EU Customs Union

Jonathan Edwards Excerpts

Wednesday 2nd November 2016 Commons Chamber

[Helen Goodman]

Let me come on to give some of those strong reasons. If we were to leave, we would face tariffs ranging generally between 5% and 10% on our exports. Even more significantly, our exporters would have to comply with the rules of origin. I think this is the biggest problem. I have the last television manufacturer in Britain, Cello Electronics, in my constituency. It imports a lot of components from China, puts the televisions together and sells them into the European market. The OECD estimates that the cost of filling in all the forms and complying with the rules of origin would add 24% to the export costs of selling into the European market. That would wipe out firms such as Cello, which, as I say, is in my constituency.

In Norway, which is outside the customs union, we know that some exporters find the bureaucracy of the rules of origin so burdensome that they prefer to pay the tariffs. This is really what the Nissan problem was. Belonging to the customs union was the first thing the Japanese Government listed in their hopes for what our deal would be, but the Government cannot take a factory-by-factory approach. Let us look at some of the big industries that would be affected: the automotive industry employs 450,000 people; aerospace 110,000 people; pharmaceuticals, such as Glaxo in my constituency, 93,000 people. All those industries have the same complex integrated international supply chains and would be badly hit were we to leave the customs union.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Lady on securing the debate and making some very strong and powerful points. Does she agree with me that if we are outside the single market there will be a load of non-tariff barriers that would definitely hit those sectors, and so membership of the single market is just as important as the customs union?

[Helen Goodman]

We need to explore that and think about it in a little more detail.

A leaked document from the Treasury found that were we to leave the customs union, our GDP would fall by some 4.5%. Of course, I am not asking the Minister to comment on a leaked document, but it would be very nice if he could say how many jobs a fall of 4.5% of our GDP would translate into us losing. I think it would be hundreds of thousands.

It is true that staying in the customs union limits our capacity to do new trade deals on the goods it covers with third countries such as India and Australia. Some of the hard Brexiteers, such as the Secretary of State for International Trade and President of the Board of Trade, the right hon. Member for North Somerset (Dr Fox), seem to think that this is a good thing. He made a speech in Manchester in which he hailed the “post-geography trading world”. Well I have heard of the end of history, but I have never before heard of the end of geography. I think he is being wildly over-optimistic. As the Chancellor of the Exchequer pointed out to the Treasury Committee, world growth and growth in trade are both slowing. This is not a good background in which to initiate these deals. The Government’s export target of £1 billion is bumping along at half that level and there would be a time lag. We cannot start the negotiations at least until our relationship with Europe is clear. That is obviously going to take three or four years, so we need to have transitional arrangements.

Finally, there must be a big question mark over whether we can get deals with third countries that are so much better that they more than compensate for what we would lose if we left the customs union. The UK is one tenth of the EU market of 550 million people. The Americans have already told us we would be at the back of the queue. The Swiss have found, in negotiations with the Chinese, that the Chinese get access to the Swiss market seven years before it gets access to the Chinese market. Ministers are at sixes and sevens on this, with the Treasury and the Department for Business, Energy and Industrial Strategy apparently on one side, and the Department for International Trade and the Foreign and Commonwealth Office on the other. Robert Peston has pointed out that the mere fact that the Department for International Trade exists makes it a fiduciary obligation for multinational manufacturers based in Britain to start thinking about moving investment and jobs to the rest of the European Union. I will not talk about the Irish dimension, because I have already taken interventions on it, but it does present a significant political problem.

What I am mainly saying to the Minister this evening is that millions of jobs depend on our staying in the customs union. I am sure that the Secretary of State for International Trade is delighted that his career is flourishing and that he is travelling around the world, meeting all sorts of interesting people and trying to do lots of deals, but those million manufacturing jobs matter more than his grandiloquent ideas. What we want from the Minister is some concrete evidence that decisions will be taken on a proper basis. My message is simple: a bird in the hand is worth two in the bush.

--- Later in debate ---

[Mr Walker]

In the six minutes I have left, it would be a challenge to run through each of those 50 sectors, but we will certainly disclose that information in due course. It is important to emphasise this is a whole-Government effort. Our Department is engaging with those sectors and conducting the analysis and drawing it all together, but we are also working closely with colleagues at the Treasury, the Department for Business, Energy and Industrial Strategy, the Department for Environment, Food and Rural Affairs and all the other relevant Departments to each sector of the economy, because it is important we get this right and there is a role for every part of Government in informing that process.

[Jonathan Edwards]

I am slightly confused about one point. I welcome the announcement about the common travel area between the Republic of Ireland and the UK, but will that not mean there is an open border between the EU and the British state?

[Mr Walker]

I think both the Republic of Ireland in its communications with the EU and we in ours are very clear about the value we place on that common travel area, which existed long before the membership of the two countries to the EU. We have been clear in saying this is not necessarily a completely easy issue; it is an issue that will require some work, but we are determined to do that work and make sure we can make this work. I hope that answers the hon. Gentleman’s question.

We must also consider carefully the position of the Crown dependencies and the UK’s overseas territories. Just today, I have met in a joint ministerial council with the overseas territories and the chief Ministers of the Crown dependencies to hear their views. There are some interesting examples. Gibraltar, for instance, has benefited from the UK’s membership of the EU but has not been part of the customs union to date.

I welcome this debate as part of the scrutiny of the Government’s position by this House. That is an important process and the information the hon. Lady and others have brought forward can certainly be taken into account as part of our analysis. I also look forward to Monday’s debate on exiting the EU and workers’ rights. That is an important aspect of our policy, and the Secretary of State for Exiting the European Union has been very clear about our determination to protect workers’ rights. That debate will be another opportunity for the House to discuss the important issues in relation to our exit from the European Union.

In summary, the Government fully recognise the importance of the question of a customs union with the EU in the context of our future relationship. It is a complex, multi-faceted issue, and we are analysing carefully all the options available to us with the aim of securing the best outcome for the UK as a whole.

Question put and agreed to.