UK-US Trade Deal
Marcus Fysh Excerpts(4 years, 9 months ago)
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Elizabeth Truss
It is very interesting that half a billion pounds in extra economic value does not mean anything to the hon. Member.
Mr Marcus Fysh (Yeovil) (Con)
I welcome my right hon. Friend’s statement and the prospects for more engagement with the dynamic US economy. The Conservatives are the party of free trade. Whenever protectionism has been touted, such as in the elections of 1906 and 1923, it has not ended well for us. Does my right hon. Friend agree that there is big scope for more marketing support for our high-quality produce, such as Somerset cheddar and brie, and that fear of imports does not take account of the ability to deal in zero-tariff quota opening, rather than complete tariff reduction up to any amount?
Elizabeth Truss
My hon. Friend has outlined a number of options; I will be interested to hear more as we go through the negotiations. He is right that we have great products that are currently facing tariffs of up to 18%, and that we could eliminate those and see more exports into the US market. We will be looking at our export strategy—the exports Minister, my hon. Friend the Member for Beverley and Holderness (Graham Stuart), is with me on the Front Bench—and ensuring that we turbocharge our exports as we go into this important year of being an independent trading nation.
Global Britain
Marcus Fysh Excerpts(4 years, 10 months ago)
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Barry Gardiner
The hon. Gentleman tempts me, and I have a great deal of sympathy with his position. I believe that the decision that the Government have reached on Huawei is already a risk too far, so I share that view with him. Of course, he is right to point out that the Chinese Government’s subsidy to Huawei is just as damaging in that sector as subsidies for steel or aluminium.
Future trade agreements could undermine rights and standards, could change the nature of work and the protections offered to workers, such as leave arrangements and parental leave, could reverse environmental protections, and could compromise data privacy and our capacity to regulate in the public interest. Trade agreements could also see our public services being locked into greater privatisation and different pricing models. I say “could” because I am trying to be generous, since Government Members have sought to assure us that no such thing will happen on their watch, but that takes us to the heart of things: if that is so, why are they refusing to allow any degree of scrutiny or engagement in the process?
The trade Bill was supposed to be one of the flagship Bills underpinning global Britain. The Government boasted that it would set out the framework under which future trade agreements would be concluded, but it has been delayed. It has been kicked into the long grass. In fact, it actually came out of its eighth and supposedly final Committee debate two years ago tomorrow. In Committee, we made every effort to legislate for proper democratic oversight of trade agreements. How unreasonable we were! We asked for consultation with industry, a published mandate agreed by Parliament, transparency of agreed texts, scrutiny, debate and positive ratification, but we were blocked.
In the other place, their lordships valiantly reinstated the democratic safeguards and, despite all the Government’s attempts at obfuscation and frustration, their lordships actually managed to introduce significant amendments to the Bill. No wonder it has now languished down the other end of the building for almost a year. In the meantime, the Government have signed a raft of trade agreements—not the 40 originally promised for a minute after midnight on 29 March last year—many of which try to mirror the existing terms of the third-party agreements with the EU. Those trade agreements have been subject to little public scrutiny, with the Government taking advantage of the Constitutional Reform and Governance Act 2010 process to ratify treaties without giving Parliament the opportunity to debate them.
New Members may be unaware of the vagaries of CRAGA, under which an international treaty is automatically ratified after it has been published and laid before Parliament for 21 sitting days, so long as neither House has resolved against it. How do we resolve against it? The Government have to make time or provide an Opposition day for such a vote, but they have no compulsion to do either. That means Parliament can be presented with a fait accompli—so much for the return of sovereignty. International treaties are possibly the most binding law we pass in this place. They commit our successors in international law and cannot simply be repealed by a future Parliament in the way primary legislation normally can.
Let us examine what is happening under CRAGA. One such agreement currently pending ratification, having been laid before Parliament on 20 December 2019, is the UK-Morocco association agreement, which purports to cover Western Sahara. Western Sahara is categorised as a non self-governing territory under chapter 11 of the UN charter, and it has been under military occupation by Morocco since 1975 after Spain surrendered the colony. The Sahrawi people have been denied the referendum that would allow them to exercise their right to self-determination.
The European Court of Justice has twice ruled, in 2016 and 2018, that Western Sahara is a “separate and distinct” territory from Morocco under international law, and that no agreement with Morocco can be applied to the territory of Western Sahara without the consent of the Sahrawi people. The group internationally recognised as the legitimate representative of the Sahrawi people has rejected every proposal that the EU’s trade agreement with Morocco should apply to them. In fact, a coalition of 93 Sahrawi civil society groups has confirmed that the people of Western Sahara reject the inclusion of their territory in any agreement concluded by Morocco.
