European Affairs

Vicky Ford Excerpts

Thursday 15th March 2018 Commons Chamber

[Mel Stride]

My hon. Friend makes an important point and, as I will say later in my speech, there is every reason to move towards a comprehensive free trade agreement covering not just goods, but services.

[Vicky Ford (Chelmsford) (Con)]

Given that nearly half of our trade is with the EU and that 40% of that trade is in services, does the Minister agree that the level of services coverage in, for example, CETA is not deep enough or broad enough to recognise adequately the mutual trade between the UK and the EU in services?

[Mel Stride]

My hon. Friend raises an important point. We will be seeking a unique deal for our country that recognises the prime importance of financial services both to our country and to the European Union and of the provision of competitive finance to the EU’s businesses and consumers. She mentioned CETA, and the relevant point there is that the negotiations, which were led by Michel Barnier, recognised the importance of attempting to include areas such as financial services, which is exactly what we will seek in the negotiations that will now follow.

We have the reassurance that the UK and the EU both issued a published text on the approach to the implementation period that reflects the significant common ground between us. The text would codify an implementation period that preserves the current status quo for business and consumers, is time-limited but also provides a sufficient window for the EU and UK to put new processes and systems in place, and ensures continuity in the application of international agreements. As a third country, the UK will have the ability to use the period to negotiate and sign new trade deals, while reflecting the fact that we cannot bring these agreements into legal effect until after the end of the period. We will also introduce a new registration scheme for EU citizens arriving post-Brexit but during the implementation period, when EU citizens should be able to continue to visit, live and work in the UK as they do now.

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[Paul Blomfield]

I was aware of that manifesto, and the right hon. Lady is right in what she says. I also reflect that the manifesto and the narrative surrounding it sought an overwhelming mandate for a hard Brexit, which the British people failed to give to the Conservative party.

Let me move on to explain why we believe a comprehensive customs union with the EU that replicates the current arrangements also does not weaken our opportunity to develop trade with the rest of the world—certainly not in services. As Germany has shown, we do not need trade deals to develop trade, for example, with China. As the International Trade Secretary acknowledged when he was there with the Prime Minister in February, membership of a customs union will not hold back bilateral trade. Where deals can be done, we think member- ship of a customs union gives us a stronger hand in trade negotiations, as part of a market of 650 million people, rather than just one of 65 million people, and in maintaining strong EU standards.

Members of this place and the Government must be honest about the fact that any trade agreement—

[Vicky Ford]

I am listening carefully to the hon. Gentleman and I understand that he is asking to have a customs union with the EU. I listened to the Leader of the Opposition’s speech less than three weeks ago, where he also asked for an exemption on state aid and competition law. Does the hon. Gentleman agree that no country has a customs union with the EU and also has an exemption on state aid and competition law—even Turkey has to apply all EU treaties in this regard?

[Paul Blomfield]

I recognise that the hon. Lady has enormous experience as a former MEP, but she did ask that question yesterday and my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook) replied. I think she is confusing a customs union with a single market requirement—[Interruption.] Let me answer the point in any case. The Leader of the Opposition did raise a concern that we would want assurances on competition policy, but we are absolutely confident that those assurances would be very easy to get and would not be problematic. As I believe was pointed out yesterday, the Leader of the Opposition said on the Peston show in January that we are absolutely confident that nothing in our manifesto would be thwarted by state aid rules.

[Vicky Ford]

I ask the hon. Gentleman to withdraw his accusation that I am somehow confused. It is very clear in reading Turkey’s customs union arrangements that it has to comply with all EU treaty rules on state aid and EU law on competition.

[Paul Blomfield]

I thank the hon. Lady for that clarification, but we are not seeking a customs union comparable with Turkey’s. We are seeking a comprehensive customs union which replicates the current arrangements that we enjoy with the EU.

Let us move on to another area. We need to be honest about the central issue on which many of those who campaigned to leave focused their campaign and which influenced the votes of many—immigration. Taking back control of our borders was a powerful promise, creating expectations that the Government really have no plan or intention to deliver. The Government have had control of non-EEA immigration for the past eight years and in every one of those years it was greater than EEA migration.

The Government know that things will not be changing significantly. Two weeks ago, that ardent Brexiteer, the Secretary of State for Environment, Food and Rural Affairs, told the National Farmers Union that

“agriculture needs access to foreign workers.”

He promised to maintain that access, for both seasonal and permanent workers. He was echoing the Secretary of State for Exiting the European Union, who said in Estonia last year that it will take “years and years” for British citizens to fill the employment gaps, and that in the meantime Estonians would be welcome to come to work in the UK. At Mansion House, the Prime Minister talked about a future labour mobility scheme with the EU.

