Taxation (Cross-border Trade) Bill

Kirsty Blackman Excerpts

2nd reading: House of Commons
Monday 8th January 2018 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

On the subject of the negotiations that the UK is having with countries with which it currently has free trade arrangements because it is part of the EU, and on the rules of origin issue, what discussions has the Minister had about cumulation and about whether the EU will accept UK-EU cumulation, or whether we will be required to have parts made only in the UK?

[Mel Stride]

As the hon. Lady will probably know, those are matters of ongoing discussion within the Department for International Trade, but this Bill and the Trade Bill, which will have its Second Reading tomorrow, are about ensuring that country-of-origin issues can be determined by ourselves under our own laws, rather than having to depend upon on those of the European Union.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I am grateful for the opportunity to speak on the Taxation (Cross-border Trade) Bill, which I will call the customs Bill for ease during my speech. I am particularly delighted that we are considering it at the same time as the Finance Bill—that is excellent. I am not sure whether Hansard can capture my sarcasm there.

Is the Minister as concerned as I am about the issues that so many different organisations have raised? Perhaps the Minister and the teams in Her Majesty’s Revenue and Customs have been meeting the organisations that are raising concerns, but I do not think that they have been listening. Part of the problem for me is the wide range of organisations that are raising a wide range of issues. As many hon. Members have said, they include UK Steel, the Manufacturing Trade Remedies Alliance, the British Ceramic Confederation, the GMB and the TUC, but also the British Chambers of Commerce, the British Retail Consortium and the Law Society of Scotland. All those organisations have raised issues, which are not all specifically about trade remedies. There are therefore several problems with the Bill, not just with one aspect but across the measure.

The Bill has 166 pages and creates so many delegated authorities that the Government have had to produce an 174-page document detailing them. The majority relate to the negative procedure, though some relate to the affirmative procedure. In four instances, the UK Government create Henry VIII powers—the power to amend or repeal an Act of Parliament—which are particularly concerning. We have consistently raised concerns about Henry VIII powers, and we will continue to do that. The Chartered Institute of Taxation said:

“The Bill will, we understand, have the powers to amend primary legislation using secondary legislation; raising similar concerns around delegated powers as with the EU (Withdrawal) Bill.”

UK Steel said that

“key aspects of the UK’s trade legislation will evade proper parliamentary scrutiny”.

It is a major concern when UK Steel, a trade body that represents important manufacturers, makes such comments.

The number of organisations that are raising concerns is worrying for Members, as is the fact that so much of the Bill will dodge proper parliamentary scrutiny. Those who supported Brexit as a means to strengthen parliamentary sovereignty are being incredibly badly served yet again by the UK Government. Sovereignty for the Government is very different from sovereignty for Parliament. I urge the Minister to read the Law Society of Scotland briefing on the Bill. It suggests several amendments, and much of its concern is about the lack of requirement for Ministers to consult when making secondary legislation.

[Stephen Kerr (Stirling) (Con)]

The hon. Lady has mentioned at least twice the Law Society of Scotland briefing document, which I have in my hand. It is a very useful and positive contribution to informing Members of all parties about the Bill. I will quote from it so that we are all clear about the context. In its general remarks, the Law Society of Scotland says:

“We recognise the necessity for this Bill”.

That conclusively states that the Bill is a necessity. Does the hon. Lady accept that?

[Kirsty Blackman]

Because the UK Government decided that we are leaving the customs union and we will therefore need our own customs procedures, it is sensible, given that it was an entirely EU competence, for the UK to create its own customs framework. However, if the UK Government had done what we suggested and remained part of the customs union, the Bill would not be necessary. Although the Law Society of Scotland says that the Bill is necessary because of the decisions of the UK Government, it raises several concerns. I ask the Minister to read the briefing, which suggests a number of amendments, particularly on consultation.

[Hannah Bardell (Livingston) (SNP)]

Further to the point made by the hon. Member for Stirling (Stephen Kerr), has my hon. Friend seen the briefing from the Manufacturing Trade Remedies Alliance? It says:

“These proposals are much weaker than we have in the EU (and also weaker than those of most other Trading Nations). Weaker remedies cost jobs.”

Just because we have legislation—and bad legislation—it does not make what is happening a good thing.

