Taxation (Cross-border Trade) Bill

Hilary Benn Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 16th July 2018 Commons Chamber

[Mr Leslie]

My experience is very different in terms of the information I have. If we look across the range of goods as a whole, there are problems with rules of origin outside the customs union.

The second problem with the facilitated customs arrangement is that it breaches article 3 of the General Agreement on Tariffs and Trade—GATT—which is part of the World Trade Organisation rules. Article 3 is the national treatment principle, which says that we should not treat imported goods unfairly relative to domestically produced goods. Because of the track and trace requirements in the facilitated customs arrangement architecture, we will have to treat imported goods differently to those produced and made in the UK.

The third problem is that if we want to make free trade agreements with the rest of the world, the Government are shooting themselves in the foot with the facilitated customs arrangement because article 24 of GATT states that we have to eliminate substantially all trade barriers between constituent trade authorities. If the UK is having to collect tariffs on behalf of the EU, that introduces a barrier that will have to fetter future free trade agreements. I do not particularly believe we can get better FTAs beyond the customs union; I think our leverage as part of the EU is superior, but on a technical level a facilitated customs arrangement, I am afraid to say, is just not going to wash.

[Hilary Benn (Leeds Central) (Lab)]

On the important issue of rules of origin, which my hon. Friend has just raised, we have heard the argument from some people is that it is not a problem. If it is not a problem, then why do the Government, in paragraph 23 of the White Paper, state that the UK is proposing

“no routine requirements for rules of origin between the UK and the EU”?

[Mr Leslie]

Exactly. Presumably the Government think they can negotiate on that between the UK and the EU bilaterally, but actually that is not the way that this works. Under the WTO arrangements, we have to make sure we have the same application of rules as we would in other arrangements around the world.

A customs union is not just preferable; it is the only realistic option. The idea that the European Union is going to say, “Fine, we’re happy with you splitting the four freedoms” is for the birds. That is not going to happen, especially as populism is running riot worldwide. The EU feels very firmly that it wants to defend the international rules-based system. It feels very firmly that the four freedoms of the single market and the customs union are integral to it. The idea that Switzerland provides an example, when it has endured decades of constant treaty negotiations year after year after year—that is not a model Britain should seek to parallel.

The idea that we should simply hope that by focusing on the withdrawal agreement we can secure our future is also a fallacy. The notion that we will be able just to staple on to the back of this arrangement, on a few sides of A4, political statements on our future relationship with the EU is deeply dangerous. We have to make sure that we settle these issues—I know the former Brexit Secretary agrees on this particular point. The idea that what is said on one side of exit day will necessarily be enforced on the other side of exit day is just not true. There is no legal enforceability to any warm words about our future relationship. These issues have to be set out at this particular stage.

--- Later in debate ---

[Matt Western (Warwick and Leamington) (Lab)]

I rise to speak to new clauses 1, 11 and 12, and very much in support of a customs union.

I was surprised by the way the former Secretary of State, the right hon. Member for Haltemprice and Howden (Mr Davis), described the border between Detroit and Ontario, which I was lucky enough to visit in February with fellow members of the International Trade Committee. I witnessed something slightly different from what he witnessed. I did see friction—even on a very cold, icy day, people spent considerable time at the border. There is an X-ray building for pantechnicons, and vehicles are frequently taken out of queues to be examined. The situation there is not as simple as he suggested. To underline that—perhaps he is not aware of this—Canada is having to invest in a second bridge across the river between Ontario and Detroit to safeguard its businesses because of the delays they suffer.

I agree with the right hon. and learned Member for Rushcliffe (Mr Clarke), for whom I have huge respect. He described the great fear associated with what seems to be the pursuit of ideological goals or indeed personal ambition on the part of certain individuals. Importantly, for almost a year I have been trying to encourage businesses—the likes of Jaguar Land Rover in my constituency and others—to speak out. Businesses are terrified of doing that because they fear incurring the wrath of the public. They see it not as their responsibility but as ours, as elected representatives. However, in recent weeks, they have felt it necessary to speak out, and of course we have heard from Airbus and Jaguar Land Rover. On the rare occasions they speak, they do so softly, but it is important that we and the public listen to them.

It is far more important for us to listen to the likes of Jaguar Land Rover and BMW-Mini than—dare I say it?—to the right hon. Member for Uxbridge and South Ruislip (Boris Johnson). I think the public are beginning to see that—and to recognise that, among all the debate that goes on in this place, those business voices are starting to provide some clarity.

Businesses have waited for more than two years for the Government to give them some sort of direction in the face of uncertainty, which is a threat to them. I was interested to hear the hon. Member for Harwich and North Essex (Sir Bernard Jenkin). I respect him and his experience, but disruption and uncertainty are the greatest concerns for businesses, which have been reviewing their options for the past 24 months. Irrespective of where we end up in the coming weeks, they are already making decisions and looking at options abroad for future investment.

Anything that makes life difficult for businesses—anything that adds cost and time—makes them review their options and consider what is in their best interest. In the automotive sector and many others, businesses would not be so obviously viable if they had to incur the cost of additional tariffs under WTO rules. They will review a 10% or 4.5% tariff, cost it in and think, “Is it really best for us to stay in the UK?”

[Hilary Benn]

My hon. Friend speaks with great experience on these matters. Does he agree that small businesses may not be able to accommodate the additional costs he mentions from tariffs, rules of origin—we discussed those earlier—and customs declarations, which may exceed the profits they make on the goods they sell? Small and medium-sized enterprises would be most adversely affected by a no deal situation, which some Government Members argue we should contemplate with equanimity.

[Matt Western]

My right hon. Friend is right that SMEs, particularly in the component supply chain, are the most vulnerable to these sorts of changes. They are the most likely either to lose business elsewhere or to have to move abroad. I can give concrete examples where that has already taken place.

The right hon. and learned Member for Rushcliffe described the apparent view that the customs union is some sort of problem holding us back. He is right that it has not held us back. The likes of Germany, which exports 10 times more to China than we do, are in the customs union, which has not been to their disadvantage. As he said, we have witnessed the most phenomenal explosion in the success of the automotive industry in this country over the past 10 years—after 20 years of relative stagnation, it grew by more than 50% in that period.

In summary, where it is rare for businesses to speak out, we should listen. They do not intervene lightly in politics, in this country or elsewhere. The preservation of a true customs union is critical to safeguarding business and investment in this country, and that is why I support new clauses 1, 11 and 12.