24 APR 2018
I have received many emails on this subject and I have tried to set out my views in detail, addressing points that have been raised in a range of correspondence.
Trade is about far more than trade deals, and that is why Parliament is debating whether it is in our national interest to remain within an effective form of Customs Union after Britain leaves the EU. I believe that it is.
When we talk about how the Customs Union affects supply chains, border checks and rules of origin, this matters because these affect costs, delays and red tape. These have consequences for future investment decisions, people's jobs, livelihoods and even for maintaining safe and timely access to medicines and medical products. The Customs Union has also played a key role underpinning the Good Friday Agreement and decades of peace in Northern Ireland.
We are now in the stages of negotiation where we are up against the reality of Brexit, rather than the overly optimistic prospectus that is sometimes presented.
It is true that remaining in a Customs Union limits our freedom to conclude independent third-party trade deals, but the inescapable fact is that the ones that we already have by virtue of EU membership are far more valuable. Trade deals are immensely complicated, time consuming and involve compromises, especially if you are negotiating from a smaller base rather than from a position of strength.
The EU is overwhelmingly the UK's most important trading partner: it provides the UK's largest export market for goods, accounting for 48% of total exports (£145 billion), or 7.4% of GDP in 2016, 78% of UK exporting companies sell into the EU, leveraging its 446 million consumers. The vast majority of these companies (96%) are SMEs. We also have access to many more non EU markets through existing trade agreements negotiated as members of the EU. The former lead civil servant in the Department of International Trade, Sir Martin Donnelly, described leaving current arrangements in the hope of closing better trade deals elsewhere as 'giving up a three course meal now ... for the promise of a packet of crisps in the future.'
The CBI has made clear its preference for easy EU trade and points out that UK infrastructure has been built to support it. The Port of Dover deals with the equivalent of 17% of UK trade, with 2.6million freight trucks passing through the port in 2016. That same year, the Eurotunnel transported £100billion in trade between the UK and the EU. This infrastructure however, was not built to cope with customs delays and these are inevitable without a Customs Union. The costs and time taken to construct the necessary infrastructure to cope with the checks and delays would be enormous. These costs would be borne by taxpayers, businesses and consumers. The proposed alternative models suggested by the government have now been firmly rejected by the EU.
It is worth pointing out that the Customs Union is only about goods—it is not about services. Remaining in a Customs Union would leave us free to negotiate new arrangements for trade in services.
There is very little economic downside to a Customs Union and no evidence that in leaving it we would be able to replace the trade we currently enjoy with better trade deals further afield without a raft of unpalatable compromises. I don't want to be forced to accept hormone treated beef for example or to put farmers in my constituency at risk from cheaper but lower welfare standard imports in order to seal a deal on greater trade.
Deals further afield of course look attractive, but they are unlikely to make up for what we stand to lose. The further afield you go, the less we trade. The population of Canada is three times the population of Switzerland but we sell twice as much to the Swiss because they are closer. It is estimated that as distance doubles, trade halves.
The simple reality is that we will only be set to lose if we set barriers in the way of trade with our closest partners by leaving a Customs Union.
We should also stop thinking of existing deals and the Customs Union as a block to increasing trade, we can increase this without awaiting independent and uncertain trade deals. Germany, for example, sells 4.7 times more to China than the UK does, without an independent trade deal. Being in a Customs Union does not prevent growing trade with key markets such as the US and China.
The practicalities of exporting matter as much as the tariffs charged at the border. It is well worth reading the report of the Business Energy and Industrial Strategy BEIS Committee on the impact of Brexit on the processes food and drink sector. https://publications.parliament.uk/pa/cm201719/cmselect/cmbeis/381/38102.htm
The processed food and drink sector is the largest manufacturing sector in the UK and contributes £28.8 billion to our economy. Exports were worth £22 billion in 2017 and this vital sector directly employs 400,000 people throughout the country, a third of whom are EU nationals. It is characterised by just-in-time delivery of products with short shelf lives and is heavily integrated with supply chains spread across the UK and the EU for sourcing raw materials, processing goods and selling them. Many manufacturers have factories in both the UK and the rest of the EU and products may cross the border many times before a product reaches the supermarket shelf.