[Kirsty Blackman]

I absolutely agree with my hon. Friend, who speaks for us on international trade. She is right about trade remedies and I will come on to that specific point later.

Although the Bill is general, it is also wide ranging. I want to consider some of the issues relating to HMRC that the Minister mentioned earlier. The new CDS software is set to replace CHIEF—customs handling of import and export freight—the current system, in 12 short months. The Public Accounts Committee report in November stated:

“It would be catastrophic if HMRC’s new customs system, the Customs Declaration System (CDS), is not ready in time and if there is no viable fall-back option.”

It expects the number of customs declarations that HMRC must process each year to increase fivefold. Every time I and other hon. Members have questioned the Minister about this, he has been particularly blasé and unflustered about the tight timetable. The PAC also said that HMRC’s timetable is incredibly tight, given the amount of work still to do. HMRC will only know by July 2018 whether the system works as intended—I am surprised that HMRC will only know by July 2018, but the Minister thinks it will all be fine—which is only one month before the first traders start to use it, and gives very little time to take remedial action if anything goes wrong.

It is vital for our exporting businesses that the customs software works. We have consistently raised concerns about this and we will continue to do so. I appreciate that the Minister is nodding, but we will keep the pressure on to ensure that it happens.

[Hannah Bardell]

My hon. Friend is making an excellent speech. How much faith does she have in the Government and the implementation of the software programme, given the disaster they are having with the change programme and the closure of HMRC offices?

[Kirsty Blackman]

UK businesses have several questions about the capacity of HMRC to deal with the volume of customs declarations, and many businesses will have to make customs declarations for the first time. Businesses are already concerned about the loss of the HMRC hotline that they could previously access. One business contacted HMRC with a query and received a reply seven months later. Seven months is not an appropriate timescale. If HMRC cannot respond to complaints and questions timeously now, how will it do so in the future after a fivefold increase in the need for customs declarations?

In a post-Brexit scenario, businesses will—in an incredibly short timescale and whether we have a trade deal or not—have to come to terms with new customs software. They will also have to come to terms with a new system of customs duties, ways to export and other massive changes. That means an incredible amount of uncertainty. When drafting the Bill, the Government could have been clearer about how the new customs system would work, therefore getting rid of a level of uncertainty. I know that they do not yet have a trade deal, but if they had been able to implement the software earlier or be clearer about how the processes will work, it would have been better for businesses.

Broadly speaking, businesses have been in favour of the replication of the Union customs code in the future. I mentioned the issue of rules of origin, and the Minister also referred to it earlier. There is a major problem with those rules. The Minister said that they should be determined by the UK Government in negotiation. As a side note, the current UCC, at 61.3, contains options for declaring origin. That does not appear to have been replicated in the primary legislation, and the British Chambers of Commerce, on behalf of its members, want to see certainty for the future on that matter.

Major problems are brewing on rules of origin, especially the duration of any transition agreement that the UK Government strike. At the very least, the Government need to negotiate interim free trade agreements with countries that the EU currently has FTAs with. Many of those trade deals allow UK companies to export because of the recognition of cumulation with EU content. For example, the trade deal that the EU has with South Korea, for example, says that

“a car will be originating in the EU if no more than 45% of the value of the inputs have been imported from outside Korea or the EU to manufacture it.”

So if the UK—in this brilliant scenario with its amazing negotiating team—manages to convince Korea, at least temporarily, to replicate the trade deal that it has with the EU, changing all references to “EU” to “UK”, for example, that will be all well and good, but it will not solve the issue of cumulation for many of our businesses. Take for example a widget that is created in the UK. It may have many parts from other EU countries. It may have 60% EU content, which it needs in order to be exported to South Korea. However, it may not have 60% UK content. Under the previous rules of origin system that we had as part of the EU, that worked fine and the widget could be exported to Korea. But if Korea says that it wants the widget to have 60% UK content, it will be a major issue for businesses which will no longer be able to export those widgets.

[Eddie Hughes (Walsall North) (Con)]

I am afraid that I am not very familiar with our trade level with South Korea. I wonder whether the hon. Lady has picked a particularly obscure example to demonstrate her point, rather than looking at the countries we will do substantial trade with in the future. I hope that I will be able to get some more information on that point.

