European Union (Withdrawal) Act

Debate between James Cartlidge and Vince Cable

Tuesday 12th March 2019 Commons Chamber

[Sir Vince Cable (Twickenham) (LD)]

It is a privilege to follow the right hon. and learned Member for Beaconsfield (Mr Grieve). I very much agree with what he had to say. Like him, we have no objections to the Irish backstop. It is one of the redeeming features of the Government’s agreement—their having foolishly and unnecessarily drawn red lines around the customs union and the single market, it was an inevitable and necessary measure to protect Ireland from a new, disruptive frontier. Our concern is much more fundamental—the fact that Brexit, as currently devised, will make this country poorer, weaker and less secure.

We have all heard a lot of general rhetoric about this issue, so I want to home in one particular aspect of the economics of it—the nature of the single market and how it originated. Thirty-five years ago, there was an insight in this country around the Prime Minister of the time, Mrs Thatcher. I do not know whether it was her or her advisers who saw that the future of business and trade rested on two s’s—standards and services—and that the traditional preoccupation with tariffs and quotas was of course very relevant, particularly for agriculture and manufacturing, but the future lay in another area.

For three decades, successive Governments—Conservative, coalition and Labour—have beavered away trying to create this structure of a single market, recognising the importance of those key drivers. That has been done on two levels. It was attempted at a global level through the World Trade Organisation, which is often called in aid by Government Members. That achieved virtually nothing, because the World Trade Organisation is essentially a weak organisation that brings together countries with massively divergent standards. It was also pursued through the European Union, with very great success.

One of the central problems of Brexit is that it potentially unravels much of the regulatory framework that has been put in place over those three decades. I have a very simple example, which gives us an indication of what is coming down the track. It actually relates to one of the Government’s success stories. The Government have been trying to roll over the 30 or 40 association agreements we have with the European Union. It would be disastrous if they were not rolled over. Quite a few important countries, including Japan and Korea, are making it very clear that they are not willing to get a move on, as the Foreign Secretary instructed them to, but one of the countries that did is Switzerland.

Switzerland is an interesting case. It is a British success story, with rapid growth in exports of 40% over five years. Britain has a big trade surplus with Switzerland. That is all under the existing arrangements. The Secretary of State for International Trade presented the roll-over agreement as a great success, and indeed it was. It is one of the few things that has actually worked for the Government in this area. But when some of the trade federations affected by the agreement started unpicking it, they noticed that it is not the same agreement that the European Union had.

Central to the European Union agreement was that it brought together about 19 key technical standards across the European Union and Switzerland, which enabled European countries to trade on a common basis. In the revised agreement, there are only five such standards. The companies in the UK that will have to deal with Switzerland in the future will do so at a competitive disadvantage. I have no way of knowing how important that is or how many jobs are at stake, but that small experience will be reproduced on a massive scale as Brexit proceeds, and we should take note of it.

[James Cartlidge]

The right hon. Gentleman raises a very good point about Switzerland, but surely the most important point about the Swiss is that they are one of the only examples of a country that has maintained very strong links with the European economy but has been able to go out and get very good trade deals, which have significantly boosted its export penetration around the world. We could achieve that, too.

[Sir Vince Cable]

I do not think that Switzerland is a very encouraging example when it comes to external trade deals. Its trade deal with China consisted of opening up the Swiss market to everything and getting virtually nothing in return. Actually, that illustrates a much wider point: one of the things that we sacrifice with Brexit is bargaining. The hon. Member for Camborne and Redruth (George Eustice) has now disappeared from the Chamber, but he pointed out a week or so ago—and he is a hardline Brexiteer—that our bargaining power with the United States over food standards is massively weaker than it would be if we continued to be a member of the European Union, and very poor standards will be inflicted on us. That is the kind of debate that we ought to be having, but we are not.

All the costs associated with the unravelling of the single market will be compounded by the loss of the customs union—I know that the Labour party has given that priority, and it is important, but it is not as important as the single market—and also by uncertainty. Had the Government done what they promised to do, which was to have a clear picture of the endgame before they completed Brexit, all that uncertainty would have gone. British firms with a time horizon of more than two years will now be afflicted by massive uncertainty about whether to invest in this country, and many of them will not do so. The future is wholly uncertain.

The combination of those factors has major economic consequences. I have taught economics for many years and worked in it for many years, and I know that it is not a precise science. However, one of the most fundamental principles of economics, going back to Adam Smith—and, indeed, before—is that if you put up barriers to trade, you make yourself poorer. That will now be compounded many times over.

In addition to all the economic costs, there is the unravelling of the collaborative arrangements. One of the best institutions in my constituency is an organisation called the National Physical Laboratory, which is a centre for key metrology standards. Alan Turing did much of his professional work for it, and I attended and spoke at its annual dinner a few days ago. The people who work there are absolutely horrified at the breaking up of their scientific network, and their inability now to attract European staff. That is being replicated in campuses, universities and scientific institutes across the country.

The European Investment Bank has hardly been discussed here. Crossrail, which has been one of the big innovations in London in recent years, was substantially financed by it, but it is now being dismantled. Those are some examples of the damage that has been done, and that is why the Government must go back to the public and put the deal to them. If they cannot get their deal through Parliament, they must give the people the final say.