The difficulties of squaring the expectations unleashed by the leave campaign with the interests of the economy are no doubt the reason why the Government have delayed the immigration White Paper, yet again, and do not look set to have a new system in place by the time we depart in March 2019.

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[Mr Jenkin]

I was going to make that point later in my speech, but shall no longer do so, for the sake of brevity.

The EU undermines democracy, prosperity and international co-operation. It is plagued by high unemployment, high debts, an ageing population that is much too dependent on state welfare, a dysfunctional euro, unaccountable political institutions and a democratic crisis. It puts up barriers to the combination of world-class universities, technological innovation and venture capital that is fundamental to the technological innovation on which the future of our economy depends.

Since the referendum, we have seen the landmark statements to which the Chairman of the European Scrutiny Committee, my hon. Friend the Member for Stone (Sir William Cash), referred. In fact, Martin Schulz, the former President of the European Parliament, wants a full united states of Europe by 2025. The formation of the euro, which was always a political project, transformed the EU, making full integration an imperative to try to prevent the eurozone from breaking up. In the end, the euro will fail anyway, because there is no political consent for the scale of fiscal transfers necessary to compensate for the huge internal trade imbalances.

The second context is economic. Shortly before the referendum, the Treasury forecast that a leave vote would inflict an economic shock on the UK, leading to reduced trade and foreign direct investment, recession, and the loss of 500,000 jobs. I am sorry to disappoint the hon. Member for Sheffield Central, but the Treasury’s analysis has proved to be manifestly wrong. It also ignored the long-term future of global trade and economic growth. Between 2016 and 2017, UK GDP increased by 1.7%, and economic growth continues to surpass expectations. Tax receipts are higher than expected, and the UK is running a current budget surplus for the first time since the year leading up to July 2002—long before the crash, and two years earlier than anticipated just last year. UK unemployment has continued to fall from 8.5% in late 2011 to 4.4% in late 2017, and the unemployment rate was recently at its lowest point since 1975.

Although some businesses are moving parts of their operations to other EU countries, the number of jobs being moved is significantly lower than expected. Foreign direct investment has continued to grow and, since the referendum vote, there has been a string of major inward investment decisions. In fact, the year of the referendum, 2016, turned out to be another record year for inward investment. We have seen Wells Fargo committing to a new £300 million London headquarters and Nissan announcing its new Qashqai and X-Trail models to be built in Sunderland, making Sunderland a super plant of 600,000 vehicles a year. In December 2017, GlaxoSmithKline revealed its plans to invest £40 million in the UK’s life sciences sector. At the beginning of this month, Siemens committed to building a £200 million train manufacturing plant in the UK if it wins orders for new rolling stock, and, just last week, Toyota announced that it will build the next generation of its Auris hatchback at its Burnaston plant in Derbyshire, including a £240 million upgrade of the plant.

That is not a matter for gloating or complacency, but it shows that inward investment is not dependent on membership of the EU. What about the longer-term prospects for trade and economic growth? In recent years, UK trade has shown a well-established trend, as the proportion of UK exports sent to the EU has been declining. It peaked at 54% of UK exports in 2006. By 2016, that had fallen to 43%. That decline in the importance of our EU trade has set in despite the UK being in the EU, in a customs union and in the single market. Conversely, over the same period, the non-EU share of UK exports has increased. For example, China’s share of UK exports grew from 1.6% in 2006, worth a mere £5.4 billion, to 3.3%, worth £16.8 billion, in 2016.

Trade has also grown significantly with the Commonwealth. UK exports to Commonwealth countries have increased from 8.8% of our exports, worth £21.5 billion, in 1999 to 8.9%, worth £48.5 billion, in 2016. The Commonwealth is a fast-growing market, reflecting much of our language, values and administrative and constitutional heritage, and therefore has great potential for the UK.

The EU is still the UK’s largest trading partner if taken as a bloc, but if we consider individual countries, the UK’s largest trading partner is the United States of America. It seems to have passed the hon. Member for Sheffield Central by that, while the UK has had a trade deficit with the EU every year since 1999—worth £82 billion in 2016—we achieved a £39 billion trade surplus with non-EU countries in 2016. Outside the EU and the customs union, the UK will be able to develop new trading relationships with many of these countries, but not under his party’s policy. Some of these opportunities, including the possibility of joining the Trans-Pacific Partnership and the strong prospects of a comprehensive free trade agreement with the US, including financial services, more than match the potential of our existing relationships with the EU.

