would probably be Japan. So Japan is of real interest to us, because what we don’t want to do—. Because the US market's fairly open already, and you've seen the marginal benefits, 0.9 per cent over 15 years, it's not huge, whereas the Japan trade agreement is something we're concerned to retain. So, at the moment, because of our relationship with the EU, and they have the Japan-EU agreement, what we don't want to do is to lose what we already have, and there's a real danger that that could happen. So if we wanted to see a priority, we would probably want to see the Japanese trade agreement going before the US one, and of course that would be helpful because they've just been through this relationship with the EU, so all of those things are aligned already, whereas the US one, alignment is not clear at all.
So if you got the concordat into the shape you wanted, and we had a seat at the table, and the next agreement that's negotiated is Japan, and there will be others then looming, what sort of capacity will you need in your trade experts, then? I think you mentioned there were about 12 in the department at the moment.
Fourteen, I beg your pardon. Are you gearing up in anticipation that you will get the engagement from the UK Government that you're after, or will we be looking at 30 experts instead of 14? I just want to get an idea of what capacity will be required to meet your policy objective here.
I think we're getting close to what we were hoping to achieve. It depends on what the engagement's like. Because the engagement has been fairly good on some sides, then why wouldn't you engage? If they're just going to completely ignore us, you can be doing a lot of work without getting any outcomes. I think what we're interested in doing is affecting outcome changes. That's why I think we're quite proud of the fact that we have managed to influence the debate in the US because of that constructive engagement and agreement.
You commended Conor Burns for his attitude and, by the sound of it, you've found that quite a good working relationship. But, quite fairly, I thought, you said that good personal relations are always a bonus, but you want them structured. So, when you say you want them structured, are we then back to the concordat or is there more upstream policy-making involving Ministers from the devolved administrations as a goal?
I haven't had any engagement yet from Liz Truss. I have asked for a meeting with her, but I haven't had that. I would quite like to get in at that level so that we get a broader picture. In terms of the detail, I'm very happy at the moment with the engagement we're getting. There are a few little niggles where we're not getting access to things where they claim that they're reserved and we'd say, 'Well, actually, we've got an interest here.' The investor-state dispute settlement is an example of where they're not exactly engaging us but we know that it would have an impact on us. So, there are some issues around what is reserved and those are the areas where we're still pushing on.
But the American Government take a similar attitude to yours, I think. The American Government want to rely on their courts system as well and don't want their sovereignty impaired in that respect, so it may be that you're not going to have great difficulties with that particular issue. You can be sanguine, but if it's US Government versus UK Government, I think I know who's going to win that one head on, on that particular question.
Yes. I think that's what we're hoping. Back to this issue of how do we get engagement from the other side, because one of the things that we have to underline and we're trying to underline in those informal meetings that we have—certainly some of the informal meetings we've had, for example, on the EU trade side—is, 'We're the ones who are going to have to implement this stuff on the devolved areas, so you need to engage us, because if you want this thing to stick, we're the people who are going to have to implement these rules, so wouldn't it make sense for you to engage with us?' Certainly, from talking to the Quebec Government, for example, they had quite a strong role in relation to that negotiation with the US, although it was really interesting to hear that, actually, that's not formalised either, but they did have an influence.
It's interesting to hear you say that you have a good relationship with the Minister of State but you're yet to meet with the Secretary of State. That's a little bit alarming, to be honest. I just wonder whether—. Don't answer this question, but I wonder whether she understands devolution or not, because it is important that a Secretary of State also gets involved in the devolved nations and Brexit. That's not for you to answer, but it's a concern I have in that sense.
In relation to your answer to David's question on capacity, and I think it is a very good question, we're talking about Japan and we're talking about the US—they could all be done in parallel—plus the EU. These are the three that you've identified that are possibly important negotiations to the Welsh economy. Therefore, it's important that we don't miss anything because we haven't got the capacity to check everything.
