European Affairs

Emma Reynolds Excerpts

Wednesday 14th March 2018 Commons Chamber

[The Minister for Trade Policy (Greg Hands)]

I beg to move,

That this House has considered European Affairs.

I welcome the fact that we are having this debate, which is perhaps a return to the tradition of a pre-European Council debate in the House of Commons. I used to take part in those twice-yearly debates. When I checked my last contribution, which was in June 2008, I was reminded that I, like so many other Conservative Members, called for a new approach in Europe in the immediate aftermath of the Irish rejection of the Lisbon treaty. The purpose of today’s debate, however, is not to dwell on missed opportunities in the past, or to reflect on what might have been had the EU reformed itself; we are here to look to the future, and the Department for International Trade is at the very centre of that bright future.

Before I turn to the future of our trade with Europe and the negotiations under way, it is important to take stock of what we have achieved so far. The joint report issued in December sets out a financial settlement that honours commitments we undertook as EU members, just as we said we would. It agrees to avoid a hard border in Ireland, while respecting the UK’s integrity, which was and is one of the Government’s priorities for these negotiations. Very importantly, it safeguards the rights of EU citizens living in the UK and of UK nationals living abroad, which the Prime Minister has always said was her first priority. Some 17% of my constituents in Chelsea and Fulham are nationals of other EU countries; indeed, my wife is an EU national. I have put in a lot of time and effort in outreach to them, and I can report to the House that the December agreement landed very well among EU nationals there. Ireland, the budget and citizens’ rights—these are strong foundations for the ongoing negotiations, and we should all welcome the progress that has been made on them.

[Emma Reynolds (Wolverhampton North East) (Lab)]

I have listened very carefully to what the Minister has said. Will he acknowledge that there are still very serious concerns about what needs to happen to preserve an invisible border on the island of Ireland—one that does not have any physical infrastructure—and that there is seemingly a misunderstanding in some parts about what is actually meant by the fall-back option of full alignment?

[Greg Hands]

We have been absolutely clear that we will of course abide by the December agreement in full. Let me remind the hon. Lady that the three priorities we laid out include a strong commitment to avoid a hard border, but also to preserve the integrity of the UK market—I remind her that having access to the UK market is very important for the people of Northern Ireland. No UK Prime Minister could accept a new border down the Irish sea.

We are also making strong progress on our trading relationships outside the EU, which is my primary responsibility as Minister for Trade Policy.

--- Later in debate ---

[Matthew Pennycook]

I just want to make a bit of progress, if that is okay.

The Prime Minister’s Mansion House speech on 2 March was as much an attempt to muffle those divisions as it was to provide clarity on the Government’s vision of the end-state relationship. To be fair, it was a more serious and detailed speech than those that had gone before, and it was pleasingly devoid of empty sloganeering. There was no repeat of earlier banalities such as “Brexit means Brexit” or “a red, white and blue Brexit”. At last, we heard a speech that started to engage with many of the hard truths about our departure from the EU. It stressed the need for compromise on all sides and conceded that inevitable trade-offs would have to be made if we were to avoid the hardest and most damaging of departures. As with her Florence speech in September last year, one wished that that content could have been delivered far earlier in the process. Had it been, I suspect that the country would have been in a better position today.

Judging by the raft of tortuous cherry and cake metaphors that we heard from the Government Benches in response to the Prime Minister’s statement on Monday, she might have succeeded in her immediate objective of holding together her deeply divided Government and party and in giving herself a small degree of room to manoeuvre in the months ahead. However, it is patently obvious that those divisions remain as deep as ever. That is blindingly obvious. If they had been healed, we would now be considering the Report stage of the Customs Bill or the trade Bill, rather than having a general debate such as this. Make no mistake, those divisions will have to be confronted, and the sensible majority in this House will have to be given the opportunity to shape the Brexit process sooner rather than later, not least because, although the Prime Minister’s speech was more realistic in important ways, it was still not realistic enough.

[Emma Reynolds]

One of the things that the Prime Minister said in her speech was that we will inevitably have less access as a result of the hard Brexit that the Government are pursuing. Does my hon. Friend agree that less access to our biggest market will mean fewer jobs, less investment and less economic growth?

[Matthew Pennycook]

I absolutely agree with my hon. Friend. I could not have put it better myself.

The theme of today’s debate is international trade. The sections relating to customs were arguably the least convincing parts of the Prime Minister’s speech. In contrast to other areas, there was no attempt to engage with the hard truths about what leaving the customs union will mean for the UK, and particularly with the impact of that decision on manufacturing and the Irish border. As the House knows, the Prime Minister simply went back to the two propositions that the Government set out in their future partnership paper published on 15 August last year. They were a

“customs partnership between the UK and the EU”

or

“a highly streamlined customs arrangement, where we”—

that is, the UK—

“would jointly agree to implement a range of measures to minimise frictions to trade, together with specific provisions for Northern Ireland.”

The first proposition is untried and untested. By the Government’s own admission, it would take at least five years to implement and it would be ripe for abuse. It was roundly rejected by the EU last year, not least because it would require EU member states to completely reconfigure their own national customs systems. The idea is not simply “blue sky thinking”, as the Secretary of State described it in September last year; it is pie-in-the-sky thinking.