Our own High Court ruled just last year that the territory of Western Sahara is separate from Morocco under international law and that the UK Government are acting unlawfully by failing to distinguish between the territory of Morocco and the occupied territory of Western Sahara.
The proposed UK-Morocco association agreement is thus contrary to international law and our own law, and it should not be ratified by Parliament until all references to Western Sahara are removed. This is what happens when there is no process of prior consultation, mandate-setting, scrutiny, transparency or debate as part of the ratification process.
Other recent treaties that replicate economic partnership agreements concluded between the EU and countries in central and southern Africa, for example, force market liberalisation measures without allowing for any modernisation or incubation capacity for industry in those partner nations. That effectively locks in economic dependency and prevents the broadening of their economic and industrial base, which is essential to achieving their development goals.
The impact on chicken farming in Ghana, Cameroon and Senegal has been well documented. Dumped chicken products from the EU, farmed with subsidy support under the common agricultural policy, have decimated local chicken production, raising genuine food security questions for these least developed countries.
Is this the global Britain that Conservative Members aspire to be: compounding economic hardship, legitimising oppression and actively supporting regimes that flagrantly abuse human rights and international humanitarian law? I do not think so, but it is what will happen unless the Government openly and frankly outline a detailed strategy for global Britain, and unless Parliament is allowed to fulfil its constitutional role of holding the Government to account.
Mr Marcus Fysh (Yeovil) (Con)
What is the Opposition’s policy? The hon. Gentleman is outlining a policy of the European Union. The Labour party wanted to join the customs union, which would have implemented exactly that policy. Is that protectionist and slightly weird policy towards the rest of the world still the Labour party’s policy?
Barry Gardiner
I will try to take the hon. Gentleman’s question seriously, because it has a serious core. We have moved on from the debate about the European Union, and we must move on, so it is now about setting the right course for global Britain. That is what this debate is about, and we should not simply roll over the bad things in the EU’s trade agreements and economic partnership agreements. We should set out a new way to engage with such countries that is not exploitative in the same way as the previous treaties. I hope that answers his question.
Mr Baker
Absolutely, and I shall come on to the question having been asked and answered.
Currently, journalists are asking me how I feel about tomorrow, the day of our leaving the European Union. It is, after all, the conclusion of what I have worked for for a good 10 to 12 years of my life—I got into politics because of that fury about the Lisbon treaty—so I should be elated. I should be rejoicing, but I am reminded of Wellington:
“Believe me, nothing except a battle lost is half so melancholy as a battle won.”
I approach tomorrow in a spirit of some considerable melancholy. I very much regret the division that this country has faced. I very much regret the cost of coming so far—the things we have had to do in British politics to get to this point. I very much regret the sorrow that my opponents will feel tomorrow as some are rejoicing on the streets.
I know that we are going to celebrate. I will celebrate—I will allow myself a smile and that glass of champagne and I will enjoy myself—but I will celebrate discreetly and in a way that is respectful of the genuine sorrow that others are feeling at the same time. That means not that I am giving in—it does not mean that I am turning away from what I believe—but that I recognise that all of us on the Government Benches who have won the argument now have a duty to be magnanimous. I urge that on everyone, inside and outside the House, even as we press forward. There are some who take an attitude of “no quarter” after the events of the past few years, and I say to them no, enough. We have to forgive and turn away from what has happened in the past, because we need to create the future that we can all enjoy and be proud of in this country. It is not a future based on past grievances; it is an open and expansive future that embraces the infinite value of every other person, even when we disagree with one another.
I do not wish to make a speech about disagreeing gracefully—perhaps on another occasion—but I do want to pick up on what the Secretary of State said about the battle of ideas raging around the world. She is absolutely right. It is a subject about which I have talked before, and if anybody is interested in my analysis, it is in the pinned video on my YouTube channel. A true conflict of ideas is going on right now—a widespread crisis of political economy—and when we listened to the hon. Member for Brent North (Barry Gardiner) talk through his ideas, some of the difficulties and conflicts about how we go forward in the world were evident in what he said.
I am not going to be critical of what the hon. Gentleman said, but one point that I shall draw out is that so many people, including him, have made a plea for us to comply with the rules-based international order. I want us to do that. I want us to build up the World Trade Organisation—a great multilateral organisation that does not involve having a supreme court with wide-ranging powers to deliver free trade—but I say gently that if we comply with the World Trade Organisation rules, we cannot discriminate against food that is safe to eat, yet there are Members of this House who make both pleas: they plead that we ban American food that is safe to eat at the same time as making a plea for complying with WTO rules. People will have to make up their minds as to what they want to do. I want to respect international institutions—the things we have carefully built up to pursue human flourishing through liberty under the rule of law, not only nationally but internationally.