The 11 TPP countries have a population of almost 500 million people and represent more than $10 trillion in economic output, which is 13.5% of the global total. The Commonwealth has a population of 2.3 billion people. A comprehensive trade deal with the US, which includes services, would give UK firms better access to its population of more than 320 million and to the world’s largest single economy. With the UK accounting for 7% of world service exports and the USA 15%, they would together account for over a fifth of the global total—a market of huge significance.

Outside the EU, the UK will also be better placed to develop trading opportunities with countries in Asia and Africa, where the most rapid growth is expected to occur in the future. When concluding free trade agreements, we can set our own negotiating priorities that best match our economic interests. The EU has historically represented the UK’s interests poorly not just because it is incredibly slow, but because, inevitably, the EU cannot prioritise UK trading interests such as access for services, which is, of course, of prime importance to our economy. EU negotiators have to take account of 28 states’ interests, which can be very different from our own, and to reflect the protectionist priorities of producer interests, such as the Italian shoe industry, French agriculture and the German chemicals manufacturers.

[Vicky Ford]

I am very much enjoying listening to my hon. Friend’s speech and hearing him talk about opportunities for trade outside the EU, but, bearing in mind that nearly half our trade is with the EU, that 40% of that is in services, and that services growth has been increasing year on year, does he not agree that we should try to do both? The EU economy is growing at the moment. We can grow our trade with the EU and with other parts of the world if we strike an amicable trading relationship with the EU as we leave.

[Mr Jenkin]

I could not agree more with my hon. Friend. We are on exactly the same page, and we can both support the Prime Minister’s negotiating objectives on that basis.

Returning to the UK the power to negotiate and sign trade deals will not only speed up trade negotiation for the UK, but enable the Government to negotiate in the UK national interest. The hon. Member for Glenrothes (Peter Grant) asked which countries we were talking about. The Department for International Trade is pursuing opportunities in countries around the world, and Australia and Brazil, to name just two, have already expressed an interest in concluding free trade agreements with the UK.

[Mr Jenkin]

I think the hon. Gentleman is somewhat playing with words, because nobody will say what kind of deal they will give us until we are actually in the negotiations and making progress. He is asking a question to which he well knows the answer for his own political reasons.

In relation to our trade with the EU, the Prime Minister in her recent speech called for trade at the UK-EU border to be as frictionless as possible. The EU has agreed, as I mentioned earlier, that tariffs and quotas should be avoided and, in the draft negotiating guidelines published earlier this month, it also agreed to the principle of an EU-UK trade deal. Perhaps that is the answer to the hon. Gentleman’s question. There should also be mutual recognition of products and standards, which is no more than the kind of standard agreement that the UK has with many other countries with which it does not have a free trade agreement—incidentally, I think that that is what is meant by a customs arrangement. It means goods need approval in only one country to meet the required regulatory standards in other countries in normal circumstances.

Although we recognise that certain aspects of trade in services are intrinsically linked to the single market, we should note that services trade has nothing whatsoever to do with being in or out of a customs union, because tariffs are not charged on services. The Prime Minister is right to insist that barriers should be introduced only where absolutely necessary. There is no reason for the EU to prevent UK firms from setting up in the EU as we will continue to allow EU firms to set up here. We should agree on an appropriate labour mobility framework and on the recognition of qualifications to provide for the mobility of skilled labour. The Prime Minister also called for the UK and EU economies to remain closely linked in areas including energy, transport, digital, law, and science and innovation. That is perfectly achievable if there is good will on both sides.

The UK is committed to remaining a close friend and neighbour of the EU, and the Prime Minister has made that perfectly clear with a comprehensive economic partnership.

Trade is, of course, of great importance to the economy. In the UK, about 28% of what we produce is sold abroad, and this business activity supports millions of jobs. We also import much of what we consume, and trade allows consumers to access a wider variety of goods, at competitive prices, but the volume of trade is only marginally affected by agreements between countries. Neither the EU nor the UK has a trade agreement with the US, but the US is nevertheless our largest trading partner.

When discussing trade, we must remember that trade agreements are only one factor upon which our economic future depends. How we educate our people, how we regulate our economy, the flexibility of our labour market, and investment in infrastructure, science and technology are far more important to our prosperity than trade agreements. Domestic Government policies have a much bigger impact on economic performance than whether the UK is inside or outside a customs union with the EU. As the hon. Member for Sheffield Central himself pointed out, Germany exports to the rest of the world from within the EU, but with many countries, it does not even have a trade agreement, let alone a customs union agreement.

Let us get all this in proportion. It is far more significant that the UK’s departure from the EU will give us greater flexibility, more responsibility, more accountability and more control over how we manage our economy as we regain: the ability to set our own tariff schedules; the ability to set our own regulatory standards and decide how they should be applied; the unencumbered freedom to set VAT rates; the freedom to relax restrictions placed on UK public procurement; and policy flexibility over things like fishing and farming.

