Brexit: Trade in Goods (EUC Report)

Lord Bilimoria Excerpts

Tuesday 18th July 2017 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, 22 February 2016, a date that many people forget, was when the referendum was announced. Normally when a business or a country goes in for a big change, it is caused by a burning platform: things are really bad or not going well. But at that time we as a country were flying. Our Foreign Secretary is very fond of cake: well, we were eating our cake and having it as well. Sovereignty was a big issue where the wretched referendum was concerned, but we had full sovereignty. We are not in the euro but we are at the top table in Europe. We are not in Schengen. We measure our roads in miles and we pour our petrol in litres. I pour Cobra beer in pints when I choose to and I sell it in litres on supermarket shelves when I choose to. When I challenge people on EU laws because they say, “I want to take back control and leave”, I ask them to name one law that affects them on a day-to-day basis. Most people cannot name even one because the laws that affect them on a day-to-day basis are made by us here in Parliament.

People confuse the European Court of Justice with the European Court of Human Rights. We wrote the European Court of Human Rights and we will continue to be subject to the court, but people do not understand that. Then they say, “Oh, look at the billions that we put into the EU every year”. A pie chart of our annual government expenditure of £800 billion a year would show a thin line with an arrow pointing to it to indicate the 1% of our annual expenditure that goes into the EU. I would pay that 1% just for the peace that we have on the continent.

Yesterday we had a debate on the impact on immigration of Brexit. What would we do without the 3 million people who are working over here? We should be grateful to them because without them we would have labour shortages. We have a 4.5% unemployment rate, one of the lowest in living memory. Is it low-skilled labour? That is nonsense. It is labour that is high-skilled and low-skilled, right across the board.

Since 22 February last year the country has been deeply divided. We as a country had the fastest-growing western economy in the world, but today we are growing more slowly than Europe. Our savings rate is really low. We have a Government who are leaderless with a leader with no credibility. The will of the people as expressed on 23 June is shackling this country, this Parliament and our parliamentarians. The vote was to leave, but to leave on what terms? No one wants to leave if we are going to be worse off as a country, as an economy, as businesses and as individual citizens. A Survation poll taken on 18 June 2017, just 10 days after the election, showed that 53% of people want a say on the final deal, and that well over two-thirds do not want a hard Brexit.

I turn to Emmanuel Macron. Luckily the populist bubble seems to be in the past. We had Trump and the referendum, but we did not have it in Austria or Holland and we now have Emmanuel Macron in France. Moreover, we are not going to get it in Germany. We have also heard former Prime Minister Tony Blair say that, according to him, European leaders are willing to consider reforming Europe to adapt to what we are looking for. I firmly believe that, when it comes to the free movement of people, there needs to be reform in Europe. That will be to everyone’s benefit because Schengen works from the tourism and business point of view, but not from the point of view of the migration crisis or the need for security.

I am a lone voice in this country but I will keep saying this: why do the Government not bring back exit checks at our borders? I challenge the Minister on that. We should have visible, physical exit checks and then we would have control over our borders. In every other country that I fly in and out of on a regular basis, whether it is Europe or South Africa or India or the United States, my passport is scanned on the way in and again on the way out. You then have control over immigration. From the security point of view it is negligent not to do it—and we need to give people more faith where immigration is concerned.

What will the future be? Brexit is the most important decision this country has faced—but, quite frankly, the future is worrying. First, we know that it is a Conservative Party issue. It was UKIP that drove Brexit, but where is UKIP today? Also, unfortunately there is no clarity at the moment from the Labour Party as to where it would stand once the issues are boiled down. The worst thing about all this is obvious, but I have to say it. For the past year and over the months ahead, what are we talking about in Parliament? Brexit. What we are not talking about are the issues that really matter to this country and which we need to be getting on with. Indeed, we are being left behind already. What hurts me most is that Britain was at the top table of the world. We are not a superpower but a global power: the G7, the G8, a permanent seat at the Security Council, the G20, a member of NATO, but no longer at the top table of the EU. We have lost our global standing and right now we are actually the laughing stock of Europe and the world.

I congratulate the noble Baroness, Lady Verma, and her committee on the report. It states right up front:

“Brexit will fundamentally change the UK’s conditions of trade with the other 27 EU Member States, and with over 60 countries with which the EU has preferential trade agreements”.


It sets out the reality:

“Goods make up the bulk of the UK’s global trade, and accounted for around 60% of all UK exports to the EU, and almost 77% of total UK imports from the EU”.


Yet the Prime Minister set out her intention for the UK to leave the single market and the customs union in her famous Lancaster House speech of 17 January. The report clearly states that,

“in the absence of a FTA with the EU after Brexit, tariffs would apply”.

When you have tariffs, you get WTO rules. That means 10% on cars, 200% on some agricultural products, and great damage in areas where we are integrated into the EU supply chain. Indeed, we have heard the noble Baroness herself say that,

“tariffs could be levied multiple times in the production process”.

Then there is the big issue of non-tariff barriers such as rules of origin.

What about the wonderful EU agencies that the UK participates in, some of which are based over here? I cite the European Medicines Agency and the European Aviation Safety Agency. The UK’s proposed relationship with the EU outside the customs union and the single market will also result in a customs border. That means customs procedures and delays, increased administration and red tape, red tape, red tape. Wow—more red tape. That is a nightmare for business; we see red when we hear about red tape.

The timetable for withdrawal is so tight. First, the Prime Minister was in a hurry to get the notice under Article 50 submitted by March. Why? Because she wanted to get out by 2019 so that she would have a clear run to the 2020 elections. Then she called a snap election which ate into that two-year period when the clock was already ticking. Now we are waiting for the German elections and the clock is still ticking. Concluding an EU FTA agreement in that time is dreamland. And then there is talk of transitional agreements.

