Exiting the European Union and Global Trade Debate
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Bernard Jenkin
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Exiting the European Union and Global Trade
Bernard Jenkin Excerpts(7 years, 4 months ago)
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Mr Bernard Jenkin (Harwich and North Essex) (Con)
Could the Government make it clearer that we want an open trading relationship with our European partners and that it is up to the European Union to decide whether they want that or not? Will the Secretary of State also ask who is arguing for protectionist measures against an independent United Kingdom? I do not hear many voices in the EU arguing for that, and I think that that is just a fear put about by people who want us to stay in the European Union.
Dr Fox
Our debates are watched beyond our shores, so perhaps the first point to make is that we are leaving the European Union. There is not any chance that we will not leave the European Union. The British people have spoken and the process, including the parliamentary process, has begun to make that happen. As we do this, we have to look beyond our membership of the EU and determine what sort of global trading environment we want to live in. We are very clear about the model we want, I have travelled to other countries, and we are encouraging Governments beyond the EU to say to our European partners that it is in everybody’s interests— including in Europe and in the wider global trading environment—that we maintain as open a global trading basis as we possibly can.
At a time when the direction of travel in the rest of the world is towards greater liberalisation, it would make no sense for Europe, for internal political reasons, to introduce impediments to that trading environment in the way some have suggested. I do not believe that that is in the interests of the citizens of Europe, whether in the United Kingdom or on the European continent. If we are guided not by abstraction but by the prosperity and wellbeing of our people in the negotiation, we are likely to come to the right outcomes.
To build a free trading world, the UK must continue to support, strengthen and promote the existing global trading structures. The World Trade Organisation is the home of the rules-based international trading system, as the shadow Secretary of State and I agreed earlier this morning, and we unequivocally support it. Its predecessor, the general agreement on tariffs and trade, was established in 1948 to offer a war-torn world stability, security and prosperity through international trade co-operation. The United Kingdom was there from the beginning, and for half a century we worked with our international partners in a series of ministerial rounds dedicated to removing barriers to trade and liberalising the global economy.
The WTO was established in 1994, following the success of the Uruguay round. For the first time, we had an international body with truly global reach that existed to regulate trade and to encourage nations to adhere to the principle of ever-greater trading freedom. If the WTO did not exist today, we would need to invent it. Britain is a founding member, and we are a member in our own right, but on leaving the EU we will need to update the terms of our WTO membership; at present all our commitments are applied through the EU as a whole. Constancy and continuity will be a key to our approach.
As I set out in the recent ministerial statement, we anticipate that our rights and obligations to other WTO members, as provided under the WTO agreements, will remain largely unchanged. We will achieve that through a process of replicating our current commitments, which will cause the minimum disruption to trade and the maximum certainty and confidence. I am grateful to the secretary-general of the WTO, Roberto Azevêdo, for confirming that the WTO fully supports this aim for stability. I thank him and his staff for the support they have given the United Kingdom in Geneva.
Let me also be clear that replicating the EU-WTO schedules for the UK’s independent use in no way prejudges the outcome of the article 50 negotiations with the EU. The process is largely technical and reflects the close ties of trade and commerce that we will continue to share with the EU, even after our exit. Throughout the process, it is imperative that we maintain transparency both with this House and with our fellow WTO members. I reiterate the offer that I made in private to the Opposition Front-Bench team: should they wish to visit Geneva and get a high-level briefing with our ambassador and the secretary-general, the Government will happily facilitate that. The better informed we all are in the House in these discussions, the better.
Barry Gardiner
The point I would make to the hon. Gentleman is that the triggering of article 50 was setting precisely the timeframe in which he was to buy the car. It said that within two years either we had to negotiate a deal, or we would be trading on World Trade Organisation terms. He makes my point precisely.
Barry Gardiner
I am sorry, but I will not give way again, because I have given way many times and I am conscious that more than 20 Members wish to participate in the debate, and we have to be fair to colleagues.
