European Affairs

Vicky Ford Excerpts

Wednesday 14th March 2018 Commons Chamber

[Greg Hands]

The hon. Gentleman knows full well that this is not an either/or situation: it is not a choice between having trade with the European Union or with the rest of the world. The Government’s objectives are clear, namely, to secure a deep and comprehensive partnership with the European Union while still being able—crucially, outside the customs union—to pursue an independent trade policy and to secure those agreements with the rest of the world.

On what was said during the campaign, the Department for International Trade has the capability in place and we have built up the Department. I have mentioned the 14 trade working groups. We are clearly not able to carry out a trade negotiation while we are still members of the European Union, but the hon. Gentleman seems to be demanding that we have those negotiations while at the same time saying that we should stay in the EU, which would prevent us from having the negotiations in the first place.

[Vicky Ford (Chelmsford) (Con)]

Does my right hon. Friend agree that, given the incredible depth and complexity of the UK’s trade with Europe, there is no off-the-shelf solution available from any other trade relationship? Does he also agree that, if we are to have as frictionless trade as possible, there clearly needs to be some form of agreement for what will happen at our customs, such as a partnership or another type of agreement?

[Greg Hands]

My hon. Friend is right on both counts. There is no off-the-shelf agreement that would be suitable in this case. We are clear that we are seeking a bespoke arrangement between the United Kingdom and the European Union. Neither something like the comprehensive economic and trade agreement nor something like the European economic area would be suitable. On co-operation, we are clear that we seek a good agreement with the European Union that creates as frictionless trade as possible across all our borders, not just the internal border on the island of Ireland.

--- Later in debate ---

[Vicky Ford]

Will my right hon. Friend give way?

[Greg Hands]

No. I am about to finish.

Nevertheless, the Department for International Trade is preparing this country for life outside the EU. We are proceeding with trade and customs Bills that will give us a functioning customs regime on day one. As one would expect, they have been designed to prepare us for every eventuality, although they will be needed regardless of the outcome of our negotiations with the EU. They will give us a strong trade remedies regime. Free trade does not mean trade without rules, but Labour opposed these new powers when they were considered on Second Reading. Our independent trade remedies regime will allow us to protect UK industry from unfair dumping or subsidy, while balancing its interests against the interests of UK consumers and other UK businesses. It will be delivered through an independent trade remedies authority, so that businesses have the confidence they need that it will be impartial and will not act against the interests of wider industry. I want to make sure that this new regime works as well for business as it should from the start. We are consulting on which existing EU trade remedies we should carry over, and I encourage any business with an interest to respond before the consultation closes at the end of this month, and any Members with producer or consumer interests to help to publicise this.

The Taxation (Cross-border Trade) Bill will also allow us to create a UK unilateral trade preferences regime for developing countries. Shockingly, this was also opposed by Labour, the Scottish National party and the Liberal Democrats on Second Reading. The UK is a proud advocate of supporting developing countries to reduce poverty through trade, and I hope that Labour will reconsider its stance. This Bill will let us continue the UK’s existing system of preferential access for developing countries, which reduces or removes import tariffs from a number of countries, while also allowing us to explore improvements on the EU’s current system.

Leaving the European Union will allow us to negotiate trade deals across the world, but at the same time, this Government understand the importance of EU trade. That is why we seek a deep and special partnership with the EU. This is the only appropriate option. Members of all parties should be optimistic that that can be achieved.

--- Later in debate ---

[Matthew Pennycook]

I absolutely agree with my hon. Friend. I could not have put it better myself.

The theme of today’s debate is international trade. The sections relating to customs were arguably the least convincing parts of the Prime Minister’s speech. In contrast to other areas, there was no attempt to engage with the hard truths about what leaving the customs union will mean for the UK, and particularly with the impact of that decision on manufacturing and the Irish border. As the House knows, the Prime Minister simply went back to the two propositions that the Government set out in their future partnership paper published on 15 August last year. They were a

“customs partnership between the UK and the EU”

or

“a highly streamlined customs arrangement, where we”—

that is, the UK—

“would jointly agree to implement a range of measures to minimise frictions to trade, together with specific provisions for Northern Ireland.”

The first proposition is untried and untested. By the Government’s own admission, it would take at least five years to implement and it would be ripe for abuse. It was roundly rejected by the EU last year, not least because it would require EU member states to completely reconfigure their own national customs systems. The idea is not simply “blue sky thinking”, as the Secretary of State described it in September last year; it is pie-in-the-sky thinking.

The second option would, according to the chief executive of Her Majesty’s Revenue and Customs, take three years to put in place and would result in friction on our borders. It would therefore require a range of measures, including unproven “technology-based solutions”, to minimise frictions to trade. In her speech, the Prime Minister claimed that both those options were serious and merited consideration, but they were widely rubbished in the wake of that speech. The EU immediately ruled them out as non-starters.

