I will respond to Senator Lombard first. On fishing, for members who have been following this process or have been talking to me about it, we have been flagging for 18 months that fishing was going to be the most difficult issue to resolve in regard to Brexit. The reason there was not a significant discussion of fishing as part of the withdrawal agreement was that we knew it would be very difficult to resolve and that it would in some ways poison the discussion that resulted in a withdrawal agreement last year that involved the protocol and all the other matters we know about. The idea of the protocol, and of the commitment in the political declaration that framed the approach towards getting a future-relationship deal, was that we would try to get fishing out of the way first and have it done by mid-summer. As part of that, an informed decision would then be made as to whether there would be an extension of the transition period to allow for all the technical work that would be required for all the other areas, from aviation and road haulage to data, services, financial services, judicial co-operation, security co-operation and climate co-operation. Eleven different strands of negotiation were all moving forward in parallel to constitute the future-relationship deal. Fishing was one but it was always earmarked as potentially the most difficult because of the politics and emotion that come with fishing.
On the British side, one of the reasons that fishing is so difficult relates to the political promises that have been made to coastal communities and fishermen in the UK, and the emotive language of taking back control of laws and waters. The fishing issue has been inextricably linked to the expression of sovereignty on which many people base their Brexit perspectives, which makes it really difficult. On the EU side, it is equally difficult because, at the outset of the future-relationship negotiations, the mandate for Michel Barnier was to maintain the status quo on fishing, in terms of access and quota share. The reason the EU was so demanding of Michel Barnier was that fishing was to be negotiated in the context of an overall deal and the UK was seeking and still seeks EU facilitation in many different areas. The UK wants to access for free the EU energy markets and to get a facilitation for aviation access, road haulage access and tariff-free and quota-free access to the EU Single Market. It also wants access to financial services.
The EU, perfectly reasonably, said that if it was to facilitate UK access to the benefit of the British economy in all these areas, surely it was not unreasonable that the EU would ask for access into British fishing grounds to ensure that it could protect the interests of its fishermen in the same way that the UK is seeking access into EU markets for the benefit of many different sectors of its economy. Michel Barnier was instructed that the price of the facilitation in many of these other areas was to seek a reasonable agreement that would involve compromise, and potentially some transfer as the negotiations have developed of increased fishing opportunities for British fleets in British waters, but that there would still be a long-term certainty about access and quota share that would be reasonable. That is where these negotiations have gone.
The starting points were extremely far apart and they have moved slightly closer to each other. The combined EU fleets in British waters - Spanish, French, Dutch, Danish, Belgian, Irish - catch about €650 million worth of fish per year, although the UK, obviously, catches a substantial quantity of fish in its own waters. The UK has stated that it wants 80% of that back, that is, €500 million of the €650 million. The EU has offered about €100 million, or slightly more than that, in recognition of the change that Brexit will bring and so on. While both sides have moved slightly closer to each other, it is still a significant gap. How we bridge that in a way that will not create winners and losers on the fishing debate linked to Brexit is the big challenge.
There will not be an agreement unless we can find a solution on fishing. There is no way the EU or I will support an agreement that can, effectively, be described as selling out our fishing interests to get a deal on everything else because fishing represents a very small percentage of overall GDP. About 16,000 people in Ireland have employment linked to the fishing industry. It is worth between €1 billion and €1.5 billion to our economy. The communities that rely on that income and those jobs do not have a whole lot of other alternatives. Coastal towns such as Killybegs and Greencastle, Rossaveal, Castletownbere, Union Hall, and along the south and east coasts, are heavily reliant on the fishing industry, both demersal and pelagic, and on accessing some of that stock in British waters. The two most important stocks for us in value terms are mackerel, on the pelagic side, although it is supplemented by herring, horse mackerel, blue whiting and so on, while on the whitefish side, there are all the other demersal stocks from haddock and cod to saithe and all the others. Prawns too are a significant part of our fishing industry.
