Brexit: Trade in Food

Debate between Stephen Gethins and George Eustice

Thursday 14th June 2018 Westminster Hall

[George Eustice]

I agree with my hon. Friend. I was going to come on to why it is in everyone’s interest to do the type of agreement that we are offering. We do not believe that we have to have total uniformity of regulations on these various issues to have a frictionless border. It is quite possible to recognise what in trade jargon is called equivalence.

Our offer to the European Union is that bold and comprehensive free trade agreement, tariff-free trade and frictionless borders, where the European Union and the UK can both adopt a risk-based approach to any border checks they might put in place, assisted by technology. We want to give each other confidence by agreeing a set of arrangements through which we will recognise the equivalency of our various regulations. That can be done. Our starting point is not as a third country trying to establish a trade deal with the European Union, but as a member state that is stepping back from being a European Union member. On day one, we start with absolute uniformity of our regulations. That is unique in the world, which is why it is absolutely possible to do the type of agreement on borders that we seek.

The other point to recognise is that the European Union has a trade surplus with the UK in food and drink alone of £18 billion each year. It may feign indifference to its trade with the UK for the purpose of the negotiations that are going on, but that matters. Access to the UK market matters to Irish beef farmers, poultry producers in the Netherlands, pork producers in Denmark, horticultural producers in the Netherlands and cheese producers in France. They need access to the UK market. Therefore, it is in their interest to take up what we are offering, which is a comprehensive free trade agreement with frictionless borders.

[Stephen Gethins]

Will the Minister tackle the issue of how the customs relationship will work? Can he set that out? How will seasonal workers work? That is a matter of urgency; other Members also have made it clear that it is a matter of urgency.

[George Eustice]

I noted the hon. Gentleman’s points from his speech and will come back to them.

First, I want to address one of the questions posed by the report: what happens in a no-deal scenario? The reality is that there are quite a number of options open to an independent country in control of its own trade policy. It does not have to be most favoured nation rules, and that is the end of the story. One option for an independent country when setting its own trade policy would be to have unilateral tariff rate suspensions—it would keep the bound tariffs where they were, but it could suspend them on certain product lines if it wanted to. It also could have what is called an applied tariff for some product lines that was lower than the bound tariff set in the WTO schedule.

An independent country could also establish unilaterally something called autonomous tariff rate quotas—ATQs. They enable the country to create a quota in certain product lines to allow that tariff-free trade.

My hon. Friend the Member for Tiverton and Honiton pointed out that one of the issues is that those have to be what is described in trade jargon as erga omnes—open to all—around the world and not just to the European Union, but we could, of course, abide by our own sanitary and phytosanitary regulations. In a short period where such measures might prevail, our existing trading partners would find it easier to satisfy those and potential new ones. There are many tools in the box that we would have as an independent country controlling our own trade policy.

My hon. Friend also asked about a sector-by-sector analysis. He will be aware that in December last year, the Department for Exiting the European Union published analyses for each sector. The hon. Member for Stroud (Dr Drew) read that and was very complimentary about the detail in it. There was a specific report in there on the food and drink sector—my hon. Friend will be aware that, in addition to that, the Government have done a great deal of more detailed ongoing analysis and modelling—but for reasons that we have been clear about, and that I think Parliament understands, there are certain things in a negotiation that we should not put out there. Not everything that we have done has been published, but we have published that report sector by sector.

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[George Eustice]

Yes. I was going to return to that point. The Select Committee report states that we have to take care during the transition. We absolutely recognise that. Indeed, in our recent consultation, we described what we have as an agricultural transition, where any changes we make to the support regime will be done gradually over a number of years to take account of the fact that we do not want to deliver unsustainable shocks to the industry that it would not be able to cope with.

My hon. Friend the Member for Tiverton and Honiton mentioned the importance of Northern Ireland. I absolutely understand that a huge amount of trade takes place across that land border. That is why, unsurprisingly, the way we should approach that issue dominates much of the discussion about our future arrangements with the European Union. He will understand that that is a much broader discussion, which is being handled by people in the Government more senior than me.

Let me pick up on some of the issues raised by the hon. Member for North East Fife (Stephen Gethins), such as customs, which is being looked at. We have a cross-Government working group, which has brought on board lots of Departments, including Her Majesty’s Revenue and Customs and the Treasury, to look at customs, as well as DEFRA and our Animal and Plant Health Agency to look at border inspection posts. DEFRA’s focus is ensuring that we have the right capacity at any border inspection posts, and we will seek to agree our approach to that. Generally speaking, customs is regarded as an easier and more administrative thing to do, rather than necessarily requiring lots of checks and infrastructure at borders. Technology really has moved on in that area.

I simply make the point that one of our biggest successes in food and drink—perhaps the biggest, and certainly the biggest in Scotland—is Scotch whisky. We have zero tariffs on Scotch whisky, but that sector competes globally and has a recognised international brand. It is also very used to dealing with national markets, even within the European Union, because there are different alcohol duty rates so there must be bonded supplies for each country. There are sectors that have got very good at managing borders. Several hon. Members made the point in yesterday’s debate that we have borders even within the single market for things such as customs duties.

Probably the second biggest food export from Scotland is Scottish salmon, which again is renowned around the world. Scotland’s biggest competitor in that sector is Norway, which is outside the European Union and outside the single market for the purposes of fish products, because, as the hon. Gentleman will know, the European economic area does not cover fisheries products. So there are sectors, including fisheries and Scotch whisky, that have developed quite sophisticated ways to address some of these challenges. This is not an insurmountable problem.

The hon. Gentleman also raised seasonal labour. We recognise that that issue is important, which is why the Home Office commissioned the Migration Advisory Committee to look at what our labour needs will be after we leave the European Union. The MAC is already doing that piece of work. It published an initial summary of the responses it received, and it is now looking in earnest at what arrangements we will need after we leave, and in particular after the end of any transition period.

However, in some ways we already have the necessary structures in place under our existing migration system, through things such as tier 3. That is currently set at zero because we have free movement of people, but we could make some allowance for work permits in less skilled sectors if we wanted to and deemed that we needed to. We have been clear that we are looking at the idea of a seasonal agricultural workers scheme. We had one, which ran successfully from 1945 until 2013, and we have been clear that we are looking at that issue. I worked in the soft fruit industry for 10 years, so I am fully aware of some of the challenges. Those are issues that we will have the power to deal with as an independent country—they will not need to be negotiated with others.

[Stephen Gethins]

I am astonished by the Minister’s use of the phrase “an independent country” given that Ireland, Greece and Denmark all consider themselves independent countries. On customs and seasonal workers, he referred to infrastructure. I mentioned urgency, so what is the timescale for that infrastructure? We have heard from a wide range of experts—we still believe experts—that the end of 2021, or even the end of 2020 when the transition period ends, is not realistic. Have they got that wrong?

[George Eustice]

Look, on your first point—sorry, Mr Gray, it is a contagious problem. On the hon. Gentleman’s first point, there are degrees of independence. As things stand, as an EU member we do not have an independent farming policy, an independent fisheries policy or an independent policy on migration. When we leave and become not an EU member, we will have independence in those areas.

On the hon. Gentleman’s second point, there will be some challenges, but we have been working on this area. One scenario we have been planning for right from the referendum result is a no-deal scenario where we come out without an agreement, even in March next year. There are contingency plans and work has been done to prepare for such scenarios. While there will be challenges, we are aware of them and have been addressing them.