[Kirsty Blackman]

I picked South Korea and car manufacturing because the percentage is particularly high. However, many other areas of trade and exports have percentage requirements. Because we have not needed rules of origin for products from the UK—we have been able to add all the EU content—it has not been a consideration for businesses. They have been able to export if they can prove that a certain percentage is from the EU. It is an issue not only for the trade deal with Korea, but for all sorts of trade deals that the UK has because it is part of the EU. The concern is not that we will not be able to do new trading, but that our current trading will become a major issue as of March 2019, if we do not get the appropriate rollover and grandfathering in place.

[Joanna Cherry (Edinburgh South West) (SNP)]

Perhaps my hon. Friend will join me in correcting the hon. Member for Walsall North (Eddie Hughes), as South Korea is very important for Scottish trade. As a result of the EU-negotiated deal, whisky goes to South Korea on a 0% tariff. The former chief executive of the Scottish Whisky Association has expressed the view that without the heft of the EU, Scottish whisky—the UK’s biggest export—would not have had the benefit of that deal.

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[Kirsty Blackman]

I appreciate that information.

There are so many technical issues that will have a major impact on jobs and manufacturing in UK. When I have asked the Government about this, the answers I received were pretty fluffy. I have asked about cumulation—mainly outside the Chamber—as it is a major issue that the UK Government have not taken seriously enough. It has been raised especially by the Society of Motor Manufacturers and Traders. If hon. Members look at how many times cumulation has been mentioned in the Chamber, they will find that it is very few.

[Vicky Ford]

I thank the hon. Lady for mentioning the incredibly important matter of cumulation. It is by cumulation that a British car that has components from other parts of Europe manages to be sold to third countries under existing agreements. My recollection is that the Minister said that the Department for International Trade would look to continue having agreement on cumulation, and that the Bill will give it the legal tools to continue such negotiations. Does the hon. Lady agree that the Bill is necessary as an enabling package to allow us to have a customs relationship with Europe and other parts of the world in the future?

[Kirsty Blackman]

I think that we should remain in the customs union and the single market, because then we would not have any of these issues. I appreciate that the Minister says that the Government are looking at this, but I am trying to make it clear how important this matter is, and I hope that I have been able to do that in my discussion of cumulation.

[Richard Graham]

The hon. and learned Member for Edinburgh South West (Joanna Cherry) raised the importance of the EU FTA deal with South Korea—indeed, it adds some £2 billion to our exports every year—but the interesting question is why the EU has been able to make free trade agreements only with South Korea and Vietnam. What about the rest of Asia? Does the SNP believe that sufficient progress has been made in expanding our trade, especially in Scottish whisky, across the whole of Asia, or could the process perhaps have been done more energetically and dynamically by Britain making its own free trade deals?

[Kirsty Blackman]

There are EU FTAs with many countries and we trade through them. Because the EU has such a large market, it is able to strike much better free trade agreements than the UK Government will be able to strike for their much smaller market. That is just the reality.

On the capacity of HMRC, I also want to talk about the issue of authorised economic operators, which was mentioned a lot in the customs White Paper. Relying on the AEO system causes a bit of a problem, as the UK is just not that good at either promoting or administering it. Some of the rules applied by HMRC are nearly impossible for many of the smaller operators to meet, such as the requirement we have heard about that the person who is in charge of customs in organisations has three years of customs experience. Some of our businesses have been trading exclusively with the EU, so they cannot meet that requirement very easily. HMRC must look at this as a matter of priority, and particularly consider the situation in Austria, where it takes less than three months for an initial AEO application to go through. Germany has increased the number of authorised economic operators incredibly successfully. The UK Government could benefit from looking at those countries when they consider making changes. It is not about making the regime slacker and enabling more people to jump through the hoops for AEOs; it is about making the process of applying for and getting AEO certification more accessible and streamlined. I know the UK Government have had representations on this matter, and I urge Ministers to consider them and act as soon as they can. We need to get the system in place as soon as possible so that companies can register and receive the certification to become AEOs in advance of the exit date.

As we heard earlier, there is also an HMRC capacity and streamlining problem in the area of VAT. That was also raised in the media recently in the context of the British Retail Consortium’s concerns. The changes to the VAT regime could create major cash-flow problems for businesses, and they might have to restructure or take on burdensome new cash-flow loans. The BRC says that there is no impact assessment produced by the Treasury about the costs of these measures in terms of additional compliance burdens for business, nor about what the costs of HMRC collecting and refunding these upfront costs would be. It seems that there is a real problem and that the required VAT changes have been pretty badly thought through.