The truth is that the Government have absolutely no idea about what to do about the issue of customs and the Irish border. The fall-back that surfaced in the EU Commission draft legal text published on 28 February—namely, that Northern Ireland should go into a customs union with the south and that the UK border should be shifted to somewhere in the Irish sea—is clearly unacceptable. The Prime Minister quite rightly made it clear that no UK Prime Minister could accept such an outcome. The Irish border issue remains unresolved.

One part of a wider solution to the border issue would be, as the Opposition have suggested, to negotiate a new comprehensive UK-EU customs union. Such a customs union would ensure that goods covered by the agreement could still be traded with the EU tariff free, with no new customs or rules of origin checks. The exact terms of such a customs union would, of course, have to be negotiated, but this represents a pragmatic proposal, reflecting current arrangements, and it has been welcomed by trade unions and by business, including the Manufacturers Organisation—formerly the EEF—and the CBI. It would be a win-win for both the UK and the EU27. A new UK-EU customs union would not prevent the UK from trading globally or improving our export industry, just as the EU customs union has not stopped Germany making China its largest trading partner, for example. Germany now exports four times more to China than the UK. The UK would still be free, as we are now, to negotiate in the areas of services, data, investment, procurement and intellectual property, and UK businesses would still be able to export to non-EU markets just as other EU countries do. In short, there is no question but that the UK could and would still increase trade inside a customs union with the EU, as the Secretary of State for International Trade said earlier this year in relation to the Prime Minister’s visit to China.

A new, comprehensive UK-EU customs union, were it agreed, would of course require the UK to adopt a common external tariff with the EU, and we would of course seek both to replicate existing EU trade agreements and benefit from negotiated future deals. It is true that we would not be able to negotiate independent third-party trade deals, but as many hon. Members have already mentioned, we need to face up to some hard facts in this area, because the notion that future free trade agreements will offset the inevitable economic costs of exiting a customs union with the EU is nonsense. To say, as the Minister did, that it is simply not an either/or question does not get to the heart of the issue that confronts us.

[Vicky Ford]

When the hon. Gentleman says that he wants to stay in a customs union with the EU, will he confirm that he will continue to comply with EU state aid and competition law as a condition of staying in that customs union? I cannot find a single example of a country that can stay in the customs union while disregarding state aid laws.

[Matthew Pennycook]

The hon. Lady has great expertise in this area, but I think she has slightly misjudged the fact, as I understand it, that that is not about customs, but about the elements that make up the single market. We have said that we would seek, in principle, to negotiate protections, clarifications or exemptions where necessary, but I cannot imagine a situation in which those exemptions would be necessary. As I think the Leader of the Opposition said on “Peston on Sunday” some time ago, there is nothing in the current state aid rules that would prevent us from implementing, for example, our manifesto.

Many hon. Members have already mentioned this, but Sir Martin Donnelly, the former permanent secretary at the Department for International Trade, said that the reality is that what the Government are proposing is akin to giving up

“a three-course meal... for the promise of a packet of crisps in the future”.

The EU currently constitutes 44% of our exports and 53% of our imports. It must be our priority. Increases in trade from new free trade agreements with the USA, Canada, Australia and New Zealand combined would be worth less than 3% of our current trade in goods and services.

--- Later in debate ---

[Matthew Pennycook]

I am just coming to a close.

The draft withdrawal agreement merely needs to include a political declaration on the future relationship—that is, its broad outlines—with the details to be hammered out after the UK has left the EU.

[Vicky Ford]

rose—

[Matthew Pennycook]

I will not give way.

But the Irish border issue is an integral part of the withdrawal agreement. Without a solution to it, it is very difficult to imagine how the Government secure an orderly exit deal or a transition period, let alone a post-Brexit trade deal.

--- Later in debate ---

[Vicky Ford (Chelmsford) (Con)]

This is an extremely important debate. The 27 other countries in the EU make up our largest trading partner, which accounts for almost half our trade. Many thousands of jobs on both sides of the channel rely on that trade. This is a sensitive time for the most complex negotiations for a generation. Businesses need clarity, especially about what will happen at our borders. They need to know what our long-term trade will look like, especially in key 21st-century sectors such as pharmaceuticals, advanced manufacturing and the service sector. They also need clarity on what transition or implementation will look like.

Honesty and transparency are needed, but let us look at the Opposition’s offer. They say that they want to negotiate a customs union with the EU, but the Leader of the Opposition stood up in Coventry and said that he wanted to negotiate exemptions in relation to privatisation, competition and state aid rules. The week after that, I was in Brussels. Not a single country that has a customs union with the EU has an exemption for state aid rules. Even Turkey has to comply with all state aid and competition rules, in accordance with the EU treaties and/or EU laws. When I was in Brussels, time and again I asked politicians from other EU countries whether they would give the UK preferred access to the single market and a customs union with the EU but also allow us an exemption from state aid rules. Time and again, those politicians looked at me and rolled their eyes. The Opposition’s position is not honest or achievable, and I believe it is deeply misleading.