[Vicky Ford]

I think that my hon. Friend just said that he did not think that there was value in having trade agreements with other third countries. I would like to clarify that, for example, our trade with South Korea has more than doubled—increased by 100%, as the Foreign Secretary said—since the signing of a trade agreement between South Korea and the EU, of which we are a party.

[Mr Jenkin]

I am not discounting the value of free trade agreements. I am asking that we dispose of some prevalent misconceptions that our prosperity depends only on free trade agreements and being part of the customs union. It is actually relatively at the margins of the overall prosperity of our economy.

It is not necessary to be a very large country or part of a large trade bloc in order to be prosperous. Many very small states export a far higher proportion of their GDP across customs frontiers. For example, Switzerland’s exports are worth 66% of its GDP, and South Korea’s are worth 42%—far higher than the UK’s. Neither of these countries are in any kind of customs union, so they achieve this across traditional customs frontiers and their people have very high living standards. In fact, the EU is Switzerland’s main trading partner, and it is not even a member. Other small trading countries include Singapore, whose exports are actually far bigger, at 172% of GDP, and Hong Kong, whose exports are 187%, because it imports and exports such large volumes. But neither is part of a customs union or of any kind of single market; they just get on with it.

Control over our own laws offers far greater opportunities to develop our economy and export than the removal of customs checks when trading with other countries. The cost of customs processes is low and declining in comparison with other costs, such as anti-competitive regulation, behind-the-border barriers to trade and the reduction of tariff barriers. South Korea had substantial tariff barriers before the free trade agreement. We gain the opportunity to focus on those matters in trade negotiations, alongside investment in science and tech, educating our people, and ensuring flexible labour markets and a competitive tax regime. So much of the debate about leaving the EU lacks this perspective.

Even so, our future opportunities outside the EU are important. Even the European Commission expects 90% of global economic growth over the next 10 to 15 years to be generated outside Europe. The UK can flourish outside the EU, perhaps not with a Corbyn Government—that might be a bit of a problem—but certainly with a sensible Conservative Government. The only question is whether we all work hard to embrace these opportunities or continue trying to hide from them. Outside the EU, instead of pretending that we can insulate ourselves from a rapidly changing world and from the effects of technological and societal change, with a failing model of regulation and centralised power—without all that—we will have the freedom and flexibility to respond, adapt, survive and prosper.

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[Vicky Ford]

Will my right hon. Friend give way?

[John Redwood]

I am sure that my hon. Friend wants me to concentrate on the customs union, because she shares my wish that the Government will be well supported if the Opposition decide to have a third go at voting through a customs union or customs union membership.

I remind the House that we have twice had big votes in the Commons in which Members have voted by a very large majority against our staying in the or a customs union. One was on an amendment to the Queen’s Speech motion, and the other was on an amendment to the European Union (Withdrawal) Bill. I hear that some Labour Members may have changed their minds and want to vote again. I am a democrat, and the Opposition have their own ways of doing what they want to do, but I urge them not to vote to stay in the customs union.

Above all, are Labour Members not at all worried about poverty in emerging markets? Do they not think it is wrong that we place huge tariffs on poor countries’ tropical produce—produce that we cannot grow for ourselves? Would it not be great, when we are outside the EU customs union, to be able to take down those tariffs and give those countries more hope of promoting themselves by good trade, while at the same time benefiting our customers because they would be able to buy cheaper tropical products? Can we not do good trade deals with those emerging market countries across the piece? The tariff barriers are too high, and we could make mutually advantageous changes if we were free to do so. I urge the Labour party to remember its roots in campaigning against poverty and to join me in saying that the best way to get the world out of poverty is to get down the high tariffs on emerging market countries that the EU imposes, which I certainly do not agree with.

The Minister must remind Labour Members that no deal is better than a bad deal, and that no deal allows us to take back control of all the things that he and I promised to take back control of. He must also remember that we do not owe the EU any money. It would be fatally wrong to pay it loads of money if everything else does not work in the way we want.

[Vicky Ford]

Will my right hon. Friend confirm that he agrees with the Prime Minister that we should look for a deal that covers many sectors that are not covered by the WTO, such as aviation, data exchange and having a mutual recognition of financial services, so that trade in those areas can easily continue?

[John Redwood]

I am afraid that I am out of time, so I cannot go into detail on all these matters. I believe that we should negotiate strongly and positively. I wish my right hon. Friend the Prime Minister every success, but I wish to strengthen her hand by saying that out there in the country, the message is, “Get on with it.” If that means leaving with no deal, that is absolutely fine.