Brexit: Options for Trade (EUC Report)

Lord Lansley Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Lansley (Con)]

My Lords, I am delighted to have the opportunity to contribute. I will attempt to be as brief as I possibly can. I am helped not least by the fact that our two chairs introduced the debate and distilled the report with such clarity. I am further helped not least by my noble friends Lord Gadhia and Lord Green of Hurstpierpoint, who respectively, in brilliant forensic fashion, talked about both the substance of the negotiations and some of the broader challenges for the United Kingdom in achieving success in global free trade. It is not enough simply to open markets; one has to win in markets.

I follow up on one issue to which my noble friend Lady Verma referred, and that is the question of the future customs arrangement. We talked about the customs union in our report, and I remember that when we were preparing it, we said that we knew that one of the first issues that the Government will have to decide is whether they are in or out of the customs union. Indeed, they have decided to be out of the customs union. When the Prime Minister made her speech on 17 January and said that we are out of the customs union because we cannot agree with the common commercial policy or a common external tariff, I may not have been alone in wondering what our customs arrangement will look like in future.

My noble friend Lord Bridges touched on this on Monday evening and talked about how the US and Canada are able to achieve sophisticated supply-chain activity across borders where they do not have a customs union. He also reminded us, as other Ministers have rightly done, that digitalisation of documentation for customs purposes has proceeded apace, not least in the past decade. The United Kingdom is probably best in class for customs documentation by digital means. My noble friend said that,

“99% of customs declarations are received electronically and 96% are cleared in seconds”.—[Official Report, 27/2/17; col. 669.]

He also, interestingly, referred to “authorised economic operator” status, and said that 60% of UK imports and 74% of UK exports are accounted for by UK companies with AEO status. We are starting to see a bit, therefore, what the Government might have in mind and what frictionless trade across borders may look like.

The central, prior issue is achieving a zero-tariff relationship with the European Union, but let me for the moment say that that is clearly part of the negotiations. Let us assume that that can be achieved—it may not be and, if it is not, serious inherent problems emerge. Leaving that on one side, the customs and border relationship none the less involves some pretty serious issues. There is reconciling all this transfer of data electronically with the physical transfer of goods. There is the business of understanding how rules of origin will apply in the supply chain and certification to comply with them.

There is the business of dealing with anti-dumping. I remember nearly 40 years ago being responsible for the generalised scheme of preferences for chemicals in the Department of Trade and Industry, as then was. If we are to align ourselves with the European Union long-term, it will be looking for us to have a generalised scheme of preferences. In general, it will not want any external aspect of its tariff—be it anti-dumping, tariff impositions or quantitative restrictions—to be circumvented by those who are able to bring their goods into the United Kingdom and re-export them to the rest of the EU. We can see this whole string of potential difficulties which could, of course, lead to cost, delay, relative lack of competitiveness and bottlenecks at borders.

At the same time, I want to ask Ministers whether they will do one thing for me. Will they tell us more about the possibilities for dealing with this, and involve us directly in thinking about this? It is not part of the negotiations. I do not think it would prejudice the negotiations in any respect for us to be working hard now to try to put in place the practical mechanisms for facilitating trade and reducing the cost and delay involved in trade across borders for the longer term. We are going to have a customs Bill, a piece of customs legislation. We should have an opportunity to have the Government come forward with their proposals at an early and draft stage to follow up the External Affairs Committee’s report with pre-legislative scrutiny in order to get the Bill right and have a better chance of having our legal framework, as well as our administrative framework, in place before the two years, or a further transitional period, are completed.

What does it look like? We know that the current customs declaration system—the so-called CHIEF, or Customs Handling of Import and Export Freight, system—has about 90 million transactions. After Brexit, the number could rise fourfold. As it happens, there is going to be a new customs declaration system in 2019. It has to be a project that is configured for, and capable of, handling that dramatic increase in the potential complexity and number of those customs declarations.

I think there are only a few hundred authorised economic operators in this country because to get to be an AEO is costly and difficult. We need some additional mechanism by which small and medium-sized enterprises can acquire some of the trusted status which goes along with AEO status for security and customs simplification purposes so that they can access the same kind of cross-border mechanisms. There is technology which allows us to track vehicles, goods and shipments in ways that mean that we do not necessarily have to stop people at borders, and in so far as they are stopped at borders, it will be on a risk-based assessment, rather than having long queues with everybody having to be checked through.

As a former—some 30 years ago—deputy director-general of the British Chambers of Commerce, I know that all over the world chambers of commerce help to make trade work. In this country, we have chambers which have a long history of certification of origin and trade facilitation. We have hundreds of trade facilitation experts—they are not international trade negotiators—in chambers of commerce. In future, we need to have new customs arrangements and, through designing a UK customs code to replace the EU customs code, an opportunity to improve the circumstances for businesses in this country, reduce the cost of compliance and make trade easier for small businesses in particular. I urge Ministers to work with us in the way I have described and to work with my friends in the chambers of commerce movement to try to put that kind of trade facilitation in place for small businesses for the future.