Mr Fysh
Does my hon. Friend agree that it is important that we work together as a House to make sure that we do not take tariff reduction off the table, because if we are to achieve some of the ambitions that the Opposition outlined earlier, we need the ability to do deals with others, which requires us to be less protectionist in our own markets?
Mr Baker
I fully agree with my hon. Friend. In fact, before I came to the House—before I expected to get into the House—I started a think-tank called the Cobden Centre. I consider myself to be an old English Cobdenite classical liberal. I believe that human flourishing will be best advanced by the policy on which my hon. Friend and I agree—one of liberalisation of both tariffs and non-tariff barriers. We should be promoting human flourishing through that deeply rooted sense of liberty that I know the Secretary of State fully believes in.
The battle in which we are engaged is, in a sense, the same old battle we have always faced. It is a battle between a belief in managing the lives of other people and a belief in liberty. Are we to be merely conservative, clinging on to the institutions of the past, or are we going to be what I would consider to be genuinely liberal? While respecting traditions that have worked, are we going to be genuinely liberal and progressive, recognising that human progress comes not through state planning and foreseeing every possible difficulty well in advance? That has never worked. It might sometimes make a contribution, but as a general principle it has not worked. Or are we going to recognise that everyone errs? Like entrepreneurs, are we going to recognise that things can and do go wrong? Are we going to have good-quality error correction mechanisms, which mean that in government, as in the market and as in science, when errors are made, they are rapidly corrected? Not only will progress in the world happen fast, but it will keep accelerating. We need the mechanisms to ensure that errors are not entrenched—not entrenched across the whole of Europe and the world—but corrected fast.
In concluding, I wish to turn to a speech made by Ronald Reagan in 1964 called “A Time for Choosing”. It is always a time for choosing. He talked about the long journey that mankind makes
“from the swamp to the stars”.
He said that
“this idea that government is beholden to the people, that it has no other source of power except the sovereign people, is still the newest and the most unique idea in all the long history of man’s relation to man.”
He went on:
“This is the issue of this election: whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves.”
The question has been asked—not just once, but four times. It was answered in a referendum; in a general election in which both main parties had leave manifestos; in European Parliament elections in which the Brexit party came first with, for want of a better term, a harder proposal for Brexit than the Government had adopted; and the question has just been asked and answered in a general election with a result that none of us could have foreseen. It is time for the whole country and the whole House, magnanimously on the part of those of us who were victorious, to accept that it is time to move forward gracefully, to believe in ourselves and our capacity for self-government, and to go forward and flourish.
Future Free Trade Agreements
Marcus Fysh Excerpts(5 years, 10 months ago)
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Barry Gardiner
It is always the way with the Secretary of State: when he sees that a valid point has been made and that he is vulnerable to it, he tries to go on the attack. It does not work. It is a pathetic response when he knows and should, with some humility, accept that the proper impact assessments were never made.
Mr Marcus Fysh (Yeovil) (Con)
Is the hon. Gentleman aware that there is some concern among Japanese car manufacturers about whether the US will end up imposing tariffs on EU products and that that might make exports from the EU to the US very uncompetitive? Is that not potentially a much better reason why, in this case, sad though it is of course, they are consolidating low-volume production models back to Japan?
Barry Gardiner
The hon. Gentleman makes a fair point, and I will address it because he has done so in an open spirit. It could well be the case that the risk of America doing as he has suggested could have had that impact. I think he will concede that it is more likely to have been the case in the high-value sectors of our automotive industry, such as Jaguar Land Rover, where we export prestige vehicles to the United States, than in the bulk sector—the Nissans, Hondas and Toyotas that form the bulk of our domestic production and of our exports to Europe. He is partially right. It could well have affected their decision making, but it is more likely to have been at the high end of the market than the low.
Mr Marcus Fysh (Yeovil) (Con)
Future trade deals must be part of a coherent trade strategy, and it is imperative that, as part of that strategy, we rapidly set out what our tariff schedules will be in all eventualities, and our attitude to tariff-rate quotas. Many people in business throughout the land are looking for that guidance. It is a key part of their preparations as we leave the EU, and I think we owe it to them to make clear what the position will be, particularly as the lead times to import are quite long in the case of some products. If products will have to go into catalogues in the future, businesses really need to know what their margins will be, and it seems unfair that they have not, as yet, been given that guidance.
Today’s debate is a classic that has been heard in this place for the last 150 to 200 years: the age-old debate about protectionism versus free trade. It is an argument that has proved to have the potential to split parties, communities and families right down the middle. I think that, in the modern era, it would be wise to try to go about these matters in as well-informed a way as possible, because we owe it to the people on whose behalf we are making our decisions to understand fully what we are talking about.
