Brexit: Trade in Goods (EUC Report)

Lord Leigh of Hurley Excerpts

Tuesday 18th July 2017 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I congratulate my noble friend Lady Verma and her committee colleagues on this report. I have spoken in many a debate in this Chamber about the importance of trade. Indeed, I have debated the noble Lord, Lord Davies, in the past. I hope I will be consistently more optimistic than he felt able to be on this matter. The wider Brexit debate has been dominated by trade, often with the focus on financial and other types of services of which we are a strong exporter. So it is important, as has been said, to turn our attention to the trade in goods, which the report analyses, not least because goods make up 56% of our trade, although only 20% of our gross domestic product.

It is reassuring to see the level of detail in the sub-committee report, which shows how this House can lead the way in examining in depth issues critical to our daily life and business. While the report modestly claims in paragraph 10 that it is made for this debate, it is for a far wider audience and will, I hope, be considered long after the debate given the many important points that the Government should, and no doubt will, heed. For example, many noble Lords, be they Brexiteers like me or remainers, can support the need for a transition period, which I first raised in my response to the Queen’s Speech a few weeks ago. It is as important in goods as it is elsewhere. Such a period would allow us to bridge the gap between our current arrangement with the EU and the eventual free trade agreement that is surely in the interests of both parties. I am happy to put on record that I support the Chancellor on this wholeheartedly.

To date I have focused my remarks in this Chamber on services—in particular, financial services—rather than goods, but the report makes the excellent point that there is a blurring of the two as many manufacturers make their real money in post-sales services, as was mentioned by my noble friend Lord Howell of Guildford. However, I would caution against some of the tone of the report, at least in emphasis if not the sum of its content. For example, the report opens with the statement:

“Brexit will fundamentally change the UK’s conditions of trade with the other 27 EU Member States”.


Yes and no, but this sweeping statement misses a fundamental point: whether in goods or services, maintaining the status quo, which is one of free trade, should be our starting point. On customs, our current standards are identical to all others in the member states. Witnesses will have stated the nub of the truth: tariffs are not helpful or welcome. We can change them once we have left, should we wish, but why would we not tread carefully at the beginning? This means a liberal interpretation of country of origin rules as well as non-tariff barriers such as regulation.

On the WTO, when we move to establish our own schedules, most agree that we can simply adopt the current EU ones as our own, giving us an arrangement closer to the status quo than many assume. On striking that elusive free trade deal, however, as mentioned by my noble friend Lord Horam, we start from an unusual position: that of being able only to add to tariff barriers. It is usually a question of navigating an existing, complex array that needs to be unpicked. That is why I remain optimistic about maintaining access to a functioning market in goods—and, for the record, services—as well as ultimately pursuing and achieving a free trade agreement. Unlike some in other political parties, I believe that we could and should keep our important ties.

The only cause for pessimism is the approach taken to date by the EU Commissioners. These people are unelected arbiters for hundreds of millions of people. Their approach to the generous offer by the UK Government in respect of the 3 million EU citizens living here and the 1 million UK citizens living in the EU indicates to me that they will not be driven by a pragmatic, problem-solving determination to make things happen, but rather will seek to score political points to protect their own view of the world. This is a real threat to serious, productive negotiations and I urge the real principals in this matter—namely, the relevant heads of state—to instruct these agents to act in the best interests of all EU citizens hereon in.

We also need to consider the nature and dynamic of our trade in goods with the EU. What stood out in the oral evidence to the International Trade Committee in the other place on its report UK Trade Options Beyond 2019 was the witness statement of Professor Patrick Minford. It stood out most obviously because, unlike nearly all the witnesses to the present report, he at least represented a declared Brexit perspective as chair of what was then Economists for Brexit. More than that, he made trenchant criticism of the EU as a trade actor—that is, how corporatist it tends to be and therefore how protectionist, an approach that makes it difficult for small players, or even international companies, to compete. In that oral evidence it was said that the EU simply has a higher standard in product regulation. Be that as it may, and I am sceptical, it gives little or no credence to the idea that consumers and the market are better arbiters of quality and can vote with their feet. This is one of the problems with the EU and departing from this approach is a key advantage for the UK.

I make one plea following my discussions with employers in the agricultural part of the food and drinks sector, a sector the committee chose to dissect. Paragraph 50 touches on this. I was surprised to read that only some 20% of workers in the sector are non-UK EU nationals, although it is not clear whether this is the rate for seasonal migrants. Like many Brexiteers I recognise the need for, and welcome, migrant workers who come to this country to work at proper wage levels. The agricultural industry is worried that the 2019 harvest, for which plans are being made now, will need certainty of labour. I would welcome it if the Minister announced that this issue will receive early attention. Similarly, it is undoubtedly important that we invest in the necessary infrastructure to support HMRC and our customs officers, to enable them to meet the new burdens that await. However, I also stress at this point that our systems are perhaps better than people think. For example, 99% of customs documents for non-EU trade are submitted electronically.

This brings me to my final point. As we push for a more liberal trade agenda, not least in our new-found membership of the WTO as an individual country, we can do so with the fastest-growing nations on earth—of which the EU, I am afraid, contains very few. I could not agree more with the report’s stress on the need to make sure that our embassies, consulates and high commissions are properly staffed with economic and trade experts to take advantage of our new-found freedom, outside the customs union, to have free trade with India, China, Japan, Brazil, South Korea, Israel and, in particular, the USA. These are rapidly growing nations and, for our own prosperity, it is vital that we seize the opportunities that free trade presents for us to share in it. In advocating a transitional period, it is also vital that this is for a finite time and crucial that during it, we are allowed to negotiate these free trade agreements in earnest and ensure adoption of the Authorised Economic Operator—AEO—scheme. It seems bizarre that we are currently not allowed even to enter negotiations. I hope this will change during the transitional period. Free trade is ultimately what will make us successful. It is a long-term strategy, of course, but one we should not lose sight of among the weeds of the Brexit negotiations.