My party has consistently said that economic logic should dictate the outcomes of the Brexit negotiations. Certainly we must not jeopardise a positive new trade deal for some arbitrary immigration targets set for political reasons. We need a new trade deal with the EU. It must maintain the supply chains and business relationships that link us to the EU and that are so critical for jobs and economic wellbeing.
Let us remind ourselves just what is at stake. The European Union currently accounts for 44% of our exports. The EU remains our closest trading partner, in terms of the volume of trade and geographical proximity. The top 10 Commonwealth trading partners combined account for just 8% of our exports, and the entire Commonwealth—all 52 countries—accounts for just 9%. The Secretary of State once referred to protectionism as a class A drug. If he really thinks that his current round of trade dialogues could possibly make up for the shortfall in goods exports of leaving the EU without a new free trade agreement in place, then protectionism is not the only class A drug he has been smoking.
Labour, business and the trade unions are united in prioritising the best possible access to the single market once we have left the EU. That means continued tariff-free access, no new non-tariff barriers to goods or services and, if necessary, a transitional arrangement to avoid any cliff edge.
It seems that we might lately have recruited the Chancellor to our cause. His Mansion House speech certainly seemed to have swallowed the Labour party playbook whole: fair and managed migration; a Brexit for jobs; and no deal being a very, very bad deal. Securing a trade agreement with the EU must remain the Government’s No. 1 priority. Leaving the EU without a trade agreement would be a significant failure by the Government, and the British public will remember that they were repeatedly told—we heard it repeated today—that it could not happen because the EU countries traded with us more than we did with them. Without an early and comprehensive deal with the EU, there will be substantive tariff and non-tariff measures, which will cause friction in trade between the UK and the EU, whether in customs duties, customs checks, visa processes for service providers or renewed VAT procedures.
The Government are to bring in the great repeal Bill to get rid of the European Communities Act 1972, which incorporates European legislation into domestic law and grants it supremacy over domestic law. Therefore, European legislation currently in place will be converted into ordinary repealable legislation. On the face of it, that appears to mean that the UK will be able to legislate without any regard to EU law. However, if we are to maintain a high level of access into the single market and preserve the supply chains currently in place, our exports will still have to meet European standards and requirements.
Much of the current legislation will have to remain as is. Our future legislative framework will need to be aligned to that of the EU in order to maintain the mutual recognition and equivalence necessary to trade into the European market. This is something that many British and foreign companies, including Toyota, BMW and the Confederation of British Industry, have been calling for. We will no longer have a seat around the negotiating table that decides on product and other standards, but we will be forced to accept them if we wish to continue trading into the single market. People might think that this is a rather hollow way of returning sovereignty to the UK.
In any free trade agreement that the UK negotiates after we have left the EU, we will have to make some compromises on our sovereignty. The UK will continue to be subject to some supranational court system—if not the European Court of Justice, we will be subject at least to the World Trade Organisation dispute settlement procedures. Importantly, modern free trade agreements often involve the harmonisation of national standards to match those of the partner country in order to be able to trade freely. This is not necessarily negative. International trade agreements provide an opportunity to promote higher standards across the world, rather than a race to the bottom, if they are negotiated correctly.
There is no dichotomy between trade with the EU and trade with the rest of the world—that is simply absurd—but our global trade opportunities will be shaped by our future relationship with the EU, whatever that is. Prospective trade agreement partners will want to know what trading bilaterally with the UK will mean for access onwards into the EU.
Barry Gardiner
My hon. Friend is absolutely right to point out that, were we to go on to WTO terms—from memory, the tariff rate for sheepmeat is about 44%—we would absolutely destroy the capacity of our hill farmers in particular to compete with foreign imports.
The Government need to come clean and give clarity to the British food and farming industry on our future trade policy options and what that means for the industry. It is not good enough to tell farmers that the status quo will be maintained until 2020 and then leave an abyss as to what options are available for their future. These people need a comprehensive international trade policy, and they need to know what it is.
