Duties of Customs

Jonathan Edwards Excerpts

Ways and Means resolution: House of Commons
Monday 20th November 2017 Commons Chamber

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

It is a pleasure to follow the right hon. Member for Broxtowe (Anna Soubry), who spoke with her trademark passion in this debate on one of the most important issues to arise from the Brexit referendum vote. I admire the ingenuity of the hon. Member for Edinburgh South (Ian Murray) in tabling the amendments that have been selected. If he presses them to a Division, my colleagues and I will support him.

The British Government are intent on pursuing a Brexit strategy that does not put the economy first. In her Lancaster House speech at the beginning of the year, the Prime Minister stated clearly that the British Government intend to leave both the single market and the customs union. Like many Members who have spoken today, I could not understand for a second why the British Government decided at that stage to close off both those options, which was why I could not bring myself to vote subsequently for the triggering of article 50. No outline was given of what the British Government were going to put in place to replace two key cornerstones of our economic policy framework that have existed over the past 40 years.

[Tom Brake]

Has the hon. Gentleman, like me, spent the debate waiting for a Conservative Member to give a ringing endorsement of our leaving the single market and customs union? That has not happened, has it?

[Jonathan Edwards]

That is a valid point. When we begin to consider the customs Bill and the Trade Bill, answers will have to be forthcoming, because the House and people throughout the UK are becoming increasingly restless. We need answers from the Government about what they propose to put in place instead of those frameworks, rather than the empty platitudes we have heard since the referendum result.

The customs union is of course the largest and most lucrative trading bloc in the world. It gives us unhindered access to nearly half a billion of the wealthiest consumers in the world. It also acts as a protective measure against cheaper and lower-standard goods, thereby safeguarding our domestic producers, especially food producers, who are a vital part of the Welsh economy. Of course, the UK Government have not negotiated a trade deal since the UK joined the customs union because doing so has been a European competence. There is little expertise in the British civil service to deal with the task at hand.

In the previous Parliament, I visited Washington DC with a parliamentary delegation to scrutinise the Transatlantic Trade and Investment Partnership deal between the EU and the US. When, over a pint one evening, I asked a British Government official there how many people were on his team, he said, “Well, it’s just me.” That indicates the difficulty of getting the British civil service ready to deal with the challenges we will face with respect to our trade policy. Recent press reports about the staff and expertise required in the Department for International Trade do not give me much grounds for confidence. A huge amount of work needs to be done to get the British state ready for the shark-infested waters of modern international trade negotiations, because they are hugely complex.

I do not profess to be an international trade expert in any shape or form, but it seems clear to me that large trading blocs have far more power in negotiations than smaller ones. As I said earlier, the EU customs union is the world’s most powerful trading bloc, and it obviously helps to promote and protect our interests and those of its producers during negotiations. As we move forward, there are big questions as to whether the UK will, as an insular trading bloc, be able to perform the same tasks to the same ability.

During the aforementioned visit to Washington, we had several difficult meetings with representatives from US sectors, who all bemoaned EU intransigence. Nevertheless, the reality was that they had no option but to accept it, because the EU customs union was such a large trading bloc. I remember vividly one meeting with people from the food sector who were impressing on us the need to open up EU markets to the chlorinated chicken and hormone beef that they have in the US, as well as, of course, genetically modified products, but they knew that there was no way they would get that past EU negotiators. I wonder whether UK negotiators will be able to withstand such pressure when they start trade negotiations with the US—I doubt it very much.

[Tom Brake]

The hon. Gentleman may be interested to know that a couple of weeks ago I tabled a parliamentary question to ask how many people in the Department for International Trade had successfully completed a trade negotiation. The answer I got was the newly appointed Crawford Falconer, so there is apparently one person in the Department who has completed a trade negotiation.

[Jonathan Edwards]

That is grounds for huge concern, because these trade negotiators will be up against expert teams that have been carrying out such negotiations for many years, and this is not just about the EU deal. If it is the British Government’s intention, as one of their first options, to take on the United States in trade negotiations, I would advise them to take the advice of the experts who told the Exiting the European Union Committee in the previous Parliament that the UK should perhaps look to smaller countries for their initial trade negotiations, rather than something as powerful as the US trade lobby.

The EU customs union’s numerous existing international trade deals have already have been mentioned. Those deals cover more than 50 countries, and several other trade negotiations are ongoing. A third of all EU members’ trade outside the EU is with those countries. When the Department for International Trade was set up and the Secretary of State for International Trade answered oral questions for the first time, the first question I asked him was what would happen to all the trade deals that we already enjoy around the world. His view was that they were going to be renegotiated, seamlessly, but I fear that that showed extreme naivety on his part. Why would those countries agree to the same terms and conditions with a far smaller trading bloc, which is what the UK will be, as they agreed with the EU customs union? Surely they will want to renegotiate so that they look after and promote their own interests, rather than just accept what is on the table.

The British Government’s intended policy of leaving the single market and customs union is already having a huge impact on Welsh people’s standard of living. The Centre for Economic Performance has calculated that Brexit has already cost the average worker in Wales £448 annually, with its effect on wages and the higher cost of living disproportionately affecting people in Wales—and that is before we actually leave the EU.