People in the trade world talk about offensive and defensive interests in negotiations, but, in many circumstances, the attempt to reach mutual agreement means that it is not really a zero-sum game. Approaching negotiations with the right partners and in the right way can bypass such oppositional characterisations of trade and of our own interests. That is not to say that we should not be mindful of the impacts that different trade arrangements might have on our people—our businesses and our farmers, for instance. I am keen to champion the maximum supply of information and the maximum involvement of communities in the preparation of trade strategies and trade policies along the way.
Emma Little Pengelly (Belfast South) (DUP)
Several Members have expressed concerns about the NHS today. We have probably all been contacted by constituents about the need to protect it, which is close to the hearts of many people throughout the United Kingdom. Does the hon. Gentleman agree that it is important not only to protect it and issue strong statements to that effect, but to provide transparency so that people are clear that what is agreed, what is to be negotiated and the negotiating mandate do not include things that are precious to them and that they do not want to be compromised?
Mr Fysh
The hon. Lady makes a good point. The earlier the involvement in these conversations, the more confident communities can be about a mandate that the Government can take to a negotiation, and the process of ratifying whatever comes back from the negotiation can then take place in a timely manner, which I think is essential. I shall talk about the NHS in a bit more detail later, but I see no reason why there should be those fears about it. Indeed, I can see reasons for it to benefit, and for its users to benefit, as a result of deals with, for example, the United States that might allow earlier and cheaper access to drugs than is possible now.
This debate is, of course, about future free trade agreements, but those agreements, and the trade strategy, are inevitably coloured by consideration of what our potential relationship with the EU might be, and what obligations we might enter into in order to acquire it. I now want to say a little about the impact of the restrictive nature of the proposed withdrawal agreement, including some of the prejudices to our future trade policy and strategy that it sets up.
The withdrawal agreement commits us to paying a lot of money without real limits, and with oversight by the European Court of Justice of the exact obligations that will be required. It allows the possibility of an extension by up to two years of the transition period that is being contemplated. We do not know at this point what sort of competition or anti-competition legislation the EU might produce in the next four years, but it might affect our economy, and might have an impact on what we could or could not do with future trade partners, either during that time or afterwards. The agreement gives the joint committee very wide powers of interpretation of what it says, and, in fact, powers to change what it says, as if it had the effect of law and Acts of Parliament. That means that the position in another two to four years’ time is very uncertain.
It should be noted that the agreement proposes the acknowledgement and implementation of the current EU system of geographical indications. I am not necessarily opposed to their being implemented in the same way in the future, but that really should be a matter for the future trade negotiation, which we have been told all along cannot take place during the article 50 negotiation period.
What is slightly more worrying for us in this discussion of future trade policy is that the agreement strengthens the current requirement for “sincere co-operation” within the common commercial policy to which we are subject as members of the EU, which effectively means that we are obliged not to undermine the EU’s interests in any international forums. I do not think we should be in the business of trying to undermine its interests, but that requirement may well restrict what we can discuss with future free trade partners during the transition period. That, I think, adds to the uncertainty that already exists about the transition period, and about what has or has not been agreed by the EU and the UK. Whether and how the EU’s existing free trade agreements with the rest of the world will apply to the UK during the transition period remains opaque, as does the extent to which the UK is able to sign free trade agreements during the transition period in the context of that sincere co-operation.
Within the backstop provision for after the transition period should nothing be agreed, there is a hard veto for the EU on any superseding agreements. Article 20 of the protocol is very clear that there needs to be a joint decision by the EU and the UK for future alternative arrangements to succeed the backstop. So whatever the best endeavours clause does or does not do, that is still a hard veto that needs to be dealt with.
The reality of the operation of the backstop as written for the UK is very dramatic from the point of view of trade and competitiveness. For example, the EU will be able to increase state aid during the period after 2019, but the UK must maintain it at current levels. If that happened for four years, it could really undermine the competitiveness of some of our domestic producers, which is exactly what we have said we need to think hard about in future trade agreements. Because of how the annexes operate, state aid provisions would effectively be applicable to our defence manufacturing industry for the first time in a way that they are not in the EU. That would enable the European Commission to take cases in our courts against defence manufacturers and/or the Government in instances that were considered to be state aid to the defence manufacturing industry.
Those are the sorts of hostages to fortune that are lurking in the backstop, and that is one reason why I am against it. We need to be very mindful of that sort of leverage over our future arrangements with the EU, whether on the status of Northern Ireland within our constitution, if our fishing is open to European actors, the status of Gibraltar, or our defence capability and sovereign ability. Those are all potential hostages to fortune in the current backstop arrangement, which is a big part of the reason why I am opposed to the current proposal and want those backstop arrangements to be replaced now, or at least to have full legally binding guarantees that they will be replaced over time.