Beyond Brexit, as the United Kingdom once again assumes competence for its own independent trade agreements, the Secretary of State must set out how he is pursuing agreements that share the benefits of globalisation more equitably. One can only wonder that this Government thought it sensible to embark upon a new industrial strategy without first publishing a White Paper on trade, so will he publish a trade White Paper? He has introduced a trade Bill in the Queen’s Speech but, as of this moment, he has not set out to Parliament or to business any policy on which to base it.
The Secretary of State has been travelling around the world holding preliminary talks with his counterparts. In fact, he has recently returned from a visit to the USA. When the Prime Minister first announced the start of preliminary talks with the USA, the American Farm Bureau Federation wasted no time in confirming that it would seek food hygiene changes in any UK-US deal, namely to end restrictions on US exports of chlorine-washed chicken and hormone-grown beef. Will the Secretary of State confirm to us that, in any talks about future trade deals, the sovereignty of our food safety and environmental protection standards will be not be sacrificed in the name of regulatory harmonisation?
An industrial strategy and international trade White Paper should have come together precisely because of the interdependence of trade, job creation, and economic growth. That makes Labour Members fearful that the Government have not done the proper assessment of the danger that future trade arrangements could pose for job losses and wage depression. The Government have put the cart before the horse. A trade White Paper should set out what the UK’s future policy on trade defence instruments will be. The EU currently has in place a series of trade defence measures, such as anti-dumping measures against China—and, to a lesser degree, India and Malaysia—on steel, other metals, and solar panels. The UK has famously opposed such measures at the EU. Now that we will be able to set our own trade policy, the Government must tell us whether they will stick to that line. If they do not plan to introduce trade defence measures, they need to set out whether and how they will protect and support sensitive sectors such as the steel industry and the solar panel industry from cheap imports.
The Government must also weigh whether they can afford to take a tough stance with countries like China and India with which they will be looking to conclude trade deals—or will they sell out our steel sector and others? The UK steel sector is in an existential crisis. My hon. Friend the Member for Middlesbrough South and East Cleveland, who chaired the all-party parliamentary group on steel, and my hon. Friend the Member for Aberavon (Stephen Kinnock), who launched the “Steel 2020” report earlier this year alongside my hon. Friend the Member for Redcar (Anna Turley), expressed outrage at the Government’s leaked memo that suggested steel would not be a priority industry post Brexit, threatening to destroy the very livelihoods of communities across England and south Wales. Similar concerns were raised by my hon. Friend the Member for Stoke-on-Trent Central, as the ceramics industry in the Potteries faces increasing competition from Chinese dumping on world markets. The British Government have for the past number of years been blocking efforts by the EU to introduce the sort of anti-dumping measures employed by the US by repeatedly exercising a veto and actively encouraging a blocking group of other nations. One official in Brussels is reported as saying:
“The British are sacrificing an entire European industry to say thank you to China for signing up to the nuclear power project at Hinkley Point, and pretending it is about free trade.”
It is right that we reach out to our international counterparts, but travelling around the world to hold “pre-negotiations” is no substitute for clear policy that sets out what our negotiating armoury is. An international trade White Paper should set out the Government’s principles—a clear plan of what the UK intends to achieve through future trade negotiations.
Sir William Cash
I will not give way just yet.
The speech by Mr Barnier today is extremely relevant, and I have the benefit of having the full text here. I will not go through every detail of it, I can assure you, Madam Deputy Speaker, but I note that some of the things that he said are highly relevant to what my right hon. Friend the Secretary of State rightly pointed out in his speech. On the question of what happens if there is no deal, Mr Barnier said:
“Here also, I want to be very clear: in a classic negotiation, ‘no deal’ means a return to the status quo. In the case of Brexit, ‘no deal'”,
he claimed,
“would be a return to a distant past.”
He is wrong—that is not the case. I think the hon. Member for Brent North said that under the World Trade Organisation tariffs, there would be a 40% tariff on lamb, but even Mr Barnier says that custom duties would include
“an average of 12% on lamb and also fish”,
which is very different from what the hon. Gentleman asserted. I do not blame him—he was speaking from memory, so I am not criticising him—but I am just pointing out what Mr Barnier said.