In trade negotiations, the devil is in the detail. The Prime Minister’s speech was very welcome. It moved us on with a huge amount of detail, and I especially welcomed the detail about the aviation sector, the tech sector, the science and innovation pact—boy, do we need to continue co-operation on science and innovation—and security.

I want to focus on three areas. On services, UK sales to the EU in services are 40% of our trade. The sector has grown as a percentage of our trade in nearly every year. In today’s modern economy, we cannot separate goods and services. My mobile phone, for example, feels like a good, but its contents are all services. If a cancer scanner is sold in Europe, it is sold with a maintenance contract—a service. I am about to buy a new car, and it will come with a financial lease arrangement—a financial service. Walking away with no deal on services is not a good deal. It is especially not good for financial services. Some 2,000 people in my constituency work in insurance, but many hundreds of thousands of German savers have bought life insurance products from British companies. Both sides need a deal that covers services.

On borders and the customs union, while we need an agreement about what happens at our borders, there is much more to the customs union and negotiations than just tariffs. In particular, we need to resolve the country of origin rules for complex manufactured products. The British car sector employs about 169,000 people directly and nearly 1 million indirectly. Many of the cars it produces contain components from all over the EU. Under WTO rules, those cars are not European enough to be European cars or British enough to be British cars. They would become orphan cars, if I may put it like that, and not eligible under any of our trade agreements with the EU or elsewhere. That is why it is particularly helpful that the Prime Minister has left open the negotiations on not just a customs agreement, but a customs partnership, which is an offer for us to mirror EU customs codes at our borders.

My third point, which is really important, is about transition. The transition period needs to be agreed now, because otherwise real issues will arise for people who work in the City and with goods. On the back of my mobile phone is a CE mark. Every product put on the market in Europe has one, and anything that is imported to the UK needs a CE mark. The mark is offered with a 12-month certificate. If a mobile phone is imported into the UK from elsewhere in the world, it will need a certificate that is valid past not just the end of this March, but the end of next March. Unless we resolve transition this month, what happens to CE marks on goods placed on the market here and elsewhere in Europe will not be resolved. There are not enough notified bodies elsewhere in Europe to take the place of the British notified bodies today.

I am grateful to the Government for getting us to the negotiating point to date, for achieving the deal in December and for the great moves forward and detail in the Prime Minister’s speech a couple of weeks ago. Let us resolve the transition period by the end of the month—that is crucial—and let us not lose sight of the devil in the detail of the negotiations ahead. The Leader of the Opposition’s position is not achievable, and we need to focus on finding deals that are.

--- Later in debate ---

[Vicky Ford]

The hon. Gentleman is making a powerful case about the EEA and EFTA, although it is unfortunate that he described the Canada deal as a chocolate teapot, because it did give free trade in chocolate.

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. This is meant to be a quick intervention—

[Vicky Ford]

Quickly—

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. There is no “quickly” about it, because you will need to explain to the Front Benchers when I cut their contributions down to eight minutes each. It is an intervention, not a speech. I call Stephen Kinnock.

[Stephen Kinnock]

In short, if we are looking for a common-sense Brexit that strikes a pragmatic balance between prosperity and sovereignty, the EEA is the only game in town. It will allow maximum access to the single market, with the ability to reform free movement, resolve the Northern Ireland issue, end the jurisdiction of the ECJ and, above all, reunite our deeply divided country.

[Vicky Ford]

The problem with the EEA is that we would have to cut and paste all EU rules, especially on key sectors such as financial services. Would it not be better to fight for a bespoke deal?

[Stephen Kinnock]

As I have said, it has to be a blend of a template and a bespoke deal. The Government have fundamentally failed to understand that, first of all, these negotiations must create common ground—a territory based on models and templates that are familiar to both sides at the negotiating table. Of course, things can then be tweaked and finessed, but the basic model of the EEA gives us the architecture and certainty for which the country is so desperately crying out. That approach would also have put the British Government on the front foot, rather than leaving a vacuum into which the EU has been obliged to step.

The referendum exposed many of the deep divisions that have existed in our country for many years—divisions between young and old, town and city, graduate and non-graduate. Those divisions came together as we coalesced behind “tribe remain” or “tribe leave”. We must not allow the tribalism of the referendum to define our destiny. We must come together. We must find a way to reunite this country, find compromise between remain and leave, and place that compromise at the heart of our negotiating strategy. In the EEA-EFTA model, we have the answer to protecting market access, jobs and opportunities; to a frictionless border in Northern Ireland; and to the call to take back control on immigration, in our courts and in this place. Let us come together, reunite Britain and build an EEA-based Brexit.