Customs and Borders

Dominic Grieve Excerpts

Thursday 26th April 2018 Commons Chamber

[Yvette Cooper]

That is exactly right. They want a Brexit deal that is good for manufacturing, and to be honest, any deal that rejects a customs union is going to hit manufacturing across Britain.

[Mr Dominic Grieve (Beaconsfield) (Con)]

To go back to the question that the hon. Member for Vauxhall (Kate Hoey) asked, any free trade agreement inevitably comes with strings attached. If one is going to do a free trade agreement with 27 member states that co-ordinate their own trade, I simply do not see how we will escape the strings that are obligatory if such an agreement is going to work. The trouble is that it then starts to look very much like a customs union, because that is what, in reality, it has to be if it is to work at all.

[Yvette Cooper]

The right hon. and learned Gentleman is right: in the end, any agreement has obligations attached to it, as well as enforcement mechanisms.

--- Later in debate ---

[Mr Clarke]

I do not believe that it is to our economic advantage. Turkey has long prized EU membership as a status symbol, but I do not believe the economics add up.

Those lobbying for a customs union know that staying in the customs union without a voice at the table would be worse than being a fully signed-up member, as was made more or less explicit by the hon. Member for Pontypridd (Owen Smith) when he said that we would need to stay in the single market as well as the customs union, which goes a long way towards revealing the true motivation of many who make this argument—they see it as a stepping-stone to undoing the people’s vote to leave.

We need to remind ourselves of why the leave campaign lobbied to leave the customs union in the first place. The EU has been slow at negotiating trade deals on our behalf, not least because there are 28 members states on one side of the negotiating table. The EU’s trade talks with Japan have taken 61 months and are still awaiting ratification. By contrast, it took Switzerland 28 months to settle its deal with Japan. EU trade talks with the US have been ongoing for 64 months now, with no sign of progress, whereas the US managed to negotiate trade deals with Canada in 20 months, Australia in 14 months and South Korea in 13 months. At the time of the referendum, the EU had managed to negotiate trade agreements with only two of the UK’s 10 largest non-EU trading partners.

Not leaving the customs union would also fatally damage the prospects for the idea that, more than any other, has captured the imagination of the Teesside public since our vote to leave. A free port at Teesport, which is a project championed by Tees Valley Mayor Ben Houchen and me, would be an enormous boost to local industry and provide a great incentive to reshore jobs to the South Tees mayoral development corporation site. That goes directly to the point that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) made about north-east jobs. There has been enormous buy-in from local people and businesses to this idea, and people are genuinely excited about what it would mean. However, a free port will not be possible if we do not leave the customs union.

Some people try to maintain the argument that free ports are possible within the EU. The reality is that those zones that exist are glorified bonded warehouses—places where people can defer tax, duty and VAT. What Ben and I are saying is that within the Tees free port there will be the potential for significant tax and regulatory divergences, but that will be stymied if we remain in a customs union.

Outside a customs union there are other significant advantages.

[Mr Grieve]

How does my hon. Friend imagine that he can engage in this regulatory divergence without incurring tariffs with those countries with which we do our principal trade or the economic consequences that flow from that? I can understand the fantasy behind the picture he paints, but it simply is not the reality of what will happen if we cut ourselves off from our principal trading partners.

[Mr Clarke]

We are precisely seeking an ambitious free trade agreement both with Europe and with the rest of the world. This goes to the heart of that matter.

--- Later in debate ---

[Mr Dominic Grieve (Beaconsfield) (Con)]

It is a pleasure to participate in this debate, but I do not want to repeat what was said by the proposing Member, the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), or my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). I agreed with every sentiment they expressed.

My desire to participate stems, first, from my continuing frustration that every time, as a Member of Parliament, I want to come and participate in such a debate, I get told by roundabout means that I should not, because it might somehow put the right hon. Member for Islington North (Jeremy Corbyn) into Downing Street. My experience in politics is that when it comes to fantasticals, wherever they may come on the political spectrum, the greatest chance of getting them into Downing Street is if people of a moderate and sensible disposition stop debating important issues, and I am absolutely determined that they will be debated.

Today’s debate offers us an opportunity to look at the possible merits of staying in a customs union. Of course a customs union is not perfect, particularly, I might add, a customs union when we are outside the EU. I agree with some of the comments that have been made that, by being outside the EU, we lose some of the influence that we have in creating and managing the customs union. That, I am afraid, is the price that we are paying for the folly of the decision in the referendum of 2016. Just because one has imposed one calamity on oneself does not mean that one then goes to inflict greater calamities simply on the basis that one has to do it in order to prove the theory—the mistaken theory—that one has espoused.

I am also a lawyer. I cannot deny the fact that it is noteworthy that we appear to be a gaggle of lawyers on these Benches who find an irrationality in the approach that some of our Conservative friends adopt and in which the Government sometimes appear to be mired.

Free trade agreements are wonderful things to have—I am a great believer in free trade agreements. I can see that, by being members of the EU, we have lost something in terms of being able to do our own free trade agreements, but not one single Government analysis suggests that they outweigh the advantages of participating in the best free trade arrangement that we have with our EU partners.

What is the point of having a free port in Middlesbrough —forgive me—if it is only going to be used to trade with the United Kingdom? Assuredly, it will not be to trade with our EU partners because they will not allow any of the goods in between Middlesbrough and the European continent. Why is it that pharmaceutically related businesses in my constituency tell me that they will be going if there is not frictionless trade with the European Union, which implies participation in the customs union? Why is it that the deputy ambassador of Japan has us all in and says, “You do realise that every Japanese company will be gone in 10 years’ time if they cannot have frictionless trade into the European Union.”

We are behaving in the most extraordinary and blinded fashion as we blunder around, ignoring the realities. In any case, free trade agreements come with strings attached, as I said earlier. If we have multiple free trade agreements, they will very quickly start to look like customs unions. That is what happens when people get together. This idea of “customs union bad” and, somehow, “free trade agreement good” simply does not stack up, and it is time for a reality check.

In fact, we need more than a customs union, because it is also obvious that we will not be able to trade without regulatory alignment. I was over in Dublin for a very interesting conference called by the Institute of International and European Affairs. The Irish border is just a microcosm of the bigger problem. It just so happens that, on the Irish border, people are trading constantly on a very intimate scale. A person sends their milk to the dairy over the border. If we do not have regulatory equivalence, we will not be able to do that. People will buy products, going backwards and forwards all the time. It absolutely highlights at that level the problem that we will have at a wider level if we persist with this idea that we can somehow get out and still enjoy the benefits of the frictionless trade that we say we want.

The extraordinary thing is that the Government know that, otherwise my right hon. Friend the Prime Minister would not be slaving away and being denounced as “cretinous” by my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) for trying to square the circle. She is entitled to be commended for trying to do something really difficult. The trouble is that, unless we start injecting a note of realism into what we are doing, she will fail, this House will fail and our country will be failed.