Leaving the EU: Customs Arrangements — [Mr Gary Streeter in the Chair]

Part of Backbench Business – in Westminster Hall at 3:07 pm on 10 July 2018.

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Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury 3:07, 10 July 2018

It is a pleasure to serve under your chairmanship, Mr Streeter. I am grateful to my hon. Friend Stephen Hammond for securing the debate. We applied for the ballot on the same day and he has twice been luckier than I have. He clearly carries the luck with him.

I will focus my remarks on three areas: what the public voted for, the agreement made at Chequers last week, and rules of origin. It is vital that we respect the referendum result. However, I argue that far too much has been read into it. The public gave us a direction of travel, not a road map.

It will be instructive for my constituents if I cite statements made by Vote Leave and its leadership. Not only did they not describe the end state during the campaign, but they refused to do so as a matter of strategy. The brains behind Vote Leave, Dominic Cummings, asked of the campaign: does it

“need an exit plan, or does that simply provide an undefendable target and open an unwinnable debate”?

The Vote Leave application for designated campaign status went even further, stating that the sole purpose of the organisation was to campaign to leave the European Union in the referendum. In other words, no plan for how to approach our customs arrangements was put to the public, only the high-level objective of leaving the EU. The application continued to state that the full range of options for leave deserved to be heard and that they were “legitimate” and “equally valid”. That hardly sounds like a campaign with a solid plan to put before the electorate. None of those statements suggested for a moment that leaving the customs union and the single market would be the clear consequence of voting to leave.

Some of my constituents in Eddisbury voted to leave the EU, the customs union and the single market, but for every email I get pointing that out, there are others that say their vote to leave was not a vote for a hard Brexit. My suspicion is that there is a majority in Parliament and the country for a soft Brexit, but no majority anywhere for the kind of Brexit supported by the European Research Group members of my party. The Government’s analysis is an effective admission that some leave campaigners have overstated the economic benefits of free trade to justify taking us out of the customs union. That is why I am pleased that the Government have come to an agreement about their negotiating position. It is a welcome dose of reality and a concrete plan, which has eluded DExEU to date.

I support the outline of the plan and look forward to the publication of the White Paper, which I hope will come this Thursday as promised, because Parliament needs time to examine the document in advance of the Taxation (Cross-Border Trade) Bill and the Trade Bill next week. The outline, however, contains much that I can support. A common rulebook for goods and agriculture and a combined customs territory with the EU will go a long way to resolving both the concerns about the Irish border and more generally about ensuring free and frictionless trade. The major industry sectors in the north- west are car manufacturing, chemicals, pharmaceuticals, aerospace, and energy, particularly nuclear energy.

I have spent five hours a week pretty much every week since we have been sitting in this place listening to evidence to the Business, Energy and Industrial Strategy Committee. Business after business has come and said that they do not want to apply under different rules. They say that very often the rules have been British rules that we have taken to Europe—rules on consumer protection, on airline safety, and on how to safely test pharmaceutical products. We have been setting the standards and exporting them not only to Europe, but globally. It is clear that the move forward at Chequers has much to support it in terms of the common rulebook. Frictionless trade is not only about customs and tariffs, but about non-tariff barriers, and it seems sensible and pragmatic to say that there are many areas—vast areas—where we do not need to diverge. We have set the standards. Very often we have higher global standards than other nations. We have much to be proud of as a nation in how we have led the way in Europe.

As for getting the detail right, I did not stand to get elected as a Conservative to increase costs on my businesses or to tie them up in further bureaucracy. Far from it. As my hon. Friend the Member for Wimbledon has described, 180,000 firms would need to have additional paperwork and fill out additional customs requirements. If we can reduce that, and if we can get and preserve frictionless trade in our negotiations with Europe, it has much to benefit both the European side and ours.

I am very familiar with the port of Holyhead. We have only one World Trade Organisation-compliant port in this country—Southampton—so all the other ports would need major infrastructure. At the moment, the technology for filling out manifests means that it takes a minimum of four hours from loading goods on to a ferry for them to be processed before they can come off at the other end. Crossings such as Dover do not last four hours, and we can immediately see the problems caused.

I, too, have concerns about services and the fact that many goods are sold with services. An iPad, as my researcher would say, is an expensive paperweight if it does not have the software that comes on it. We need to look at how we can include services, because they are so important for our economy. The loss of access to European markets would be devastating for the many people in Eddisbury who work in the service sector.

Although regulatory alignment on goods is important, it is not enough on its own and this is where we have to look at the impact on our trade of rules of origin. My hon. Friend the Member for Wimbledon was not aware of my speech and I was not aware of his, but we have both picked on the same point about the threat that rules of origin potentially pose for us. Outside a customs union, the UK’s exports to the EU would no longer be exempt from the EU rules of origin. A detailed analysis of supply chains and the cost of obtaining a proof of origin certificate would be required. A complex motor, for example, has many different parts, and every nut, bolt and screw has to have a rule of origin certificate. It is not a simple and easy process to undertake.

It would be a substantial burden to exporters and would act as a significant non-tariff barrier even in a free trade area. The Centre for Economic Policy Research even suggested that the cost of proving the origin of a product could be between 4% and 8% of the value of the goods. That would have a knock-on impact on our ability to roll over trade deals that we currently benefit from as a part of the EU, because the trade agreements treat the EU as a whole when considering whether rules of origin apply to goods that are

“sufficiently processed in the EU” so as to qualify for the preferential tariff rates.

Japan identified “cumulative rules of origin” as an issue in its letter to the UK and the EU. That is why I have raised questions about the Government’s plans to retain membership of the regional convention on pan-Euro-Mediterranean preferential rules of origin. I hope the Minister has something to say about that. I look forward to further detail in the White Paper, but I welcome the steps forward made at Chequers.