Mr Barnier also made the extraordinary assumption:
“In practice, ‘no deal’ would worsen the ‘lose-lose’ situation which is bound to result from Brexit.”
Again, he is wrong. He went on to say:
“And I think, objectively, that the UK would have more to lose than its partners.”
That is just not so. He then went on to reveal what is really going on at the EU and with his negotiating position:
“I therefore want to be very clear: to my mind there is no reasonable justification for the ‘no deal’ scenario. There is no sense in making the consequences of Brexit even worse. That is why we want an agreement.”
They want an agreement because they know, just as Allister Heath, the distinguished editor of The Sunday Telegraph, pointed out in an article two weeks ago, that German car makers are getting really worried about the idea that there will not be an agreement, because that is not in their interests either.
On trading relationships, it is absolutely essential to remember that, while we will continue to have some 40% of our trade—although the figure is declining—with the internal market, or the framework of the remaining 27 member states, we run a monumental deficit of £71 billion a year with the EU, as the hon. Member for Luton North (Kelvin Hopkins) has said. That figure went up by £10 billion last year alone, and we do not even have this year’s figures, which will be even greater. The Office for National Statistics may have indicated to my right hon. Friend the Secretary of State how much worse they will be by this time next year.
By the same token, our global trade surplus with the rest of the world, in goods and services, imports and exports—that is the golden thread and the parameter that international trade statistics rely on—is expanding at an enormous, accelerating rate. That is the basis of our future prosperity. I say with respect to Opposition Members that more effective trade with the rest of the world, including taxing companies, will result in greater profitability. Out of that enormously growing prosperity zone, we will be able to pay for the public services that the public want and we want. The national health service will actually have more money at its disposal as a result of our successful international trading relationship with the rest of the world.
Mr Barnier went on to make an interesting observation:
“To my British partners I say: a fair deal is far better than no deal.”
That may be how it looks, but the truth is that they have to be very careful that they do not put us in the position of having to accept the idea of no deal. If that happens, as my right hon. Friend the Secretary of State has said, the advantages to us of trading on WTO terms are simply not unsatisfactory at all—quite the opposite. We all need to be realistic.
Interestingly, Mr Barnier then referred to the great port of Zeebrugge, which he said he will visit shortly,
“and for which the UK is the primary market with 17 million tonnes of roll-on roll-off traffic in 2016”.
He went on to say that he could not imagine, in the interests of the UK, Flanders and Belgium, that it would be a good idea to have
“an interruption of supply or a highly efficient organisation being called into question.”
We do not want a trade war over ports with the rest of the European Union. As I pointed out in an intervention, it was the EU that introduced the ports regulation. We had a massive row in the House of Commons, including in Committee, and I have been dealing with the issue as Chairman of the European Scrutiny Committee for the past two years. It is, however, going ahead, and the reason for that is that there is no way we can stop it. That is the response to the questions that have been asked. The reality is that until we get our sovereignty back and get the ability to run our own ports system on our own terms, we will be subjected to things like the ports regulation, which was put through by a majority vote behind closed doors. Nobody really knows who decided what. I tried to find out, but we could not make any serious progress in discovering who was making decisions. A lot of it, I think, was coming from Hamburg, because it has an enormous interest in preserving its own position.
The imposed rules were rejected by every single one of our 47 ports—not just the employers but the trade unions, which all piled in and said, “We can’t tolerate this new ports regulation.” Yet there it is, going through, if it has not gone through already while we were away for the general election. The bottom line is that our ports are the arteries for the lifeblood of our international trade, and they have been such for four centuries, as my right hon. Friend the Secretary of State said.
Mr Jenkin
I remind my hon. Friend and the House that the reason it is a ports regulation is that when it was a directive it was blocked by the European Parliament. So undemocratic is the EU’s legislative system that the Commission can force it through as a regulation, so even the European Parliament cannot block it. What kind of democracy is that, and is it not a good thing that we are getting back control over our laws?