The second option would, according to the chief executive of Her Majesty’s Revenue and Customs, take three years to put in place and would result in friction on our borders. It would therefore require a range of measures, including unproven “technology-based solutions”, to minimise frictions to trade. In her speech, the Prime Minister claimed that both those options were serious and merited consideration, but they were widely rubbished in the wake of that speech. The EU immediately ruled them out as non-starters.

The truth is that the Government have absolutely no idea about what to do about the issue of customs and the Irish border. The fall-back that surfaced in the EU Commission draft legal text published on 28 February—namely, that Northern Ireland should go into a customs union with the south and that the UK border should be shifted to somewhere in the Irish sea—is clearly unacceptable. The Prime Minister quite rightly made it clear that no UK Prime Minister could accept such an outcome. The Irish border issue remains unresolved.

One part of a wider solution to the border issue would be, as the Opposition have suggested, to negotiate a new comprehensive UK-EU customs union. Such a customs union would ensure that goods covered by the agreement could still be traded with the EU tariff free, with no new customs or rules of origin checks. The exact terms of such a customs union would, of course, have to be negotiated, but this represents a pragmatic proposal, reflecting current arrangements, and it has been welcomed by trade unions and by business, including the Manufacturers Organisation—formerly the EEF—and the CBI. It would be a win-win for both the UK and the EU27. A new UK-EU customs union would not prevent the UK from trading globally or improving our export industry, just as the EU customs union has not stopped Germany making China its largest trading partner, for example. Germany now exports four times more to China than the UK. The UK would still be free, as we are now, to negotiate in the areas of services, data, investment, procurement and intellectual property, and UK businesses would still be able to export to non-EU markets just as other EU countries do. In short, there is no question but that the UK could and would still increase trade inside a customs union with the EU, as the Secretary of State for International Trade said earlier this year in relation to the Prime Minister’s visit to China.

A new, comprehensive UK-EU customs union, were it agreed, would of course require the UK to adopt a common external tariff with the EU, and we would of course seek both to replicate existing EU trade agreements and benefit from negotiated future deals. It is true that we would not be able to negotiate independent third-party trade deals, but as many hon. Members have already mentioned, we need to face up to some hard facts in this area, because the notion that future free trade agreements will offset the inevitable economic costs of exiting a customs union with the EU is nonsense. To say, as the Minister did, that it is simply not an either/or question does not get to the heart of the issue that confronts us.

--- Later in debate ---

[Matthew Pennycook]

I simply do not think that that stacks up. I listened to Sir Martin’s comments very carefully, and I am not sure that he was referring to that. However, if the hon. Gentleman makes a speech, I will be personally interested in hearing his points.

[Emma Reynolds]

Will my hon. Friend give way?

[Matthew Pennycook]

I am going to make progress, as lots of people want to speak.

A sensible, pragmatic Government focused on the economic interests of the country would adjust their policy accordingly and consider the option of a new, comprehensive customs union along the lines that Labour has suggested. Importantly, so would any Government committed, as this Government are under the terms of the phase 1 agreement, to the avoidance of a hard border on the island of Ireland, including any physical infrastructure or related checks and controls—a border that is frictionless, not as frictionless as possible. Let us be clear: a border that has checks, even “very, very minimal” checks, as the Foreign Secretary suggested to a business audience last week, is still a border that would require some kind of infrastructure and patrols.

A version of the Canada-US border, which the Prime Minister suggested was being explored, is simply not good enough. The threat that such an outcome would pose to the politics, security and economy of the island of Ireland, as well as to the daily lives of citizens on both sides of the border, are obvious to most hon. Members.

We recognise that a new, comprehensive customs union, in itself, is not a complete solution to the Irish border issue. To obviate the need for physical infrastructure on and checks at that border and to uphold the Good Friday agreement in its entirety, in all three strands, full regulatory alignment in relation to all goods production and trade would be required. That alignment would, of course, have to be maintained over time as EU legislation evolved.

That is one of the reasons why we need to secure a new agreement that gives us the closest possible relationship with the single market: full access to European markets; no new impediments to trade; no drop in the rights, standards and protections built up over our 43 years as an EU member state; and no prospect of falling behind them in the future. We must recognise that our future economic relationship depends on maintaining a level playing field and the same standards that business wants.

But when it comes to goods, a conversation with the EU27 about full regulatory alignment, and the institutional mechanisms that might be required to facilitate such alignment, is not even possible when the Government have ruled out membership of a customs union. The idea that

“a comprehensive system of mutual recognition”

is an alternative solution—something that EU member states do not even expect of each other—is mistaken. There is no solution to the Irish border issue that does not involve some form of customs union. That is why the Government must reconsider their red line in this area. If they do not, it will be difficult to see what their solution to the Irish border issue—or, indeed, the issue of a customs border at Dover—might be. That matters because, although the Government may be able to fudge some of the difficult decisions for now, the issue of the Irish border issue can no longer be fudged.