As the backstop is currently written, it envisages a customs union. There has been much talk about whether that means frictionless trade.
Angus Brendan MacNeil
I am grateful to the hon. Gentleman, who serves with me on the International Trade Committee, for giving way. He has clearly laid out his opposition to the backstop for various reasons, and I respect what he has said on that, but where does he go then: to no deal or to the revocation of article 50?
Mr Fysh
I do not think it is as clearcut as that. In the Malthouse compromise, which some might have read about, there is a proposal to replace the backstop with a permanent arrangement that is effectively a zero-tariff environment for the time being with a trade facilitation agreement, which allows very efficient trade to take place across the border. It would not be a unilateral exit from the backstop, and there would not be a time limit on it; I understand communities in Ireland wanting some certainty about that. I actually think it is a much better idea to replace the backstop within the withdrawal agreement if we want to pass the agreement now, and if that does not happen we should keep offering to do exactly that. I will come on shortly to some of the back-up plans should that not be acceptable either.
The customs union arrangement within the backstop would oblige us to continue to adopt the common external tariff and would potentially oblige us to have the common commercial policy. There is a great deal of uncertainty about the physical operations at our borders. What the annexes of the withdrawal agreement backstop say is required, in black and white, is that every transaction between Great Britain and Northern Ireland and vice versa, and between Great Britain and the EU across the channel, would require an a.uk physical, stamped certificate, effectively showing where the duty has been paid in the customs territory it is coming from. That is a massive administrative burden. Based on the HMRC numbers of transactions with the EU, the number the CHIEF—customs handling of import and export freight—computer has to handle will be going up from 55 million currently to 255 million in the future. That means there will be an extra 200 million of these things every year; that is over half a million physical certificates a day that HMRC officers will somehow have to process. That is wholly unrealistic, and when one talks to the Government in detail about it, or to the EU, they admit this is totally unworkable and will not be introduced. How then can they say they cannot introduce alternative arrangements now that would have another two years to be implemented on the ground?
In addition to those physical stamped certificates there would have to be export declarations into the export control system, which would enable the logging of whether a tariff needed to be collected or indeed whether rectification was needed in the inward processing relief systems. So the idea that this is a frictionless system is wrong, and it needs to be replaced. It is unworkable; it is full of friction and it also prevents an independent trade policy for the time that it persists.
If we were to continue to offer the Malthouse proposals even if we could not get a withdrawal agreement done, we would continue to offer a stopgap measure of a zero-tariff, simple free trade agreement, or an agreement between the UK and the EU to prefer each other’s trade for a period of time, which could be notified to the World Trade Organisation under article XXIV of GATT—the general agreement on tariffs and trade. That is a very simple thing to propose, in a sense: because it would be a goods-only agreement, it would not need ratification by all 27 member states, and it could be agreed and implemented very rapidly.
If the EU did not want to do that either, although that would be best because it would be absurd for us to be charging tariffs on each other, we would need to look at other things we might do. We heard discussion earlier of some elements of the unilateral free trade policy that we would potentially need to put in place to prevent price rises for different goods. That does not mean we would have to unilaterally reduce our applied tariffs for every product; we can make that choice product by product.
We have already heard on the grapevine that we are not planning to zero-tariff agricultural goods in our future tariff policy. That makes sense in many ways, because we need to take a nuanced approach. We need to look, product by product, at where domestic producers need some sort of tariff or programme so that they are not exposed to world prices immediately.
We also need to consider an interesting strategy that would encourage other countries to enter into free trade agreements with us. It would propose that we would take a unilateral free trade approach for a period but that we would reintroduce tariffs going up towards the bound tariff level—the common external tariff level—after, say, two or three years. That would encourage the countries that want the continuation of free trade to enter into free trade agreements with us to achieve it.
In the meantime—coming back to agricultural products and taking beef as an example—while we might have a tariff, we would still have a tariff rate quota that allowed some nations zero-rated access to the UK market up to a certain quota. We could open those quotas that would have been for the EU to the rest of the world. The EU would then have a choice. It could enter into a free trade agreement with us and have a quota or it could see the markets that it currently has in the UK being opened to the rest of the world. I personally think that it will want to have a free trade agreement, at least on a temporary basis.
Angus Brendan MacNeil
I am trying to follow what the hon. Gentleman is saying as closely as I can. He talks about working on a tariff-by-tariff basis and making judgments or decisions depending on domestic demand or production, but this would open us up to a retaliatory or mirror action from the European Union. For example, if there were no citrus fruits such as oranges here and we decided to get rid of tariffs on oranges, impacting the Spanish and Portuguese orange producers, they could ask themselves what tariffs had existed only to protect the United Kingdom as part of the EU pot. They could then pluck out those tariffs, and we would find ourselves in an even more disadvantageous trade situation.