I think you're getting the message that we are concerned about capacity, to ensure that the Welsh Government is able to ensure that the arrangements that are coming down the line and are being negotiated benefit the Welsh economy as much as possible. What discussions have you had with the First Minister in relation to that?
I think there's a recognition that we won't be able to check everything. I think there's a real understanding that that is going to be the situation. We have regular meetings in the sub-Cabinet that was previously Brexit but it's now Brexit and trade. So, we have regular discussions with the First Minister and other Members of the Cabinet relating to trade now, because there's an understanding that we'll have to get to a point fairly soon where we'll be needing to get our own trade-offs prepared within Government. So, those processes are in place.
So, the sub-committee of the Cabinet dealing with this is ready and established to be able to discuss trade-offs within the Welsh Government.
We've already started those discussions. We have regular meetings on trade now as a part of the Brexit issue. So, we're just making sure that we've got all the structures in place, not just within my team but across Government, and understanding what are our priorities and where do we want to do that. We won't be able to cover everything—there is no way—which is why I know this committee has been very involved in the trade agreement continuity agreements. There's a lot of interest in those. But the impact of lots of those agreements on the economy is quite small, so we haven't given those perhaps the attention that you may have wanted us to give, because we have to prioritise. We have to say 60 per cent of our trade is with the EU, so that's got to be a priority.
Beyond that, we're getting ready now to receive the Japanese mandate and we'll want to look at that very, very seriously. We've got a lot of companies that export to Japan. Although, if you look at the figures, the impact on the economy: 3.5 per cent of our imports are from Japan, 15 per cent of our imports are from the US. So, although in big figures the US is more important, in terms of the effect on the trade relationship it'll be really interesting to see the economic impact assessment that has been done quite comprehensively—well, not comprehensively, but there is an analysis in the US agreement, whereas in the EU agreement they just say, 'We'll look at this in future.' There's very little analysis. We've seen previous analysis, but it's not in the objectives of the UK; the analysis is not included in there.
Thanks, Chair. I'm slightly encouraged this afternoon by generally what we're hearing here, because it seems that there is, of necessity, a maturing going on here in terms of the way that Governments work together. But I just put it to you that when these things have worked at their best previously—when devolved Governments have worked with the UK Government in terms of the EU discussions around trade—it has been when the UK Government has also acted.
A lot of the discussion around here has been the worry about an adversarial approach, but it's actually when the UK Government has recognised the limitations of devolved Governments and capacity and so on and has tried to anticipate where the priorities of Wales, Scotland, and so on, would be—. We wouldn't always agree, but they normally come to the table saying, 'We think this is what your priorities are. Are we agreed on this?', and then you discuss.
What I'm trying to get to is: is this where we're heading to? The normalisation should be the UK Government should be trying to assist Welsh Government, Scottish Government and others in terms of working towards an agreed position on a range of things, not a—. Because we will never have the capacity to do what Whitehall is doing.
No. And you've got to remember that this is all very new to Whitehall as well. This is a whole new experience for them. They've had to develop their expertise very, very quickly. We recognise we're not leading on this, but they do need to respect devolution.
Sorry, my point is more than that, Minister. It's not a question of respecting devolution; it's respecting and actually working with devolved Governments to say, 'We're trying to anticipate, we're trying to work constructively with you', and to say, 'We think this is a space that we've got agreement in, we think these are the differences, now let's talk through those', as opposed to the adversarial, 'How do we beat each other into a corner over these things?'
Look, that would be ideal. The difficult bits we haven't started on, if we're honest. This is very, very high level. When you talk about high standards, your understanding of high standards or the UK Government's understanding of high standards may be different from what we consider to be high standards. So, it's when we get into the detail that that friction may become a bit more evident. But, I've got to say, in terms of the high-level approach, we've had our first joint ministerial meeting with Scotland and Northern Ireland as well, and I think they're doing the right things at the moment.