The success of our food and drink sector is highly dependent on participation in both the Single Market and Customs Union with 60 per cent of UK exports going to EU markets. Half of total UK food and drink exports go to five countries, four of which are EU member states.
This matters to this constituency not only for farmers but to the fishing industry. Brixham lands the most valuable catch in England and exports much of that to the EU, our most important overseas market. No one wants to buy fish or shellfish that has been held up at the border.
The Government itself has estimated that non-tariff barriers could have a disastrous impact on the food and drink sector by increasing costs by approximately 17 per cent in tariff equivalent.
Outside an effective Customs Union, there is no such thing as a frictionless border and the implications go far beyond the food and drink sector with the added costs likely to affect future investment decisions.
Presenting the industry's most detailed evidence yet to the BEIS select committee, Honda UK said it relied on 350 trucks a day arriving from Europe to keep its Swindon factory operating, with just an hour's worth of parts held on the production line. A staggering 2m components are moved across the channel every day so any delays at the border would add huge disruption and cost. Honda also reported that it would take 18 months to set up new procedures and warehouses if Britain left the Customs Union.
The Draft Agreement between the EU and the UK on 19 March 2018 provides some welcome reassurance on customs arrangements during the transition period but leaves great uncertainty regarding customs checks beyond December 2020. We do not have the luxury of time before settling the long term position.
The issues go beyond the economic. The Health and Social Care Committee, which I chair, heard evidence about the extent to which NHS care is dependent on a network of highly integrated, complex and time sensitive supply chains for the delivery of medicines, medical devices and substances of human origin. We have long taken it for granted that medicines will be available on the pharmacy shelf and I do not want to see that put at risk.
During their life-cycle, medicines, medical products and technologies cross multiple countries for material sourcing, manufacturing, packaging, sterilisation and other processes. UK and EU supply chains for medicines and medical technologies are highly integrated, for both finished products and components. Pharmaceutical sector supply chains across the EU involve the exchange of medicines, active pharmaceutical ingredients, clinical materials–including the trade and exchange of samples–and raw materials. The delivery of NHS care also depends on the seamless flow of time-sensitive products, such as medical radioisotopes, used in around 700,000 diagnostic or therapeutic procedures each year in the UK. If the supply of medical radioisotopes is affected by problems with supply chains a significant proportion of patients may not have rapid access to, amongst other things, diagnostic imaging. There are many other examples where supply chains are fragile and no supplies are manufactured in the UK for example dialysis equipment.
Frictionless trade is a patient safety issue that will be helped not only by close regulatory alignment, as already recognised by the Prime Minister, but by remaining in a Customs Union. The full report on the many other aspects of Brexit affecting access to medicines, devices and substances of human origin can be read here https://publications.parliament.uk/pa/cm201719/cmselect/cmhealth/392/39202.htm
My final point is around the Irish Border. Both sides have committed to avoiding physical infrastructure as that would run counter to the Good Friday Agreement. Leaving the EU without reaching an agreement in relation to avoiding a hard border on the Island of Ireland would have very negative consequences and put decades of progress and peace at risk. It is also important to note that in the event of a walk-away, no deal, hard Brexit, WTO rules prevent the UK from unilaterally creating an open border with Ireland without offering this to the entire membership of the WTO.
The Northern Ireland Select Committee recently examined the opportunities for technical solutions, and concluded that they had not seen evidence "of any such solutions, anywhere in the world, beyond the aspirational, that would remove the need for physical infrastructure at the border". Given that creating a border down the North Sea is unacceptable to the UK, the only practical solution to this most important issue is for us to remain within a Customs Union alongside a close relationship which allows seamless access to our closest trading neighbour.
In conclusion, the vote on Thursday is not a vote to block Brexit. This is a debate and a non-binding vote about the type of Brexit and MPs will be able to examine the evidence on what is best for jobs, our economy and the security of supply chains. Following the large majority in support of a Customs Union last week in the House of Lords, it will also test the likely view of the Commons ahead of binding votes due in the coming weeks.
I appreciate that some will continue to feel that I should vote for the UK to leave the Customs Union and not to negotiate any arrangement to replace it with any effective Customs Union or arrangement. I hope this at least sets out the reasons why I respectfully disagree.
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