Mr Fysh
I thank the Chairman of our Committee for his intervention. I absolutely agree that it makes the most sense to have a free trade agreement. That is the simplest thing, and it would eliminate the absurdity of even having to discuss these matters. So it would be my first proposal, my second proposal and my third proposal to have just that kind of FTA. This is really the fall-back to the fall-back to the fall-back position—
Mr Fysh
The backstop to the backstop to the backstop, exactly. I really do not think that we should get into that position. Looking at the sensible contingency planning that the EU is doing in lots of other areas, I see no reason why it should not continue to be sensible and reasonable, just as we are, and I believe that we will get there.
I want to come back to the trade facilitation issues, because they are really important to the consideration of what trade costs and therefore to the potential value of future free-trade agreements as well as the value the EU’s current agreement. I would like to congratulate HMRC on its work to make trade efficient in the event of no deal at the end of March. Indeed, that work will also be applicable in the future if we are outside a customs union and the single market. These will all be very useful things.
The transitional simplified procedure that has been opened up to operators is really good news, but I think the Government should take it further straight away by making it available to intermediaries such as the logistics service providers that control a large amount of our trade. That would make the most sense, because it would enable them to be authorised consignees so that they could close out the transit documents that will be an essential part of future trade.
The Government should also look at a more comprehensive scope of waivers for transit guarantees, because the financial liability, especially of operators, cannot close out those guarantees. That will be essential to keeping our trade flowing. They should also look at underwriting some elements of the liability to duty in the EU, so that our export side can operate efficiently.
These things come down to the impact assessments that we have seen. When I have spoken to logistics service providers, customs brokers and others, it is obvious that these documents—the transit documents, the export declaration on this side and the import declaration on the other side—will need doing. It is more than we have to do now, so people need to get ready. I say to business: get ready. Businesses being able to do these things, and ensuring that their logistics service providers are able to do them, will be essential to enabling their trade to flow efficiently.
These measures cost about £50, not hundreds and hundreds of pounds. The value of the goods on a truck crossing the channel can be £10,000 if it is carrying bread or bread products and up to £300,000 for beef or beef products, so £50 is just a tiny fraction of that. We are talking about, at most, 0.5% of the value. According to the Government’s impact assessment, the cost of customs administration in the event of no deal would be 5% to 6% of the value, which is wrong by an order of magnitude. We must not underestimate the value of our future trade agreements based on a misapprehension of the real costs of trade.
Similarly, as the Opposition spokesman said, we should not get the gravity relationship wrong. In the UK, the factor of linkage between trade and distance is only about 0.23%. When we back that number out of the Treasury’s forecasts before the referendum, we get the figure of 0.9%. The figure of 0.9% is the intra-continental EU gravity factor, and it is my contention that the wrong one has been used in our models. That undercooks the benefit to us from free trade around the rest of the world and really overcooks the value of the EU’s trade. I am not saying that we do not want the EU’s trade—we absolutely do—but we want to trade with Europe and with the rest of the world. The referendum result was about us wanting both.
The Government really need to pull their socks up over what they have been saying about UK businesses’ access to Europe. The Secretary of State for Environment, Food and Rural Affairs has again said that there is a big risk of our agricultural products not being allowed into the EU, but that is simply not right. The EU has stated it will put contingency arrangements in place, that we will be listed on the right lists and that we will not be shut out in that way. It is simply wrong to say that we will. I personally think that it does our farmers a disservice to frighten them unnecessarily in that regard.
Similarly, the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford (Richard Harrington), who is also in charge of no-deal planning at the Department, said on “The Week in Westminster” on Saturday morning that UK car manufacturers could not be sure whether they could sell their products into Europe because of the regulations. That statement is in grave danger of misleading the British public and the auto industry, and it could be devastating to the confidence of smaller players in the automotive market that may not be aware of what the rules are or what the EU’s position really is.
The reality is that the EU Council and Commission decided on 8 January that UK vehicle certificates can be registered in the EU. There is no reason for UK car manufacturers to fear that their parts or their cars cannot be sold to Europe. That is simply not the case. The Government need to look at themselves in the mirror and stop scaremongering, which is not in the national interest.
Quickly, because I know that everyone wants to get to speak, although it seems that I am the only one left on the Government Benches—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. That does not mean to say that the hon. Gentleman has to take up all the time and stop others getting in. Come on, Marcus Fysh.