We are trying to ensure that the Irish fishing industry survives Brexit, not on the basis of financial compensation for loss of fish but by ensuring it can access fishing opportunities in the future to keep these communities intact from a fishing perspective. As for the effort to suggest that they could be paid off and financially compensated for dramatic losses in order to get a deal, that would be a disastrous outcome. We want fish, not money. Compensation packages are about restructuring industries and so on and money will be needed arising from Brexit and Brexit disruption but in the case of fish, the most important thing is to maximise fishing opportunities and access into British waters. We must also limit the displacement problem that will arise from limited access to British waters, which may drive many other EU fleets that currently catch fish in British waters, which may lose those opportunities, into Irish waters. That would be a double negative for the Irish fishing industry in terms of sustainably managing our stock.
If I am overdoing it on fish, the Chairman should stop me but this is an important issue. The final thing I will say on fish is this assumption some people have that all fish caught in British waters are British fish also needs to be challenged. It is this idea of zonal attachment that where the fish are caught is where the fish are owned.
If one looks at the most valuable stock, which is mackerel, the truth is that most of the mackerel we catch off the west coast of Scotland are actually born off the west coast of counties Kerry, Cork and Clare. They mature, grow and swim north past the coasts of counties Galway and Mayo and mature into adolescent fish off the coasts of counties Mayo and Donegal, where some of them are caught as they become adults. Most of them, however, then swim into Scottish waters as adults when the fat levels are right and they are ripe to catch in the most sustainable way. These are not Irish fish and they are not British fish. They are a shared stock that is hugely valuable for everybody who catches them. We need to manage them in a sustainable way that does not create perverse incentives for the Irish fishing fleet to catch them as juveniles before they swim across this imaginary line at sea where they enter British waters. That is the danger.
If, therefore, we are serious about protecting our stock, which is an extraordinary resource that is shared in a sort of transnational way between EU, Irish and British waters, then we need a fisheries deal that recognises this is a shared stock which swims between jurisdictions and cannot have these simple hard and fast political slogans attached to it linked to sovereignty, and so on. I suspect a mackerel off the coast of County Mayo swimming towards Scotland does not feel Irish or British, quite frankly. They just happen to be swimming in those waters that are highly fertile fishing grounds for everybody.
That is the challenge of fish and whether it gets put off. The danger for putting it off or doing a partial agreement now and coming back in five years' time, which has been written about, is that if one puts the decision off it is hard to then come to an agreement on fish that is part of an overall agreement where there is give and take in many other areas, whether that is energy, services, financial services or whatever.
The only way to get a fair deal on fish for the EU side is if it is part of a bigger package of arrangements where the UK wins in terms of accessing EU markets in many areas and the EU gets a reasonable deal which allows our fleets to be able to access fish in British waters, whereas, if one isolates fishing and does it on its own it becomes a sort of horse trading session, stock-by-stock, where the UK demands X and the EU can only give Y. One then tries to find some arrangement in the middle, which is not easy.
We need to try to take the emotion and emotive language out of this particular element of the negotiation and try to have as much pragmatism as we can towards recognising British sovereignty. That is a must to get a deal. Britain needs to be respected as an independent sovereign country outside of the EU. At the same time, however, it also needs to respect that we have fishing industries and families who rely on income from fish and who have been fishing in these waters for many decades. As part of an overall package where the UK is facilitated, the UK also needs to recognise EU concerns in this area.
I will be much quicker on the other issues and around the governance issue. My understanding is the negotiations at the moment are centred around, first, that the EU can never sign up to a trade deal that involves no tariffs or quotas unless it can have reassurance around fair competition. The UK is just too big an economy and too close to the EU Single Market to have tariff-free trade and a risk that a future British Government could decide to create competitive advantage for its economy by deregulating that economy or by applying state aid that goes way beyond what the EU allows in the Single Market, and then have free access into the Single Market to use that competitive advantage for the British economy. That can never be facilitated. The EU wants tariff-free trade and a trade deal that allows as seamless a trading relationship as possible. It must, however, get guarantees around fair competition between both economies. There needs to be a series of sectoral agreements around the principle of fair competition on a level playing field. We know the kinds of areas we are talking about there from environment to labour standards, consumer protections, taxation, state aid and so on.