I also want to raise the issue of virtual free trade zones. The Bill contemplates only physical free trade zones, but a virtual zone would allow businesses along the supply chain to benefit from simplifications and facilitations without having to incur the time and expense of individual applications, such as with inward processing relief. The British Chambers of Commerce has requested that the Treasury consider the possibility of including virtual free trade zones in its powers relating to designated free zones.

In the context of HMRC, I also want to mention import VAT on gifts from the EU, which I have spoken about before. Folk will be shocked when they get a bill because they have received a gift worth more than £39 from somebody in the EU. Such a system currently applies if people get a gift from elsewhere in the world, but the Government are suggesting that it should also apply in the case of goods from the EU. That is a major concern, because as there has been free movement and people have been able to live in other European countries, it is perfectly feasible that an awful lot of people will have family members in other EU countries and therefore will be likely to receive gifts of a value of over £39. I want to make it absolutely clear that if and when people start getting those bills, they will be totally caused by Brexit, leaving the customs union, and the proposed changes to VAT.

Trade remedies have been mentioned, particularly by Labour Members. Some of the evidence about the matter that the International Trade Committee received last year was concerning. The EU currently has anti-dumping and countervailing measures that would normally be expected to still be in place after Brexit day, such as a five-year measure that was put in place two years ago, meaning that it will have about two years to run at the time we leave the EU. Bernardine Adkins of the law firm Gowling WLG told the Committee that

“it won’t be possible to grandfather the measures, otherwise you will face problems with the World Trade Organization.”

If she is right, we have a pretty significant problem, especially because the call for evidence the Government issued at the end of November seems to suggest they do not know which trade remedies are relevant to UK companies. If the UK Government have to create a trade remedies agency, get it up and running, and furnish it with details that have not been provided in this Bill—how to conduct investigations, how subsidies are to be defined, how to assess if a UK industry has been injured, how to define a UK industry, and how to calculate the level of duties and guarantees needed to rectify the injury caused—and if they have do all that before putting in place even the trade remedies that currently exist, we have another problem.

UK Steel has been particularly vociferous in its criticism of this aspect of the Bill. It says that the chief and overriding concern is that schedules 4 and 5 to the Bill, concerning anti-dumping and anti-subsidy measures respectively, contain very little detail. It goes on to point out that for many of our major trading partners, including the EU and US, such issues are covered by primary legislation. The UK Government have chosen to deal with this through not primary legislation, but secondary legislation. That is yet another concern that we have about the Bill. The Bill does not even have the level of detail of the WTO agreements, so if the Government had included those, the Bill would have been substantially better.

The lesser duty rule is also a significant issue, as the UK Government are looking to go in that direction at a time when the EU is looking to move away from it. This is a concern for us, and for UK manufacturers and jobs in particular.

I and my party have general concerns about the loss of the customs union and the single market. We also have very specific concerns, which echo the views of businesses, about aspects of this Bill. A Fraser of Allander Institute report last year said that 134,000 jobs in Scotland are supported by trade with the EU, and Brexit threatens to cost our economy in Scotland £11 billion a year by 2030 and to result in many fewer jobs. The OECD highlighted in June last year:

“In case Brexit gets reversed by political decision…the positive impact on growth would be significant.”

There are major issues about tariffs if we leave the single market. The EU average tariff on imports from outside the EU was 5.2% in 2014. The average tariff on food was 15%. Skimmed milk exported into the EU from outside the single market attracts a tariff of 74%. If our organisations get hit by these tariffs when they are exporting—if we end up outside the EU single market and customs union as part of a no-deal scenario —we will not just have the problems I have mentioned about issues with the Bill, trade remedies and how HMRC will cope with all this. All these things are an incredible problem. Would it not be better and easier, and would it not be in the economic interests of everyone in this country, if the UK Government were to say, “Actually, we are going to stay in the single market and the customs union”?