The EU member states combined were the single largest trading partner of the UK, accounting for 47% of our exports and 54% of our imports. There are also important trade agreements with third countries that we benefit from, such as the one with the Republic of Korea that has been referred to. They are the FTAs that we have through the EU, with up to 60 countries, which we will no longer enjoy if we leave the European Union.

I chair the Manufacturing Commission—we are a proud manufacturing country. Along with Molson Coors, my joint venture partners, we manufacture Cobra beer in Burton-on-Trent. Manufacturing was 30% of GDP in the 1970s, at the time that we joined the European Union. Today it is 10%—but it is still very high-value manufacturing. The report states that our manufacturing export intensity rose from 30% in 1991 to 47% in 2011. I am boasting here—please forgive me—but Cobra has won 94 gold medals since 2001 and this year was the only beer in the world to win the judges’ trophy. It is manufactured in Burton-on-Trent in Britain. It is British manufacturing at its best—British manufacturing that employs 2.7 million people in the UK; British manufacturing that supports jobs in the services sector.

The noble Lord, Lord Marland, referred to our world-class universities, the best in the world along with those of the United States of America. UUK illustrates this with an example: we are less than 1% of the world’s population, yet the UK produces 16% of the world’s most highly cited articles. The UK also ranks first in the world by field-weighted citation impact. What is the danger of leaving the EU? It is not just losing the funding that our universities rely on—the Government can say, “We’ll give you that funding”—but, more important and more worrying, it is losing the collaborations that exist. I saw this when I went to India with Jo Johnson, the Universities Minister, as chancellor of the University of Birmingham and wearing my hat as chair of the advisory board of the Cambridge Judge Business School. In India, we demonstrated the collaboration between the University of the Punjab and the University of Birmingham. Our field-weighted impact result is about 1.8; that of the University of the Punjab is 1.3; combined, it is 5.3. When we research with Harvard, which has a field-weighted average of 2.3, the combined result is 5.4. That is the power of collaborative research; that is what we would possibly be losing.

The noble Lord, Lord Howell, spoke about services being 80% of our economy. We are already a great trading nation; we always have been. Trade makes up 65% of our GDP. Then the Government will have to make a trade-off between their desire to determine UK laws and regulations and the extent to which an FTA with the EU can operate to two separate regulatory standards. As the report points out, that is another problem. The report then states that leaving the customs union would result in costly administrative requirements and customs procedures—burdens for companies—and further states:

“Administering UK-EU tariffs and non-tariff barriers—in the absence of a common regulatory system—would also significantly increase the work of HMRC”.


What about HMRC? How will it cope with this?

We are going to lose out on a huge amount. The 60 countries with which the EU already has free trade agreements account for about 17% of our exports. If we add the 50% of our trade accounted for within the EU and the 17% with those other countries, we see that two-thirds of our trade globally is tied up with being in the EU. Wake up—this is really serious. Leaving will be a huge problem.

And then our great International Trade Secretary, Liam Fox, goes to India and says, “I’m going to open up a free trade deal with India”. I have shared a platform with the Indian high commissioner, a seasoned diplomat, who says that we are welcome to do a free trade deal with India—“Please, do come along, but also remember that a free trade deal with India also means looking at movement of people”. It is not just goods and tariffs; it is services, it is movement of people and it is students. By the way, how many bilateral free trade deals does India, the largest democracy in the world with 1.25 billion people, have in the whole world? Nine—and not one is with a western country. How many free trade deals does the biggest economy in the world, the United States, have? It has 20.

This is not easy; this is not a joke. This will take a huge effort; it is not the panacea. The noble Lord, Lord Inglewood, said very sensibly that business is invariably ahead of government. Unfortunately, for a whole year, the Prime Minister did not listen to business. Now she is trying to do that. It is not just the CBI; it is not just the British Chambers of Commerce; it is not just the FSB. We need individual business leaders—FTSE 100, FTSE 250, FTSE 350 and SMEs—to speak out individually and have the guts to say to government and to the country, “This is madness, because it is business that creates the jobs that pay the taxes that pay for our public services that we all benefit from”.

EasyJet is already saying that it is going to set up a new European base. A report from the Centre for London think tank said that up to 70,000 finance jobs could be lost—Paris and Frankfurt are just waiting. And then the biggest free trade deal in the world, the EU-Japan deal, has just been concluded after four years of negotiation. Here is the reality. A headline in the Independent states:

“Brexit: German business warns May its priority is to protect single market, not a good trade deal with the UK”.


Here is the other thing. We hear it said: “Oh, Europe’s going to be desperate to do deals with us, because the German car makers will make sure of it”, but the article states:

“Carmakers in Germany were expected to lobby their government for a free trade deal to help them sell into the British market, but they say protecting the single market is more important”.


That is the reality. The Financial Times says that short-term transition deals will not work and gives reasons for that.

It is said that this situation is about respecting democracy. We are being shackled because of the will of the people—52% versus 48%—that was expressed a year ago. The reality is that in a normal democratic election, if the Government have not performed, five years later the public can throw them out. Here, this is permanent. Keynes said:

“When the facts change, I change my mind”.


If we really respect the will of the people, we will allow them to make a decision once they have the full facts. That is respecting democracy; that is the will of the people. By that time, the people will see that the Brexit emperor has no clothes—and then it will not be “Brexit means Brexit” but “Remain means remain”, because people will realise that, for the benefit of this country, its economy, its business and its citizens, it will make sense not to leave the European Union.