The Government's Plan for Brexit
Debate between George Kerevan and Lord Lilley(7 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Lilley
My right hon. Friend makes a good point, and I would add that we do not easily manufacture oranges at scale in this country.
There are two realistic options. The first is that we continue with roughly the status quo: tariff-free trade and no new barriers to service trade. The EU already has free trade agreements that do not require free movement with 50 countries. The second is that we trade with them on WTO terms and they might try to make trade in our service and financial services industries a bit more difficult. The important thing is that both options are actually very simple to negotiate. Going from zero tariffs to zero tariffs is much easier than negotiating a trade agreement between Canada and the European Union, where each side has 5,000 or 10,000 different tariff lines and must trade them off against each other. We also have exactly the same rules on products and so on as our partners in Europe. The status quo would therefore be simple to negotiate. The WTO option does not even require negotiation; it is what happens if the negotiations have no successful outcome. Both are simple and could be done quickly.
I also believe that both options are acceptable to the UK. In the view of most people, retaining the status quo would obviously be the superior option if we could get it immediately, but if we go to trading on WTO terms, the average tariff would be about 4%—much less than that on average on manufactured products, but the 4% includes agricultural products. We have just experienced a 15% devaluation against the euro, so our exporters will, on balance, be much better off even with those tariffs, whereas exporters to us will have to face a 15% hurdle plus that 4% average tariff, so they will be much worse off.
It is important that we emphasise to our negotiating partners that although we might prefer to continue with the status quo, if they do not want it, we are willing to walk away and trade on WTO terms. Quite a few Opposition Members have been trade unionists and are used to negotiating, but not many people in this House are. We cannot successfully negotiate unless we are prepared to walk away with no deal. Ultimately, however, it will be our partners in Europe—the EU 27—that will choose between whether we continue with roughly the status quo or whether we move to WTO terms and some obstacles.
Mr Lilley
I am sorry, but I will not.
Our EU partners will choose. If their primary concern is the economic wellbeing of their people, they will choose to continue with free trade. If their overriding primary concern is political and if they want to punish us and be seen to punish us, they will go with WTO terms. In practice, they will punish themselves far more, and we should make that clear. We cannot negotiate our way into making them choose one option over the other. We can perhaps try to persuade them, their industries and their electorates that they will be much better off if they continue to trade with us on roughly the current basis than if they move to WTO terms, under which they will be the principal losers. We are their single biggest market. A fifth of all German cars come here, much French wine comes here, and so on. Let us go to them and say, “It is a simple choice, make that choice”—