Mr Richard Bacon (South Norfolk) (Con)
I want to point out that my hon. Friend is not the only one left on the Government Benches, although I really came to listen—
Mr Bacon
I really came to listen to my hon. Friend, because it is such a privilege to listen to a genuine expert on this subject. He has forgotten more about it than most people know. I am just wondering how he accounts for the fact that we have had palpably inaccurate statements from Ministers. Is it possibly because our esteemed Under-Secretary of State for International Trade, my hon. Friend the Member for Beverley and Holderness (Graham Stuart), was not involved in making those statements?
Mr Fysh
I thank my hon. Friend for his intervention. I am quite sure that the Minister present was not involved in the decision making around such Government mistakes. He is an eminently sensible fellow whom I know well. He used to be my Whip, and I would trust him explicitly. I cast no aspersions on the current occupant of the Government Front Bench.
The Government’s sabotage of the people’s desire for an independent trade policy has to stop. Having an independent trade policy is a mainstream Conservative manifesto promise and desire. People want to take advantage of the new opportunities for free trade agreements around the world. They do not think that there will be a gap in or loss of EU trade, just as long as we execute on the things we need to execute, and the measures that HMRC could implement right now would go a long way to ensuring that that is not the case.
We also need to deal with the fallacy that the UK is somehow a small player that will get completely taken to the cleaners in any negotiation. The reality is that many players around the world are excited about the return of the UK to the global trading environment and are keen to do business with us. They see some of our leading markets, such as pharmaceuticals or financial services, as regulatory environments in which it makes sense for them to do more business, and we can help to develop the rules-based trading system around the world in a way that helps them, too.
That is particularly true in the US context, and our service businesses have a lot to gain from potential deals with places such as the US and Japan, where being part of the EU has really restricted our ability to do the sorts of deals that would advantage those service industries because, by and large, the European industry is not services based. For example, America has a $700 billion market in insurance in which our insurers, which are only currently selling about £2 billion into the US, could raise their market share. By comparison, sales of insurance into the EU are about £1.5 billion, so the US represents a much bigger market opportunity than the EU—even under single market strictures.
By way of conclusion, because I want to allow other people to get a look in—[Hon. Members: “Hear, hear!”] I appreciate the House’s time. It is nice to have a bit of time for once on a Thursday to speak in detail about something about which I know, rather than be limited to four or five minutes, which is more often the case in the big debates.
The Department for International Trade has some brilliant civil servants and officials who have been doing incredible work. Even though it is a small market, the roll-over of the Chilean free trade agreement is a benchmark, because the officials have provided for diagonal accumulation between the UK and the EU and Chile. That really should be a benchmark for how we treat our future trade arrangements, which will be the successor arrangements to those that we currently have with the EU. I want to see International Trade Department officials more involved in the thinking about what we are doing with the EU, because that would be of great benefit to the Government and the country.
In conclusion, we need to trust in business and in the ability of businesses to adapt, to innovate and to lift their eyes beyond the current horizons. We need to trade with both the EU and the rest of the world. We need to say no to protectionism, because free trade has driven global growth around the world over the past 150 years, and it is misguided to think that there are not tremendous consumer advantages as a result. We need to be there for our farmers. We need to make the most of the derogations from normal restrictions on subsidy for items such as marketing to ensure that our farmers and producers can get the best prices around the world for their high-quality produce. We must not hang them out to dry. We also need to focus on the tremendous opportunity that leaving the EU gives us to make our way in the world in a different way. We can be best of friends with the EU and best of friends with the rest of the world.
Several hon. Members rose—
EU-Japan Economic Partnership Agreement
Marcus Fysh Excerpts(6 years, 5 months ago)
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Mr Marcus Fysh (Yeovil) (Con)
It is a pleasure to follow the hon. Member for Dundee East (Stewart Hosie) and to have heard a free trade speech from the Opposition Benches. I welcome my hon. Friend the Minister. Let me also praise my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) for his sterling work on these issues in the Department, and for his engagement with the various Committees of which I am a member.
This agreement is very important to the UK, and I support it. The total trade between Japan and the UK is worth £127 billion, and Leonardo, in my constituency, has a relationship with Kawasaki, producing helicopters, which it would like to expand. As my hon. Friend the Minister said, the Government’s impact assessment forecasts gains amounting to no less than £3 billion from the new agreement, partly as a result of increases in both imports and exports. Cheaper imports help our economy, which is one of the main reasons why we voted to leave the EU and its customs union.
After we leave the EU there will be great opportunities to improve on the Japan agreement, especially in respect of services, in which our economy has a strong interest. The Japan EPA states that world standards should be followed, and demonstrates how we can use methods of regulatory co-operation in the agreement that we make with the EU to guide, smooth and facilitate the handling of goods at our borders with it.
