Oral Question: EU Exit Bill Negotiations

- Wednesday, 8th February 2017

 

EU and British Flags

Peter Lilley: I would not dream of correcting my right hon. Friend, but I would ask him this question. When it appeared that we were going to stay in the EU, was he concerned about the terms of the Transatlantic Trade and Investment Partnership and what that would have done to British farmers? Was he concerned about the trade agreement with the Canadians, of which we have today voted to take note? Was he concerned about those things, or is he concerned only when it feeds his remaining remoan tendencies?

 

Ed Vaizey: I did not accept the argument that TTIP would undermine our NHS, and I did not receive any representations from my farmers about its impact on them. I was concerned about the French introducing cultural protections, but felt that we were getting close to a free trade agreement thanks to the negotiating power of the European Union.

 

...later...

 

Peter Lilley: Is my hon. Friend not puzzled about why Caroline Lucas and others now want to be able to vote on and control legislation on whole swathes of which, for the last 40 years, they have been content to have no vote—no vote before negotiations, no vote during negotiations, no vote at the end of negotiations—and no power to destroy an EU regulation even if every Member voted against it.

 

Kit Malthouse: My right hon. Friend has neatly drawn attention to the fundamental paradox that sits at the base of all Remainer arguments.

 

When we come to new clause 77, I think we have reached what I would call peak nonsense. The new clause, tabled by the hon. Member for Nottingham East, states:

 

"In negotiating and concluding an agreement in accordance with Article 50(2) of the Treaty on European Union, Ministers of the Crown must have regard to the desirability of retaining full participation in the making of all rules affecting trade in goods and services in the European Union."

 

That effectively means remaining members of the Commission, members of the Parliament, and members of the Council of Ministers, or else not leaving the EU. As far as I can see, that is indeed peak nonsense. Yet again, we see bad legislation and bad law.

 

...later...

 

Peter Lilley: For the sake of brevity, I will focus, if I may, on new clause 11, which is entitled "Tariff-free trade in goods and services". Of course, there are no tariffs on services worldwide, so that should be fairly easy to achieve. I take it to mean tariff-free trade in goods and the minimum of barriers to services.

 

With regard to trade, there are only two realistic outcomes to the negotiations we will have: first, that we negotiate a free-trade agreement continuing tariff-free trade—more or less what we have at present—and secondly, that we move to trading on the basis of most favoured nation tariffs under WTO rules, which is basically what America, China, Japan and Russia, the four most successful countries exporting to the EU, do.

 

From what I have heard in this House and what I know of the Government's position, everybody would like us to negotiate continuing tariff-free trade with our European partners. We do not particularly need any clause in this Bill to try to achieve that. Moreover, it is very simple to negotiate. It is very easy to go from zero tariffs to zero tariffs—it can be done in an afternoon. It is not like negotiating the removal of tariffs, as the EU has had to do with Canada. Canada had 5,000 different tariffs, the EU had 12,500 different tariffs, and they had to trade off one against the other.

 

Tariff-free trade is very simple to negotiate. As far as barriers and services are concerned, if our regulatory systems began to diverge, all we would have to negotiate—after assessing whether or not the matter was serious—is the normal dispute resolution procedure, because after the great repeal Bill we will start with identical regulatory arrangements.

 

Tariff-free trade is also in the interests of the European Union. We are the biggest single market for the rest of the EU—bigger than the United States, with which it has laboriously been trying for years to negotiate the removal of tariffs. The EU also has a big surplus in trade with us, so it should not be difficult. It is very much in the EU's interests and it already has free-trade agreements with some 50 other countries that do not involve free movement of labour, paying a contribution or accepting European legislation. It has demonstrated that that is the sort of thing it can do with countries with which it wants free trade.

 

It might be the case that, within the EU, politics will trump economics. Although it is in its economic interests to continue tariff-free trade with us, the EU may feel it necessary to punish us in order to deter other countries from following our example and their voters from voting for Eurosceptic parties. This House has to acknowledge—few people seem willing to do so—that that will be the EU’s choice. It will either decide to go along with continuing free trade, or it will say, "No. For political reasons, we can't accept that. We must trade on most favoured nation terms in future." We cannot go back to it and say, "Sorry. You didn't give it to us the first time, but the House voted against, so can you give it to us the second time?" If it does not give it to us the first time, it will not give it to us at all.

 

We need to acknowledge that, although trading on most favoured nation terms is not as good as continuing free trade, it is the second best option and better than continuing with our previous arrangement. If Europe applies the common external tariff to us, most favoured nation tariffs would average 4%. The net contribution that we make to the EU annually is equivalent to 7% of the value of our exports. We are currently paying 7% to avoid a charge of 4%.

 

Clive Efford: How much do we get back?

 

Peter Lilley: The 7% is after taking account of everything we get back. If the hon. Gentleman wants to know, he should look up table 4.27 on page 159 of the Office for Budget Responsibility report, which spells out how much we will get back net when we leave, which is £13 billion-£250 million a week.

 

Kelvin Hopkins: Does the right hon. Gentleman agree that if a 4% tariff is imposed, it is possible that the pound will depreciate by the same amount, because we have our own currency?

 

Peter Lilley: It is already 15% more competitive than it was a year ago, which dwarfs the average of 4%. We can, of course, give processing relief—that is, remit tariffs—on components that are part of processing and manufacturing chains and that will be re-exported. We will get £12.3 billion of revenues, if we apply the common external tariff to imports from the EU, but our exporters will pay some £6.5 billion of tariffs on their exports to the EU, so we would have ample money to compensate any exporters who were not sufficiently advantaged by a 15% devaluation, and still have billions of pounds to reduce general taxation. We can also, of course, negotiate free trade agreements with the rest of the world and slash unilaterally the tariffs that we currently charge on food, clothing and other things that we do not produce but that mean that our consumers have to pay higher prices to subsidise inefficient producers elsewhere in the EU, instead of importing from, say, the less-developed countries from which we should naturally be importing.

 

There are many other advantages, but as you have urged brevity, Ms Engel, I will not tell the Committee what they are but hold them back for a future occasion.

 

 

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