Sir William Cash
My hon. Friend and I have been battling on these questions for 30 years, including since Maastricht. He hits the nail on the head. Democracy is lacking in the European Union. The freedom of choice to which Donald Trump referred today—the freedom of sovereign nations to decide their own democratic decision-making processes, including the right to determine their own trade policies—does not mean that there is anything negative about our ability to deliver what is in our national interest. All our history, and every single aspect of our life in this Parliament for centuries, has depended on our ability to make up our own minds about what is in the interests of our own electorate, based on the general elections at which they exercise their freedom of choice. That freedom of choice is based on the word “freedom”.
The key point is that, as the likes of John Bright and Richard Cobden understood, freedom includes freedom of choice—freedom of choice in the marketplace and economics, and freedom of choice to make electoral decisions in the ballot box. That is why they worked towards giving working people the right to vote in 1867. It is all about freedom; when we have that freedom, we will be able to make decisions in our own national interest. My right hon. Friend the Secretary of State is right to say that we have done so successfully for centuries.
Mr Vaizey
And Russian. So everything is now in place for progress to be made.
I have to say that I am sceptical about the future. May I quickly add that I do not work for the BBC? However, I want to use this opportunity to say that I am a huge supporter of the BBC and of BBC news, which is respected all around the world. Those people who question the BBC’s patriotism or declare that it is somehow biased in this debate are absurd. You can see me on YouTube, when I defended George Osborne’s Brexit emergency Budget debate, being torn apart by Andrew Neil. He cut me no slack as a remainer coming on his programme. The BBC is not biased or partial, and people who claim that it is have simply lost the argument.
Let me get back to the main point of the debate, which is trade. I confess that I find this country in a confusing position. We are leaving the European Union free trade area that gives us access to 500 million consumers in order to trade with them on the basis of the World Trade Organisation rules. That seems to be the only position that we are taking. At the same time, we will negotiate a free trade deal with the United States because we do not like trading with that country on a WTO basis, so I am completely unclear as to what our position is on free trade and why we are walking away from 500 million consumers. I also find it odd that we want to have no deal rather than a bad deal.
It is quite clear from Michel Barnier’s speech this morning that we cannot pick and choose which sectors might benefit from access to the single market. It is also clear that having access to the single market and being a member of the European Union enables us to have free trade. The European Union has negotiated 60 free trade deals. The House approved a free trade deal with Canada this week, and another has seen exports to Korea rise by 54%. The EU has just started negotiations with Japan, and it is through no fault of the EU that we do not have a trade deal with the United States.
Trade deals are not necessarily nirvana. Ministers and others say that we will be able to have free trade deals from the day we leave the European Union, but I caution them as to the nature of those free trade deals. My hon. Friend the Member for Stone (Sir William Cash) talked about the virtues of free trade, with which I agree, and the opportunity to reduce import tariffs, but he has to be aware of the reaction of the British public and different sectors of the British economy if we simply reduce tariffs against their competitors. Not every free trade deal will be plain sailing, which is why it has taken seven years to negotiate the free trade deal with Canada.
Mr Vaizey
My hon. Friend makes a fantastic point. She was an incredibly effective MEP and she certainly would have turned up to Juncker’s speech in the European Parliament; she worked tirelessly and I very much hope the Government will listen to her as we negotiate Brexit, because she has experience that is unparalleled in this House. The point she makes is pertinent to my constituency, where MRI scanners are made at Oxford Instruments.
I was going to talk about Euratom, but I have run out of time—luckily we have a Westminster Hall debate on Wednesday. I do not know whether my hon. Friend the Member for Stone (Sir William Cash) will be speaking in that debate, but we all want to make our points on Euratom then.
Mr Vaizey
I will on Wednesday morning, because I have run out of time now—I have only 30 seconds left. I wish to conclude with a plea. I know that we have this two-year timetable under article 50, but, as the Secretary of State said, this is a political process. He is hoping that the European Union will do a deal because their politicians will want to do what is right for their people. Why are we wedded to a two-year cliff-edge process, given that even in a brief, six-minute speech I have been able to highlight some of the extraordinary complexities we are facing? If only I had had longer, perhaps 12 or 18 minutes, I could have expanded on this.