Brexit: No-deal Tariff Schedules

Lord Callanan Excerpts

Monday 7th October 2019 Lords Chamber

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, with the leave of the House I will now repeat in the form of a Statement the Answer given in the other place earlier today by my honourable friend the Minister of State for International Trade. The Statement is as follows:

“On 13 March, the Government announced that they would implement a temporary tariff regime in the event of a no-deal Brexit. This regime would apply equally to all imports that are not subject to alternative trade arrangements and would apply for up to 12 months while a full public consultation will take place to inform long-term tariff arrangements.

The Government would prefer to leave with a deal, and will continue to work energetically and with determination to get that better deal. This will require the European Union to show the same spirit of compromise that my right honourable friend the Prime Minister is demonstrating in his engagements with our European friends and allies.

As the UK leaves the EU the Government are stepping up their preparations to get the UK ready to trade if there is no deal. The temporary tariff regime would maintain open trade on the majority of UK imports, helping to support consumers, business supply chains and sensitive sectors of the UK economy. Due regard has been given to the five principles set out in the Taxation (Cross-border Trade) Act 2018: the interests of consumers in the UK; the interests of producers in the UK; the desire to maintain and to promote external trade of the UK; the desire to maintain and promote productivity in the UK; and the extent to which these goods are subject to competition. It reaffirms our commitment to become a free-trading nation. It realises the benefits of an independent trade policy to support increased trade and investment with partners new and old around the world, and increased choice for British shoppers.

At the same time, Her Majesty’s Government recognise the importance of retaining some tariffs. Tariffs would therefore apply on just over 10% of imports, supporting sectors facing unfair global competition, mitigating otherwise significant adjustment costs for the agriculture sector, supporting the strategically important automotive sector, and maintaining our commitments to developing countries. Preferential access to the UK market is important for our developing country partners and tariffs have been retained on a set of goods, including bananas, raw cane sugar and certain kinds of fish, to demonstrate the Government’s ongoing commitment to countries in the developing world. During the Article 50 extension, the Government have remained responsive to the concerns of business and have reviewed the tariffs that would come into effect if the UK left the EU without a deal.

To answer the honourable gentleman, the Government will publish the final tariffs shortly. It would not be appropriate for me to comment on any amendments being considered prior to that announcement. As he will understand from his former guise as shadow Chancellor, to do so would be irresponsible. The Government will ensure that Parliament is informed as soon as practically possible once a final decision has been made”.

[Lord Stevenson of Balmacara (Lab)]

Ah, “shortly”; that wonderful word.

My Lords, I thank the Minister for repeating the Answer. Tariffs are, of course, the simplest and most direct of the tools of trade policy. They are taxes on imports. Higher tariffs shelter domestic industries; lower tariffs increase competition and benefit consumers, so Governments should be interested in them. We are interested in the announcements that are about to be made.

Having apparently lost interest in the Trade Bill—maybe it just got lost—we should perhaps not be surprised by the way the Government have been treating tariffs. The interim announcement in March was done without consultation and with very limited debate. We have yet to see an impact assessment or even an Explanatory Memorandum. Can the Minister confirm that these important documents will be published for the next round?

There are rumours about changes that will be made to the original list, which was heavily criticised from all sectors in industry. Can the Minister say more about that? He said that he would not comment on it, but can he give us a timeline rather than just “soon”? We know that the rumour is that the statutory instrument dealing with this is to laid on 21 October, although it will be a made affirmative SI, which I understand to mean that this House will not have a chance to comment on it. Can the Minister confirm that?

Do the Government intend to have our final WTO schedules formally ratified by the WTO this time, or is this just another temporary announcement? On a related issue that bears on the same point, have we reached an agreement yet on our tariff rate quotas? We know that significant challenges by other countries have already been logged that may require substantial compensatory offers. Where are we on that? What assessment have the Government made of likely new tariffs on our exports which will be introduced by our new trading partners? Does this not just mean that UK companies will face competition from a flood of cheap imports that undercut them, putting thousands of UK jobs at risk? What remedies do the Government have in mind to counteract that?

[Lord Callanan]

I thank the noble Lord for his comments. He will understand my difficulty as I cannot comment on a specific date for the announcement, but it will be made shortly.

On his question about SIs, there will be one made affirmative SI and 10 made negative SIs to implement the tariff schedules. We will introduce them as soon as possible following the tariff announcement, which, as he will know, is market sensitive. We expect to liberalise roughly 87% of tariff lines and that tariffs will be applied to roughly 13%. We do not expect to have significant changes from the previously announced regime from March. As always in these things, there is the difficulty of getting a balance between the interests of consumers and the interests of producers.