Angus Brendan MacNeil
Given the high praise that the hon. Gentleman is heaping on the European Union, might it not be important to have some bits of paper from both the European Union and Japan saying that this relationship could continue—as he has suggested that he would like it to—following the UK’s departure from the European Union? We would not want to find ourselves in a less advantageous position.
Mr Fysh
The hon. Gentleman has made a good point. I shall come on to those matters—by which, as he knows, I am exercised—a little later. I will say, however, that we want a good relationship with the European Union. The fact that we are leaving it does not mean that we should not have that relationship and nurture it.
The Minister rightly pointed out that the Japan deal is an “EU competence only” agreement because of the exclusion of investor-related matters. I noted his statement that the UK would seek a stand-alone investor agreement, and I should like to know a bit more about that. One of the things that concern me slightly is the legal basis that will apply as we leave the EU and, potentially, enter a transition period. In particular, I should like to know what access third parties would have to our markets under EU free trade agreements, potentially without reciprocation.
I understand that the Department has been undertaking bilateral discussions with the third parties on these matters. It is positive to hear about the bilateral agreement that we are negotiating with Japan for after we leave the EU, but I think that during the transition we shall need more clarity. Article 124 of the withdrawal agreement relies on a notification to be given by the EU that the third parties would somehow abide by the arrangement, but it is unclear to me whether that means that we will seek formal third-party confirmation, and, if that is the case, I should like to know what legal basis will apply to enforce it.
We need to caution against the uncertainty that could be extended during this process. We have article 50 running now, we have a potential transition period, and there is talk of potential backstop extensions. During all this, it is proposed that we should be effectively in the customs union and large parts of the single market, but it is unclear what the underlying legal basis would be. Clarity would be much appreciated by business. It is clear to me that no countries will want to conclude deals with us, or even start to negotiate seriously, while they think there is any chance that we will stay in a customs union with the EU, and the Government need to stand firm against any such suggestion. In my view, Labour has cynically undermined business certainty in this regard. Both importers and exporters need clarity on how this process will work.
In a customs union, not only would it no longer be possible for us to improve JEEPA, but we would have no say on our trade policy and no say on our trade defences, and the EU would be able to sell third parties access to our markets.
Oral Answers to Questions
Marcus Fysh Excerpts(7 years, 2 months ago)
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Greg Hands
The Government have been absolutely clear on the importance of this House and this Parliament scrutinising trade agreements. There is an irony in the hon. Lady’s question. Only last month, she voted against the European Union (Withdrawal) Bill, which would write into domestic legislation 40 years of workers’ rights and environmental protection coming from Europe. She did not want to see that transfer. She even whipped her own side to vote against the Bill. Today, she is calling for us to introduce European procedures. I think her actions speak louder than her words.
Mr Marcus Fysh (Yeovil) (Con)
Rehman Chishti (Gillingham and Rainham) (Con)
The Minister for Trade Policy (Greg Hands)
As the Prime Minister set out on Monday, the Government are preparing for the UK’s future as an independent trading nation. We will maximise our opportunities globally by seeking a deep and special partnership with the EU and boosting our trade relationships around the world.
The trade White Paper establishes the principles that will guide future UK trade policy and sets out the preparatory steps we are taking, as my right hon. Friend the Secretary of State laid out earlier in response to Question 1.
Mr Fysh
Will my right hon. Friend confirm that it is Government policy to take full control of the UK’s trade policy in services regulation, to take advantage of the free trade opportunities that are open to us as we leave the EU? Does he agree that this must not be obviated by any conditions of a period of implementation for our new arrangements with the EU?
Greg Hands
The Prime Minister has made it very clear that we want a deep and comprehensive trade agreement with the EU. We in the Department for International Trade are losing no time in preparing ourselves for our own independent trade policy in terms of transitioning existing EU FTAs, in terms of the 14 trade working groups that we have set up and in terms of transitioning trade preferences for the developing world, and that includes the ability to scope out and negotiate new trade agreements once we leave.
Oral Answers to Questions
Marcus Fysh Excerpts(7 years, 5 months ago)
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Mr Marcus Fysh (Yeovil) (Con)
T5. My constituency has one of the largest export clusters in the south-west, and it is focused on the rest of the world as much as it is on the EU. What assurance can my right hon. Friend give that we will focus on doing global trade deals and not just on the EU?
Dr Fox
My hon. Friend makes a very valid point, and of course it is not just about exports; it is also about inward investment. Therefore, let me bring the House up to date by saying that at 9.30 this morning we published figures showing that a record-breaking number of foreign direct investment projects came into the UK in 2016-17—2,265—safeguarding nearly 108,000 jobs or creating new jobs in the UK. No doubt, the usual suspects will describe this by saying, “despite Brexit”.