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[Julia Lopez (Hornchurch and Upminster) (Con)]

If we are to deliver Brexit, the UK needs to leave the customs union and establish its own customs regime. Without doing so, the UK will be precluded from striking its own free trade deals and left open to certain judgments from the European Court of Justice. I fear that those who believe we can honour the referendum result while staying in the single market or customs union are simply wishing to deliver Brexit in name only.

The Bill is widely drafted in order not to prejudice the eventual outcome of any deal we strike with the EU. It instead ensures that the UK can respond to its new status, whatever the circumstances in March 2019. That could include a no deal scenario—something that would represent a wasted opportunity of historic proportions on the EU’s part. Our Government have already made it clear that the UK wants to maintain free, frictionless trade with the EU and that they wish to maintain continuity with EU law at this stage on customs, excise and VAT to give businesses certainty.

There would be no need for chaos at customs or increased tariffs if our standalone regime could be linked closely to the EU’s, potentially in a new customs partnership. The question is whether the EU has the capacity to recognise its own interests and, more crucially, the interests of the people it governs. Until 2008’s financial crisis, global trade had been growing at up to twice the rate of global output for decades. Ever since, trade has slowed to be in line with, or sometimes below, growth in the global economy and political upheaval has followed.

As a founding World Trade Organisation member, the UK has long been a passionate advocate for liberalised trade. It is time to regain that leadership role and push back against the superficial allure of protectionism. The Bill sets the scene for that. While it introduces the potential for levying tariffs, giving us the tools to protect against dumping, it also allows us to adopt a unilateral trade preference scheme for developing countries to ensure trade further replaces aid as the primary poverty alleviation tool.

The Bill also aims to manage the flow of goods at our ports. Over the summer, I visited London Gateway, a state-of-the-art port in Essex with modern HMRC and Department for Environment, Food and Rural Affairs facilities and spare capacity. A logistical hub is being developed to deliver goods directly to London and the south-east rather than via midlands distribution centres. German grocer Lidl has already taken space there. The competition from nearby ports such as Tilbury, with its vast Amazon fulfilment centre, keeps freight costs low and ties into the Government’s ambitions to unlock the entire Thames Gateway with a new river crossing and more homes. This plan and these efficiencies strip out cost to retailers, helping to offset any potential increase in tariffs. Our customs systems are already highly efficient, but the Bill sets up an authorised economic operator scheme to indicate the fulfilment by exporters and importers of recognised compliance standards and makes provision for HMRC-approved warehouse operators. These measures should fast-track shipments. We now need to identify the sectors most exposed to any new cost and resource HMRC appropriately, which is what the Government are doing.

In my capacity as a member of the International Trade Select Committee, I would like to say something about tariff-free quotas. As an EU member, the UK is party to over 60 free trade agreements that permit our trading partners to export a certain volume of goods to the EU tariff-free. Along with the Trade Bill, this Bill provides the foundation for the continuation of these deals after Brexit. We hope that this grandfathering process will be straightforward, but our trading partners may use the opportunity to renegotiate terms, and rules of origin might add complexity to existing trade. Rules of origin define where a product was made and help to determine the application of quotas, preferential tariffs and trade remedies.

At present, the UK can export to the EU with no restrictions on the value of imported intermediates from third countries, and this will likely change once we are out of the customs union. Origin is generally conferred based on where a good was obtained or manufactured or where the last substantial transformation took place. Cumulation of origin allows for greater flexibility when using raw or semi-manufactured materials from certain third countries. Currently, as an EU member state, the UK benefits from the pan- Euro-Mediterranean cumulation zone.

Cumulative rules of origin may prove hard to negotiate, requiring trilateral discussion between the UK, the EU and the third country concerned. None the less, the UK’s departure from existing free trade agreements is not challenge-free for the EU either. Those FTAs were negotiated on the basis of access to an EU economy that included a UK market, which, in 2015, amounted to 17.5 % of the EU’s GDP, and which contains some of its most voracious consumers. If we withdraw that market from the FTA, there will inevitably be an impact on its functioning, if not on its legal character. The EU plans to remove the equivalent of the UK’s market share from the duty-free quotas that it offers its trading partners. Otherwise, EU domestic producers will have to compete with a greater inflow of tariff-free foreign goods. FTA partners, however, are understandably very unhappy at the prospect of a substantial reduction in their tariff-free quotas.