[Lord Purvis of Tweed (LD)]

The Minister repeated the estimates from March of how this would impact British business. I remind the House of how the business community described those figures. The CBI described them as a “sledgehammer to our economy”, and said that they show,

“everything that is wrong with a no-deal scenario”,

and that there had been no input from businesses. The Federation of Small Businesses described them as “undercutting”. When I took the textile firms that I used to represent in my former constituency through what the implications would be, they described them as devastating for the remainder of that sector.

If these measures are a “contingency”—as the former Business Secretary described them to the BEIS Committee in the Commons when it asked him about them in March—rather than anything definite, what consultation has there been with the business community? If the figures have not changed, as the Minister indicated, then we can assume that there will be no changes, so we would start to feel their dramatic impact almost immediately if there is a no-deal scenario.

Secondly, the Minister will recall that these “contingency measures”, as they were called then, were published alongside what would have been the emergency measures for the Northern Ireland border, because we cannot have this tariff regime in place without mechanisms for what would be our land border with the European Union. Can the Minister be very clear: would the contingency arrangements covering the Northern Ireland border that the Government also published in March be implemented in a no-deal scenario?

Finally, the Minister rather glibly said “shortly”. If this measure is put in place, it will be because there has been no deal. That could be in a little more than 10 days in which Parliament can consider the implications of the next European Council. If businesses are not to see a repeat of the lack of input that they described in March, will the Government at least publish what the responses from the business community have been if we are to take the Government at their word that it has been consulted?

[Lord Callanan]

I thank the noble Lord for his questions. I genuinely would like to be helpful, but I cannot go further than to say that the announcement will be made shortly. We have been responsive to business concerns. We have been listening to businesses and sectors since the original announcement, but, as I said in response to the first question, there is always a balance to be struck between the benefits for consumers and for industries that rely on imports for their productivity and domestic producers. These are difficult decisions; I am not hiding that. I did not say that there would be no changes; I said that there would be no significant changes. I can confirm that we will not be implementing these tariffs on the Northern Ireland border.

[Lord Davies of Stamford (Lab)]

How can our Irish and continental partners possibly be expected to take seriously the document they received from the British Government last week when it promises “an open border” but at the same time provides for customs controls internal to the island of Ireland?

[Lord Callanan]

I think the noble Lord is a Question behind. That is on the previous Question; on this Question we are talking about the tariff regimes.

[Baroness Neville-Rolfe (Con)]

As my noble friend knows, I have been concerned all along about the tariff schedule. As has been said, business and consumer interests need to know what charges will be levied if we have no deal. I know that there are some concerns about the detail in some sectors, so I am very glad to hear that the SIs are on their way. I hope that business will have been listened to by the new Government.

My concern is actually a longer term one, which I raised with my noble friend the Leader. Assuming that we go down the road of free trade agreements, as has been promised, there has to be an incentive for countries to agree to them. We might be talking, for example, about an FTA with the EU, which sends us so much more in the way of goods than we send it, or about Canada or Japan, which would do very well out of the temporary schedule published in March. When I was a business executive, I was involved in a successful EU FTA with Korea and a failed one with India. I know how difficult it is if you do not have strong levers and protections that the other side wants lifted. How are we going to win in these difficult circumstances?

[Lord Callanan]

I thank my noble friend for her question. She speaks with great knowledge in this area. I remind her that the announcement, when it comes, is a temporary tariff regime lasting for up to one year. We will still have considerable levers over the countries that she mentions because we can revise it in the future if they are not interested in a free trade agreement. We are a free trading nation and we want to have tariffs as low as possible on a mutual basis, but we retain the levers because they will want long-term certainty for their businesses.

[Lord Lansley (Con)]

My Lords, following on what my noble friend Lady Neville-Rolfe was saying, my noble friend will be aware that if we have a temporary tariff regime of our own we need to establish at an early stage what our notified schedule with the WTO is going to be in the longer term. In the unhappy event that we have to go out of the EU without a deal, will the Government commit to consult rapidly and substantively on what that longer term schedule with the WTO should look like?

[Lord Callanan]

My noble friend makes a very powerful point. We will want to move to permanent arrangements as quickly as possible and to consult widely with both business, consumers and parliamentarians before we do so.

[Lord Empey (UUP)]

My Lords, can the Minister respond to the point made by the noble Lord, Lord Purvis of Tweed? How is a Northern Ireland farmer expected to compete when the Republic’s farmers will be able to bring produce into Northern Ireland tariff-free, whereas they will not be able to send it to Great Britain tariff-free? Surely common sense dictates that our market will be used to dump because they can bring in products for next to nothing. How can the Government maintain the pretence—particularly after last week’s documentation—that Northern Ireland is being treated the same as the rest of the United Kingdom? It blatantly is not.

[Lord Callanan]

I thank my noble friend for his question. As I said in a previous answer, this will not be a permanent arrangement. We will want to look at it and revise it in the light of circumstances, but we remain of the view that it is the best thing to do in the short term to ensure that the Northern Ireland border works smoothly with no infrastructure or controls put in place there.