Chair, my observation would be that this is where some of the formality does come into play—when you get down to that hard detail—but I would still argue it is not in the interest of the UK Government to try to either blindside Welsh Government, or Scottish or Northern Ireland colleagues, or alternatively to try and get to a position where, on some real, hard detail, it is totally against the interests of Wales.
It is surely in their interest that the nature of them negotiating with you behind the scenes and with your good team of officials should be, 'We've got some tricky issues, let's resolve it behind the scenes and come to an agreement, but we're not going to push you, as Welsh Government, into a corner, where sectors of your industry, your agricultural industry or whatever, are going to say that just doesn't work for them.' Surely, it's not in the UK Government's interest to back Welsh Government, Scottish Government or anybody else into a corner.
I agree—I think that makes absolute sense—but it is interesting, the contrast between the way that we're being dealt with and the way that the Brexit Minister is being dealt with. It's a very, very marked contrast.
And let's not forget that the EU, in their discussions with Canada, for example, were insistent that the regional tiers of government were engaged and involved. So, there are some other angles here that can also be used.
If it's not stating the blindingly obvious, would you care to suggest, as a Welsh Minister who's involved in the process, why that difference is? When the EU process is going on at pace, why isn't that engagement there? I would say that that sort of approach should apply to both.
You would think so, wouldn't you? Our department—the people who deal with trade are in the same department. That is absolutely not the case in the UK Government. It's clearly being driven absolutely from No. 10, so it's much, much more political.
I was just going to ask the same question, because, clearly, as you've just pointed out, the EU-UK negotiations are being driven by No. 10, because David Frost, as I understand it, who's leading those, reports back to the Prime Minister. I'm assuming, from what you're saying, that the UK-US trade negotiations, when they get underway, will report back to Liz Truss, the Secretary of State. Have you as a Welsh Government got any indication as to how those two sets of negotiations and discussions are going to be going on so that, in effect, we know what's happening in both areas and no-one is trying to play the other one off, because that's a very strong possibility?
This is obviously something we've been discussing with the Minister Conor Burns, and asking him how—. Because you're running them in parallel, but one obviously influences the other. If you make a decision here, it's going to impact on what you're able to do there. So, we've been asking about what the mechanism for those agreements is going to be. It isn't clear what that mechanism is at the moment. I don't think that they've got a structure for that to be allowed to happen.
But, certainly, we did ask Conor Burns to relay to the people negotiating on Brexit the fact that, actually, we are content with the approach that we're having and the engagement we're having when it comes to third countries, and that that should be a model that they follow in relation to Brexit as well. Was there something you wanted to add?
No, I think that's spot on. I think there is a UK Government Cabinet sub-committee, XS, which is used at the moment, but that doesn't include all UK Government Ministers either. It's my understanding that the Department for International Trade—Liz Truss—does not sit there, and the Department for Environment, Food and Rural Affairs Minister doesn't sit there. So, I think, as the Minister said, that governance structure hasn't been sorted out at a UK Government level either.
Okay. We've come to the end of the session. Do any Members have any further questions? No. Then, can I thank you for your attendance this afternoon, Minister? As you know, you will receive a copy of the transcript. Please let the clerking team know if there are any factual inaccuracies, so that we can have them corrected as soon as possible. Once again, thank you for your time this afternoon.
For Members, we move on to item 3, which is papers to note. We have one paper, and that's correspondence from the Counsel General and Minister for European Transition regarding the scrutiny of common frameworks. Are Members content to note that paper at this point? I see they are. Thank you.
bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi) a (ix).
that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi) and (ix).
Cynigiwyd y cynnig.
Item 4 is a motion under Standing Order 17.42(vi) and (ix) to resolve to exclude the public for the remainder of today's meeting. Are Members content to do so? They are. Therefore, we will now move into private session for the remainder of today's meeting.
Derbyniwyd y cynnig.
Daeth rhan gyhoeddus y cyfarfod i ben am 14:30.
The public part of the meeting ended at 14:30.