Brexit: The Customs Challenge (European Union Committee Report)

Lord Triesman Excerpts

Monday 1st April 2019 Lords Chamber

[Lord Triesman (Lab)]

My Lords, it was a pleasure to serve on the sub-committee chaired so effectively by the noble Baroness, Lady Verma, whom I thank.

After all these months of delay, waiting for the Government to respond, we should consider where we are overall. The Government are hardly prepared for the customs arrangements that would be needed for any version of hard Brexit, and the businesses and individuals who will have to operate in this environment have few clues as to what to expect. People in haulage, ports and administration have a sense of application to do their best, but nobody has been able to tell them which best they should do.

All the time, the clocks are ticking. Complex supply chains face multiple difficulties without any real prospect of resolution. With the small cavalcade of lorries in Kent, the appointment of a ferry company with zero experience, zero ships and zero port agreements, the emergency plans for food and medical shortages and the declaration of the possible need to contain civil unrest with military deployments, it is hardly surprising that nobody is oozing confidence. The sunny uplands are a fantasy. We Brits are a pragmatic and phlegmatic lot, but this has felt to me like launching Eddie the Eagle down a precipitous slope to jump against seasoned athletes, our best aspirations amounting simply to hoping he will survive.

In the area of customs, I still do not know what our national vision is. How does that vision, if there is one, link trade and customs provisions with economic performance, and thus with other vital interests such as security, defence, foreign policy, justice, home affairs and other key sectors? Customs and trade are essential components of a successful economy, and a successful economy holds the key to everything else.

In all markets between nations, including the WTO’s often dysfunctional system, we generally acknowledge that there must be rules so that everybody knows the standards within which they will trade. Even outside the EU’s customs union, checks and intrusive procedures are still inevitable. How else will we deal with, for example, the enduring compliance with preferential rules of origin? If we are to enjoy the frictionless benefits of being inside, do we really think it right to do so without accepting that there are both rights and responsibilities?

Customs arrangements underpin many of the things the United Kingdom values very highly: mitigating risks to public health, reducing environmental risk, food safety, the operation of financial regulation, the social market and decent workers’ rights. None of these is a second-order issue for the quality of our social fabric.

The sub-committee pulled me back to thinking about our national strategy. The United Kingdom may no longer be a great power, but we can be a very good second-tier power and project ourselves internationally with effect. To do so we need to demonstrate our ethical trustworthiness, and this must be underpinned by serious intellectual endeavour. We need credible forces, as the noble and gallant Lord, Lord Stirrup, and my noble friend Lord West often remind your Lordships’ House, and the foundation for it all is a sustainable economic capacity to deliver on these other interlocking attributes. No nation on earth can do these things on its own—not one.

Let the House be candid about the economic world we inhabit today. Customs problems are not the only problems on the economic horizon, and we had better understand the cumulative effect of all the problems we may well face. China’s growth is now far weaker than it was before 2007, and in essence has been driven only by the injection of a $586 billion stimulus in 2009. That is now impacting on much of the world’s economic prospects. The recovery of the United States is evidently unstable. The poor are becoming poorer. Average wages last year retreated to the purchasing power of 1978, and US retreats always have their effects in Europe and Japan. Europe is sluggish at best. Germany had zero growth in Q4 last year and barely sidestepped recession. Italy has negative growth, and the UK’s growth was the weakest since 2012. There is a correction as the post-2007 recovery regimes are changed and monetary tightening takes effect. The yield curve has inverted, showing how anxious investors have become—always a warning of recession. The eurozone crisis deepens.

Private debt once again threatens the stability of many major economies. In the United States, private debt is higher than before the housing and mortgage crisis of 2007, and is now fuelled by borrowing to speculate. Global debt is three times global GDP. It impacts on corporations and individuals, and in China on just about everything and everybody. Growth is squeezed out by unsustainable and unpayable debt. Investment in wages and productivity continues to be in grim decline. In short, the predictive indices that have preceded past financial collapses are as visible today as the queues once were outside Northern Rock.

This is the economic climate into which we want to add the uncertainties of trading without proper customs arrangements, reintroducing significant friction between us and our nearest huge markets, and our political, trading and security partners. It is hard to believe that anyone would take such a course willingly. Of course, there may be no certain and smooth economic path open to us, but following the worst options could well be the straw which breaks the camel’s back.

Our country has been served very poorly, both by its Government and by the Official Opposition, but it would surely prefer to meet its global and domestic strategic objectives in leadership and values, intellectual capability, security and defence through a viable military—to meet its obligations in the world as it has always tried to do. While customs may appear to be just a piece of this jigsaw, it is about economic capability and therefore about the interplay of the overall strategic fabric. We can do without cutting unmendable holes in that fabric.