If the EU can think imaginatively and flexibly about a customs link to the UK economy, with potential agreement on rules of origin at least for a transition period, the potential problems of both sides can be addressed. The EU’s default arrangements relating to rules of origin are relatively liberal, and processes already exist for exporters to self-certify origins. Agreeing on those processes, and ensuring that businesses sign up to them now, should be a priority.

[Kirsty Blackman]

May I pursue the issue of tariff-rate quotas? Is it not the case that, even if countries receive the same amount in total—if they were previously able to distribute 100 tonnes of goods, and in future they could distribute 70 to the EU and 30 to the UK—they might challenge that on the basis that if the UK market collapses, they will not be able to transfer that amount to another country, as they currently can?

[Julia Lopez]

My point is that any issues relating to tariff-rate quotas will affect not just the UK but the EU, and it is therefore in the EU’s interests to try to reach an accommodation with the UK.

I welcome the Bill, which is about preparedness and which, given its wide drafting, allows for any negotiated outcome. I hope that it sets us up for a new chapter in our long history as a proud, global trading nation.

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

Ga’i ddymuno blwyddyn newydd dda i chi—may I wish you a happy new year, Mr Speaker?

I wish to confine my remarks to three key points. First, I wish to add my voice to those calling for our continued membership of the largest trading bloc in the world. Secondly, I wish to outline the concerns from Welsh ports, which would face immediate challenges to their existing position as a result of changes to our customs arrangements. Thirdly, the weakness of this Bill’s ability to protect our vital industries will form the final part of my speech, and we have heard many interesting contributions on that point already.

As promised, I wish first to reiterate to the British Government the illogicality of, and harm they will cause by, ripping us out of the customs union. A student of GCSE economics could explain the foundations of international trade as laid out by David Ricardo. His theory of comparative advantage is not complex to grasp. By specialising in particular industries, combined with free international trade, all nations will see positive results. The premise is simple: rather than creating a range of mediocre products, the highly specialised industries of each nation produce better goods, which are then traded internationally, satisfying domestic demand for the products made in other nations. Whether we agree that this commercial international order should be our goal or not, it has underpinned our economic approach to trade for centuries.

International marketplaces have moved on from Ricardo’s time. Instead of cloth and wine, the modern economy trades aeroplane wings, specialised steel products and microchips. To account for this complexity, policy makers have created institutions to manage commerce.

The European customs union is the greatest example of one such institution. By removing physical and financial barriers to trade, it has created the largest, richest, most powerful network of free-trading states in the world. As a result of our membership of the customs union, Welsh businesses can trade on a completely unfettered basis within the bloc, gaining access to 600 million consumers.

As a trading bloc, the EU customs union also applies a common external tariff on entering the bloc, and we should remind ourselves of the extra costs that will hit our exporters if we are no longer members and have no agreement on future tariffs. Carmarthenshire is known for its agricultural produce, so it is worth putting it on the record that the tariff for animal products can be more than 138%, with an average of 20%; the maximum tariff on dairy products can be as much as 134%, with an average of 45%.

I could also point to other major employers in Carmarthenshire who manufacture component parts for export and will obviously follow the upcoming negotiations with great interest. We should not be under any illusion: if it becomes burdensome, financially or through regulation, for those companies to move their goods, they will relocate. Our membership of the single market and the customs union has been invaluable in securing valuable foreign direct investment in areas such as my home communities in the Amman valley.

Before I am accused of scaremongering, today’s shambolic reshuffle was trailed in the press over the weekend as a reorganisation to prepare for a no-deal scenario. The 27 members of the EU are not the only ones with whom we will lose our existing free-trade arrangements. Sixty-seven countries have agreements with EU customs union members which must be grandfathered, although there continues to be some dispute about whether that is possible. The issue will be discussed in greater detail tomorrow when we deliberate on the Trade Bill.

By pulling my nation out of the European customs union in search of some false free-trade, low-tariff Brexit nirvana, the British Government risk the jobs and wages of my constituents. The Minister will undoubtedly claim that this is the will of the people. We can of course engage in a tit-for-tat argument over whether that is the case. However, that denies him the opportunity to outline the purported benefits of the British Government’s approach. For that reason, I ask him the following: if certainty is his aim, and the status quo is certainty, why is rolling the dice on more than half our imports and exports a good idea? Why is he gambling away my constituents’ jobs and wages? Why is he pulling us out of the customs union at all?

