Brexit: The Customs Challenge (European Union Committee Report)

Lord Bilimoria Excerpts

Monday 1st April 2019 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, this report once again illustrates that the best deal for this country by far is the deal that we have at the moment as a member of the European Union. When the noble Baroness, Lady Verma, introduced her committee’s report Brexit: the Customs Challenge, which was published on 11 September 2018, I was shocked that more than six months later the Government have not provided an official response. Will the Minister, who I respect greatly, explain why that is the case?

On 17 January 2017, the Prime Minister famously put down her red lines which involve leaving the European Union, the single market and the customs union. Then she progressed towards a facilitated customs arrangement. Throughout this Brexit process the Government’s approach has been to continue to try to have our cake and eat it. The 27 countries of Europe have given a clear mandate to one individual, Michel Barnier, and they have stuck to their guns. They have been intransigent but fair in that they have not moved on their position that we cannot leave and expect to have the same terms as if we are a member.

HMRC has said that the estimated annual cost to UK traders of no deal is £18 billion, which is more than twice what we contribute annually for membership of the EU and which I would pay for the peace we get thanks to being a member of the European Union. If we go for WTO rules, there is no question that it will be disruptive and costly, as the noble Baroness, Lady Verma, said earlier. Tariffs will apply and although they are low we will see them go up in many areas. We have heard that 145,000 VAT-registered UK businesses and potentially a further 100,000 businesses under the VAT threshold currently trade exclusively with the EU. That is a huge number of businesses, and we are reliant on roll-on roll-off ports. The introduction of any new customs checks under no deal will be highly disruptive. There is no question about it. We have heard in this debate that many companies rely on just-in-time. Many manufacturers send products backwards and forwards to and from the EU. It is quite frankly—what word should I use?—laughable that when Dominic Raab was Secretary of State for Brexit, he said that he did not realise how important the Calais-Dover corridor is for frictionless trade. That is astonishing, to put it mildly.

Then we have the implications for the UK-Ireland relationship. The UK’s role as a bridge between Ireland and the EU has already been mentioned in the debate. It is 10 hours door to door for a lorry leaving Dublin for Calais using the land bridge. If it has to go all the way round, it will be 40 hours. At the moment there is no technology that will sort out the issues and keep the Irish border frictionless and open. Will the Minister confirm that I am not mistaken and that HMRC has admitted that it does not have the technological ability to cope with a no-deal Brexit, even with a two-year implementation period?

Here is the reality: the EU is the UK’s largest trading partner for goods. Last year exports to the EU accounted for 49% of the total value of UK goods, and imports from the EU were worth 55% of the value of all UK goods imports. That is 50% of our trade, whichever way you look at it. The Government are openly admitting that they have limited options to mitigate any no-deal scenario, yet more than 170 MPs signed a letter saying that we must go for a no-deal situation—that we must commit suicide as a country. That is what they are saying.

The ports of Dover and Calais operate on a closed-loop system. The Government spoke about temporary tariffs on 13 March, but the reality is that tariffs will still apply to 13% of goods and some of them will be really high for products such as beef, lamb, pork and poultry. Half the UK’s food is imported: 30% comes from the EU, and another 11% comes from non-EU countries under terms of trade negotiated by the EU. Brexit is likely to result in an average tariff on food imports of 22%. Does the Minister agree with that? All the trade agreements that we have with more than 56 countries cannot easily be rolled over. As we have seen, the Government will hardly be ready to roll over six of them.

The political declaration is a wish list—it is wonderful. It says:

“The Parties envisage having a trading relationship … The economic partnership should ensure no tariffs ... The Parties will put in place ambitious customs arrangements”.


Nothing is definite. It is not a legal document; it is a wish list full of platitudes. Professor Catherine Barnard of Cambridge University and Professor Anand Menon have said:

“WTO terms provide a basic floor for world trade … However, the inadequacies of these arrangements provide incentives for countries to go further and seek preferential access to tackle issues inadequately covered through WTO rules”.


That is why we have free trade agreements, and it is why we are part of the European Union. They continue:

“The WTO option alone would have a significantly disruptive impact on trade between the UK and the EU, and even on some UK trade with other parts of the world. Falling back on WTO terms would be, to say the least, suboptimal politically, economically and socially”.


Pre-Brexit, we know that—we have low tariffs. However, let us look at the average EU tariffs on agricultural products. Some of them are very high, so our agriculture sector is protected by our being a member of the EU. The EU explains that its customs union has very clear principles: no customs duties on internal borders between EU member states; common customs duties on imports from outside the EU; common rules of origin for products from outside the EU; and a common definition of customs value. UK businesses are therefore saying, “Please, please, let us remain in the customs union”. The EU says that it is ready for no deal but, quite frankly, the Irish Government are not. Angela Merkel is going to Dublin. Whatever happens with Brexit, the EU wants to make sure that the Irish border is properly protected.

To conclude, Simon Jenkins has said today that it is time for common sense on Brexit—that a customs union must prevail. He says:

“May will be accused of repeating Robert Peel’s split in 1846 over the corn laws. She should remember that Peel faced down his backwoodsmen and created a Conservative party fit for the Victorian age. He was in the right”.


The Conservative Party was also out of power for 28 years. The Evening Standard has just said:

“Titanic crash looms for the Government”.


Finally, the UK chief executive of German manufacturer Siemens is pleading with Britain, saying:

“Brexit is turning Britain into a laughing stock”.


Siemens turns over £5 billion and employs 15,000 people in this country. He is asking for us to stay in the customs union.

However, the customs union itself is not enough. We need to stay in the single market as well, and the best option by far, if we had the guts, would be to revoke Article 50 and then to put it to the people, saying, “Now that you know everything, are you sure that you really want to damage our economy, our livelihoods, and our citizens’ and our children’s future?” I am convinced that the public would say, “Absolutely not. Now we know, we would rather remain in the European Union”.