Brexit: Trade in Goods (EUC Report)

Lord Horam Excerpts

Tuesday 18th July 2017 Lords Chamber

[Lord Horam (Con)]

My Lords, there is great logic in what the noble Lord has just said about the future and the possibility of a second referendum. I agree with him that there is an absolutely logical case for that.

As a member of the sub-committee which produced this report, I first agree with my noble friend Lady Verma on what an excellent job the staff did in bringing together a huge amount of information and shepherding it into a sensible and rational arrangement which we, and I hope others, could understand. When it comes to writing reports of this kind, I am always reminded of the story of Henry Kissinger, when he asked his assistant to provide a report. The assistant turned up with a report and Kissinger said, “I think it needs a bit of tweaking here and there. Come back in a week”. So the assistant came back in a week and Kissinger said, “I know your talent for writing reports. I think you could do better. Come back in a week”. The guy came back for a third time and, before Henry Kissinger could say anything, he said, “Look, Secretary of State, I’ve shot my bolt. This is it. I can’t do any more”. “Okay,” said Henry, “I’ll read it now”. Fortunately, we were not in that position in our committee, because they got their first draft pretty well spot on and we were able to agree on the bones of the report.

From beneath the positive cornucopia of information in this report, we went away with two themes, which we had also outlined in the first report in December. The first is that transitional arrangements are essential. I think that there is broad agreement on all sides of the committee, on all sides of the House and in all shades of opinion that some sort of transitional arrangements are necessary. Even across the channel, there has been such an understanding, in Brussels as well as here. This is not going to be done in the remaining 20 months, whatever one likes to call it.

Secondly, in addition to transitional arrangements you need arrangements that are disruptive as little as possible. If you are to have those, I suggest you must at least stay in the customs union. Now, we heard a number of arguments in the debate today about whether you should also stay in the single market. The two are quite distinct and not necessarily linked. I am afraid that I agree with my noble friend Lord Livingston that there are some political realities about staying in the single market as well as the customs union. However, let us at least stay in the customs union because that would deal with the just-in-time supply chains that are common in aerospace and automotive industries, and deal with the problem of the Irish border.

That is clearly what the Chancellor of the Exchequer is gunning for. In today’s Financial Times he is quoted as saying that we shall need at least two years in addition to the nearly two years that we have under the Article 50 arrangements. We are talking of about four years, possibly, for a transitional arrangement. That seems sensible. I understand that Mr Barnier has said something along similar lines. Three to four years is the sort of period that we need for sensible arrangements. That is supported by this EU committee, reporting twice on the subject of trade. I understand that it is supported by the Evening Standard today. The Home Secretary has said that we need at least a period of time inside the customs union. Obviously, it is supported by the Engineering Employers’ Federation, the CBI and other business organisations.

The argument against that put by Liam Fox and others is that it will not allow us to make our own free trade agreements with other countries. However, as my noble friend Lord Livingston pointed out, you cannot do these things in four years. If we have an interim arrangement to stay in the customs union for four years, very few FTAs would be finalised in that period, even though legally we cannot do that anyway. Even the provisional work would not be completed inside four years on any FTA, together with the fact that we are doing multiple FTAs all at once. The sheer impracticality is mind-boggling. I do not think that to remain in a customs union really puts out of court any serious agreement we would have with any other country outside the European Union.

We can also overrate the value of free trade agreements with other countries. I speak with some experience here. Notice that I do not use the word “expert”. Experts are somewhat devalued these days; ideological purity seems to triumph over experts. I speak with some experience because a company I founded many years ago, before I became a Member of Parliament, is fortunately now thriving and we export 92% of our services. The noble Lord, Lord Bilimoria, boasts about exports and I will boast a little bit. Opening up new markets in what are inevitably distant lands—Chile, China or whatever—is hard work; servicing them is even harder. It is not a question of getting on the Eurostar to Brussels or going on a plane to Spain. If you are going to Chile or China, you must have people on the spot with offices. It is costly and all the rest of it. It is not easy to do all this trade or make free trade agreements with other countries that are distant and small by comparison with the trade arrangements we already have.

Also, these countries extract a price. Look at what Aramco is now asking for to have its business listed on the London exchange. They all demand a price and want their pound of flesh. It amused me during the referendum campaign to see the slogan, “Bring back control”. If you weaken the economy, you make it more difficult to have control over it. You lessen the control you have if you are in the position of a demandeur. You are less in control of your affairs than if you are in a strong position—as we were inside the European Union. As Mr Carney once put it, we are more dependent on the kindness of strangers—and we will continue to be if we have the debts that I fear we will have as well as the position outside the European Union. I do not want to get too far into these deep waters. All I am saying is that the sort of free trade agreements we can have with the rest of the world that we do not have at the moment are not a substitute for the markets we have now. They are valuable, yes, but they are not a substitute.

The Government must make their mind up about remaining a member of the customs union. They should announce that soon. As has been said during this debate, while we rely on these platitudes, as we have done for so long, investment drops away and companies make worst-case assumptions: easyJet thinks about going to Austria, Barclays thinks about going to Ireland, et cetera. Again, this point has been made but I fear that Governments invariably leave it until too late. If you look at that admirable book by King and Crewe, The Blunders of Our Governments, you will find endless episodes of Governments, for internal reasons, simply taking too long to make decisions. Of course, the private sector must pick up the pieces.

In addition to that, we need not only to have a clear view but also to sell it to the European Union. The right approach is to go to the EU, come October or whenever we start the trade negotiations, and say, “Why can’t we keep what we have? Let’s not build up barriers between us where we don’t have them at the moment. That is ridiculous. We’d be the laughing stock of the world if we do that. Let’s keep what we have. Of course, further down the line we will want to raise issues such as free movement of labour and maybe the role of the European Court of Justice—but that is further down the line. Let’s begin with working on what we have in common and what we can keep”. That positive approach will produce better results. I do not know any more than anybody else in this House what the reaction of the European Union will be or what Mr Barnier will say to all this. We do not know at this stage. None the less, on the understanding of proper negotiations, a positive, co-operative approach must be the sensible way through.

Finally, I believe that there is a way through these difficulties. It is necessary for the Government to be more realistic and flexible, and to listen to business and sensible centre-ground opinion. That opinion has been admirably expressed in the two reports and in today’s debate.