"When my constituents in County Durham voted to leave the EU, they were concerned by the future of manufacturing as well as what they see as uncontrolled immigration.
The prime minister has clearly got their message, but unfortunately her understanding does not add up to a negotiating strategy for Brexit. That is why MPs who campaigned for both sides of the referendum are pressuring the government to be more open. It’s why on Wednesday I initiated a debate on the customs union.
In September the Treasury select committee met their counterparts in Berlin and Rome to learn what deal might be possible. Over and over again we heard the same thing – no precedents must be set. So while the UK’s demand to control immigration is likely to be met by a refusal to let us continue this full membership of the single market, less has been said about the customs union – and this may prove to be more important.
The customs union was set up in 1968; it’s what we joined in 1973 and reaffirmed in the 1975 referendum. It’s what most people call the common market and it’s pretty popular. The customs union levies a common external tariff on imports to the EU, but within it goods move freely and the commission negotiates external trade deals. If we leave the customs union, when we export into the EU market we may have to pay tariffs and will have to show where all the components in our products come from.
It’s designed to stop third countries from cheating.
Britain’s last television manufacturer is in my constituency and uses many components from China. If we leave the EU they’ll have to show what proportion of the final product is British and how much is Chinese, so that each part is charged the right customs duty.
The tariffs vary – many are around 5 to 10 per cent, but the OECD estimates that meeting the bureaucratic rules of origin can add 24 per cent to costs. Norway is in the single market, but outside the customs union. Some Norwegian exporters have found that complying with the rules of origin is so costly it’s cheaper to pay the tariffs.
For the UK this would be catastrophic – 70 per cent of our goods exports are manufactured. After 40 years in the EU, we have highly integrated supply chains. Parts move back and forth across the EU. This is the Nissan problem and why ministers jumped quickly to address it. But rather than do a factory-by-factory deal, they need to prioritise staying inside the customs union. Some 3 million jobs are at stake.
Leaving the customs union means we can’t negotiate trade deals covering goods with third countries like India and Australia. Hard Brexiteers like Liam Fox, who claimed that we’re now in a “post-geography trading world”, are pinning their hopes on these. I believe he is wildly over-optimistic.
Can deals with third countries produce more exports than what we have now? Half of our goods are exported into the EU and this will not be replaced quickly or easily, with slowing world trade growth and the difficulty of striking new deals.
No doubt Liam Fox is delighted to be back in the cabinet and no doubt he’s enjoying travelling the world, but protecting 3 million existing jobs is more important than satisfying his grandiloquent ambitions."
You can watch the Adjournment Debate here.