Trade and Customs Policy

Baroness Murphy Excerpts

Tuesday 5th December 2017 Lords Chamber

[Baroness Murphy (CB)]

My Lords, I am surrounded by trade experts and I am no trade expert, so I speak largely from the gut. I cannot be the only person in this Chamber—I know that I am not from the voices I have heard around me—who finds myself in despair over the performance of our Government in the negotiations leading up to some kind of trade exchange in Brussels. I did not want them in the first place because I cannot see, as many others cannot, what possible improvements in trade over and above what we already have could be achieved by what we are hoping to get in Brussels now. By abandoning the common market and the customs union, it seems to me that we are abandoning things that we have taken so much trouble to build up over the last 40 years.

Secondly, I was ashamed to see our Prime Minister unable to negotiate on the UK’s behalf as a result of what I consider the fickle decision of the DUP to intervene. However, that may be the Prime Minister’s fault. As she had a special relationship with the people in the DUP, you would have thought that she might have turned to the nearest Irish woman or Irish man that she could find before she started these negotiations, but she did not.

My main purpose today is to talk about those members of the Cabinet who are still talking about the possibility of an ultra-hard Brexit and crashing out of the European Union with no deal at all. From what we know about how trade works and how trade deals are done, it seems to me quite unconscionable that we could contemplate such a thing.

The White Paper before us is very pretty. I have never seen Dr Fox with such a big smile on his face. There is a little picture at the front of Britain with laser beams going out from it. I thought that it was a butterfly at first and then I realised that it was the UK at the centre of the world, as the noble Lord, Lord Liddle, said, just like that old Mercator projection that used to hang in our geography classroom at school, which depicted Britain at the centre of the world with all the pink bits round it. Ours still had India in pink, in the early 1950s, I am afraid, as we had an old map. That reminded me that this image harks back to when we ruled 25% of the world. Britain got rich plundering that empire, and I find it quite frightening that pro-Brexit groups should be so deluded as to think that we could so easily remake links that were—in the face of our history—difficult to maintain when we had them, and refashion others that we so casually abandoned when we joined the EU. This trade policy White Paper is, of course, largely aspirational since we have no idea at all what kind of deal is likely to be achieved with the EU: it is riddled with “don’t knows” and uncertainties. As we heard, in another two years at the end of the negotiations, we will probably be on another cliff.

Behind the news of this lurks this persistent and dangerous threat. The more the Prime Minister yields to the EU, the more some cavalier Brexiteers argue that Britain should leave without any deal. The little Englanders hate the concessions that have been made, especially over money. One can predict that the second phase of the negotiations will prove to be even more painful, with the EU sticking right to the rigid line on trade. It would be an unmitigated disaster: it is not the right tactical approach; it is actually an absurd idea. Unfortunately, some really believe that “no deal” would not really be so bad. I believe that there are eight famous economists who agree that it would be perfectly fine, even if there are 8,000 other economists who say it would be crazy. Britain could revert to trading on World Trade Organization terms, but that is not an automatic outcome.

Britain’s relationship with the EU is far more intimate than that of most countries. We have already heard that the EU accounts for 43% of our goods exported and half of its imports; more than that in services, which make up 80% of British GDP, and almost half of exports, so the EU market is crucial. Until that is accepted, I cannot see what we are negotiating about. Theresa May has dismissed a Canada-style free trade deal for reasons that we might understand: it would mean a restriction on our mutual market access. However, we should remind ourselves that the Canada negotiations took seven years, and it has not even ratified it yet, no doubt waiting to see what will happen with our negotiations.

It is also misleading to claim that the rest of the world trades with the EU on WTO terms. The Institute for Government has pointed out that all big countries have bilateral agreements on customs co-operation, data exchange and standards. Only seven countries in the world trade with the EU on WTO terms alone, and they are pretty small fry, such as Cuba and Venezuela, which are rather disheartening bedfellows. Reverting to WTO rules is not simple, as we have already heard. It requires a division of EU import quotas, for example on beef, lamb and butter. Big food exporters such as Brazil, Argentina and America are unlikely to be thrilled with that, nor indeed if we got them would our farmers be very thrilled. The WTO proceeds by consensus among its 164 members. It makes negotiating with the 27 EU countries look easy peasy, does it not?

A no-deal Brexit would undoubtedly damage other EU countries, but Britain would be hit the hardest. Of course it would perhaps mean not paying the divorce bill, which would jeopardise the position of British citizens in the EU and EU citizens in Britain. Amid the recriminations that follow a breakdown of relationships in any divorce with its bad blood, the EU would surely look to its own interests first. We would fall out of all those many EU organisations that we are so dependent on, from Euratom to the European Medicines Agency. I know a little about that agency. We now know that it is going to move to Amsterdam. It will cost us about £532 million: that is our UK cost to move that institution since it is a direct consequence. With it will go at least 800 jobs. There are about 100 very senior people who might move to Amsterdam with it, but that would be all. Not only will we lose that agency and all it brings with it, but it plays host to tens of thousands of national regulators and scientists each year from across the continent, who come to London to negotiate and talk about deals. It puts our own industries in a very favourable position from the point of view of being able to understand what is going on. It seems ludicrous to me that many people voted for Brexit because they thought there would be more money for the NHS. To anyone with analytical nous, this would clearly be a non-starter. It makes it all the more sad that we are going to lose one of these extremely important regulators. Crashing out of the EU would be an absolute no deal for all kinds of reasons, not only in respect of medicines, the pharmaceutical industry and the other things that I know most about, but for all those other incredibly important industries.

The customs White Paper is another bland set of aspirations that ignores the huge problems created by Brexit. I have only one question for the Minister on this. What options in this White Paper appear to her to be superior in the short or longer term, or even as good as the arrangements that we already have? Further interim solutions that give business no certainty seem inevitable, as the paper admits.

I have probably covered many issues that other people have already covered more expertly than I can. I would like to stay within the customs union and single market, but I would much more prefer the solution suggested by the noble Lord, Lord Kerr, of withdrawing our invocation of Article 50. The economic health of our nation is at stake, and I would like the Minister to confirm that the economic health of the citizens of this nation means more to her Government than mollifying the whingeing Brexiteers.