I also implore Labour Front Benchers to come to their senses. The constructive ambiguity of the Labour party’s Brexit position may offer marginal electoral advantage, but it provides the silver platter on which the Tories can serve up an extreme and damaging Brexit. Rather than playing hokey cokey with the single market and customs union, I ask Opposition Members to join us and take a clear stand to say we are better off in these great European economic institutions. Let there be no mistake: the Tories can deliver their current policy of an extreme Brexit only because the position of the Labour leadership is to leave the single market and the customs union after the transition phase.

[Kirsty Blackman]

Does my colleague agree that Opposition Front Benchers are not supporting a jobs-first Brexit? If they wanted a jobs-first Brexit, they would keep us in the single market and the customs union.

[Jonathan Edwards]

I am grateful for the intervention, and am aware that during the debate many honourable colleagues on the Labour Back Benches have made that exact point and implored Front Benchers to change their position. Some very interesting reports are coming out of the parliamentary Labour party meeting this evening.

Before the recess, the tangible and immediate chaos created by pulling us out of the customs union was vividly illustrated. The Prime Minister’s attempts to conclude phase 1 of the negotiations were almost scuppered by the issue of customs borders on the island of Ireland. Others will be able to expound with greater invested passion why no such border should exist. However, I would like to raise my concerns about the sea border that my nation shares with Ireland and thus the EU.

Wales and its ports are intimately linked with Ireland. Holyhead, Fishguard, and Pembroke Dock are vital trading links between Wales and the Republic of Ireland. Holyhead is the UK’s second largest port. In excess of 400,000 trucks pass through it every year. A hard maritime border between Wales and the Republic of Ireland will inevitably hit Holyhead hard, and I ask Ministers to read the excellent article of 4 January by my former university lecturer, Professor Richard Wyn Jones, on this specific issue facing Holyhead and his native isle of Ynys Môn, or Anglesey. In Holyhead there is simply no space in or around the port for the kind of infrastructure that will be required to process the number of lorries and trailers that currently pass through it. A hard border in Holyhead can yield only chaos. The same problems apply to Pembroke Dock and Fishguard.

The inevitable consequence of physical constraints in and around the ports is that freight will need to find ways to bypass Holyhead and Wales, especially if there is a soft border between the British state and the European Union in Northern Ireland. Without trade arrangements that mirror the outcomes of what we already have, Welsh ports will be in danger of becoming uncompetitive. With the intention of pulling us out of the customs union, the Bill and the actions of the Minister make it clear to the people of Holyhead that the Government consider their livelihoods to be dispensable.

Finally, I would like to highlight the concerns of an industry central to and symbolic of the Welsh economy—the steel sector. Primarily its concerns centre on trade defence provisions. These are found in clauses 13 and 14 and schedules 4 and 5. I am sure the Minister will have seen last week’s letter in the Financial Times from almost a dozen industry and union representatives highlighting the fact that these clauses

“set up a lighter-touch approach to illegal dumping by China and others than in the remaining EU and any other major economy.”

In the lead-up to the referendum, the exact opposite was promised by the leave side. In an ITV Cymru debate I took part in, Mr Nathan Gill from UKIP, speaking on behalf of the leave side, promised that a British Government freed from the shackles of Brussels would be able to impose prohibitive anti-dumping duties on China. I am sure that that clear promise influenced votes in some communities in south Wales. When he uttered those words, we know the British Government were selling the Welsh steel sector down the river. In March 2016, the British Government blocked attempts to strengthen EU trade defences against imports of cheap Chinese steel that devastated Port Talbot steelworks and took it to the brink of collapse—as we heard from the hon. Member for Aberavon (Stephen Kinnock) earlier. Yet again, it seems that the Government have little concern for steelworkers, preferring to seek dodgy deals with Trump’s America and cosying up to Beijing to protecting Welsh jobs and wages.

Fundamentally, the Bill would be wholly unnecessary, and its deficiencies of no concern, if the policy of the British Government followed the sensible path of remaining a member of the European customs union. For this reason and other reasons I have outlined, my Plaid Cymru colleagues and I will refuse to give the Bill a Second Reading and will vote against it tonight.