With 90% of Welsh food exports destined for the EU customs union, a reckless Brexit could be disastrous for the communities I serve in rural Carmarthenshire. In a recent meeting with sheep farmers, I was amazed to find out that 50% of their produce was sold domestically, with 50% sold in Europe. Domestic markets will not be able to fill those gaps if we lose unfettered access to European markets.

It is also worth concentrating on some of the tariffs associated with food products. The average tariff on dairy products is 38%. For meat products, we are talking in the region of 58% to 70%. That would clearly make our food products destined for the EU completely uncompetitive. Farmers are preparing for 2019-20 at the moment, so they need answers now. They cannot wait for a protracted trade negotiation.

I also want to concentrate on the impact of leaving the customs union on the border between the British state and the Republic of Ireland. Much has already been said on this matter tonight and it has also had considerable media coverage, not least because the border on the island of Ireland is one of the three sticking points that need to be resolved before we reach first base in our negotiations with the European Union. Despite the fact that both sides have focused on this matter since the beginning of the negotiations, we are no nearer a solution. Indeed, press reports over the weekend seemed to indicate that things are getting even more difficult.

The British Government have miscalculated the resolve of the European Union. The EU’s overriding priority in these negotiations is maintaining the integrity of the single market and the customs union. Therefore, in choosing to leave those frameworks, the UK will become a third country—in other words, a competitor. In those circumstances, we will not get a “have your cake and eat it” solution. As the right hon. Member for Broxtowe said, the British Government are living in fantasy land. There will be no such thing as a special partnership. If we are not part of the single market or the customs union, the best thing that we can hope for is a free trade agreement similar to that of Canada. A welcome development in recent months is the fact that both Labour and the Government have agreed that a transition is a good idea, but the key question is what happens at the end of the two years.

[Anna Soubry]

Does the hon. Gentleman agree that the reality is that we will not get a great deal because the EU does not want to give us a great deal? If it gives us a great deal, it would have to give one to a whole load of other people who might decide to leave the European Union. Although I am not saying that it wants to punish us—I do not think that it does—it does have a responsibility to keep the European Union together.

[Jonathan Edwards]

The right hon. Lady captures my sentiments exactly. By deciding to leave the single market or the customs union, we effectively become a competitor —a third country. On that basis, the overriding priority of the European Union is to protect its interests. A lot of the problems that are arising in our negotiations, as we heard from the hon. Member for Glenrothes (Peter Grant), could be dealt with if we said that we wanted to stay in the single market and the customs union.

The transition period is a welcome development, although I am slightly unclear about whether the British Government and indeed the Labour party are arguing for being in “the” customs union or being in “a” customs union with the European Union, because they are diametrically opposed. Even if we did decide to stay within the single market and the customs union for the transition period, the key question arises of what happens at the end of that two-year period. If we are to have a free trade agreement such as that with Canada, it will take far longer than two years to negotiate.

With reference to the border on the island of Ireland, Michel Barnier, the chief negotiator on behalf of the European Union, has said that the EU will not tolerate the UK using this soft border between the six counties and the Republic as a way of avoiding the trade consequences of leaving the customs union. That is the crux of the problem. Even if the British Government’s position stands, there will be two types of borders between the Irish Republic and the British state. There will be a soft border on the island of Ireland and a hard border on the maritime divide between Ireland and Wales. Inevitably, that will have a huge impact on Welsh ports.

We heard earlier about the huge tailbacks that we can expect at Dover and some of the Channel Island ports. Welsh ports will face exactly the same situation, and the infrastructure is not there to deal with such challenges. That might lead to business being diverted away from the traditional Wales-Ireland trade routes to trade routes between Belfast and Scotland and England. Therefore, instead of businesses flowing between Dublin, Dun Laoghaire, Rosslare and Cork to Holyhead, Fishguard and Pembroke, they will be flowing between Belfast and other parts of the UK. We must remember that the Welsh ports sustain thousands of jobs. This is all an unintended consequence of the British Government’s muddled policy.

I want to finish with a point about the impact of leaving the customs union on the UK’s constitutional arrangements. International trade is a reserved matter. However, trade policy could have massive ramifications on the ability of the Welsh, Scottish and Northern Irish Governments to deliver on devolved competences. For instance, if the British Government were to allow food products of a lower standard to enter the UK, it would obviously have an impact on Welsh agricultural policy, not least our ability to export to our main European market in the customs union. If the British Government, for whatever reason, open up public services to further private interference, which has been the concern of many experts in this field, it would fundamentally undermine the ability of the devolved Governments to deliver competences within their public services for which they have responsibility. There is probably a whole range of other problems that I have not even considered yet.

In recognition of those potential problems ahead, the trade White Paper does talk about reconstituting the Board of International Trade with representatives from all four constituent parts. However, that does not go anywhere near far enough. In my view, trade policy would have to become an area of shared competence between the British and the devolved Governments. Within the EU customs union, EU trade deals need the endorsement of all member states and even some other governments, as we saw with the issue of Wallonia during the comprehensive economic and trade agreement discussions. It would be absolutely incredible to me if trade policy was the sole preserve of Westminster, with the interests of Wales, Scotland and Northern Ireland neglected, and our devolved and democratic Governments and Parliaments not allowed to have a say on that. In my view, Brexit will make a new UK constitutional settlement inevitable. Inter-governmental networks within the British state will need to be formalised and strengthened. If we fail to do that, every trade deal could be a constitutional crisis.