Second, one then needs governance arrangements that can deal with disputes if and when they arise. In other words, what is the consequence if somebody breaks that agreement? As a result of the Internal Market Bill and the approach taken by the British Government in these negotiations which said, effectively, in the case of the Internal Market Bill, unless it can implement the protocol in the way it would like, then it will pass legislation anyway to give a British Minister the power to do that, overriding the protocol and breaking international law and the terms of that treaty. Since that approach, which has damaged trust, I believe the EU is even stronger now. It needs a robust and independent dispute resolution mechanism and a governance around it, which the UK and the EU accepts, that allows there to be a consequence that would be triggered quickly for a breach in the level playing field agreement. In other words, if one side breaches it, the other side can retaliate within the framework of a deal and that would be facilitated through a governance arrangement, and so on.
These kinds of things are difficult to design and get right and, of course, all this must respect British sovereignty outside the European Union, making its own decisions in its own parliamentary system through its own legal mechanisms and courts, and so on. That is complicated, to say the least. Those two issues are level playing field and governance and the difficult issue of fishing, which goes way beyond its value financially because of the reasons I hope I have outlined.
The state aid issues as they relate to the protocol are slightly different because there is a dispute between both sides. No one is disputing that under the protocol that Northern Ireland needs to mirror EU state aid rules in terms of level playing field. It gets complicated if a company has a footprint in Northern Ireland and in Great Britain. If a future British Government provides significant state aid to a parent company in Great Britain, does that derive competitive advantage for a satellite of that parent company in Northern Ireland in a way the protocol does not cover? We would say the protocol covers that but the British Government has a different perspective.
I want to pay tribute to both Mr. Michael Gove and Mr. Maroš Šefcovic, who are the two co-chairmen, one might say, of the joint committee which is responsible for the implementation of the withdrawal agreement. They have a good relationship and I believe there is much pragmatism now in the process of trying to find ways of implementing the protocol in a way that makes life as straightforward as possible for all the different stakeholders impacted by that. We are getting pretty close to agreeing the outstanding issues in terms of the implementation of the protocol because of that pragmatic relationship between those two individuals and their teams. I believe that would be fair to say.
All of the media coverage focuses around the Michel Barnier-David Frost relationship and the task force versus the British negotiating team. Much quiet and good detailed work linked to the joint committee and specialised committee has been done and few outstanding issues are left in the context of implementing the protocol in full. I hope that will mean the British Government will not make what I would regard as a significant mistake next week as this process hopefully draws to a conclusion and reintroduces Part 5 of the UK Internal Market Bill, which had been removed by the House of Lords, in a way that threatens to breach, in British law, the withdrawal agreement again.
There is also, potentially, a second piece of legislation, a finance and taxation Bill, that would do the same. If the British Government does that, it will be a clear signal to the EU that this process is not going to conclude well and, effectively, that the UK does not want a deal. I hope that does not happen. We have certainly given signals in as respectful but blunt a way as we can that it would be a mistake for the UK to do that at this stage. That was reflected in Michel Barnier's briefing of the Committee of the Permanent Representatives of the Governments of the Member States to the European Union, COREPER, meeting this morning.
Days matter in these negotiations. A lot of negotiating will happen between now and next week when the United Kingdom Internal Market Bill may come back into the House of Commons and the finance Bill may also come to the House of Commons. I hope that there will be no need for any domestic legislation that threatens the implementation of the protocol because of a successful outcome of negotiations. Time will tell. I am afraid that there is still quite a lot in this.