Response from Margot James to the draft Withdrawal Agreement between the UK Government and the European Union
I have now had a chance to review the Withdrawal Agreement and the Political Declaration on our future relationship with the EU after we have left.
Both documents contain much I welcome. Indeed I am surprised that the Prime Minister has been able to persuade the EU that the UK can agree a free trade area with no tariffs and quotas, whilst being able to strike trade deals around the world and bring an end to freedom of movement.
My belief is that had David Cameron been able to negotiate such a deal the country may well have voted to remain in the EU in the first place.
The downside – the price we will end up paying for these advantages – is the requirement that the regulations underpinning manufactured goods remain aligned with those of the EU. This means that although there will be procedures for the UK to diverge from EU regulations, in effect the UK will have no further say in these regulations, in return for market access on terms similar to those which we enjoy as full members of the Single Market.
I do not minimise the significance of this compromise. For years Britain has been a significant influence (very much to the benefit of other member states as well as to our own benefit) over EU regulations. We will miss this influence and it remains to be seen how much influence we can continue to have via international standards bodies, in which we play an important part, and in an advisory capacity to some pan-European bodies.
I believe though that this compromise is a price worth paying for the trading benefits which our manufacturers will continue to enjoy, whilst Britain acquires the other rights I refer to above. This will not just benefit large companies like Jaguar Land Rover (JLR), Nissan and British Aerospace; it will benefit thousands of small and medium sized companies that supply these big employers, and we have countless such firms in the Black Country.
The political declaration sets out an agreement for ambitious arrangements for services, investment and data flows. This is crucial as, of course, Britain is a service driven economy. Estimates vary but manufacturing now only accounts for about 15% of total GDP. Whilst approximately 45% of our exports of manufactured goods go to EU countries 75% of our data flows in and out of the country are with other European countries so it was important to get confirmation that this will continue without cumbersome checks and bureaucracy.
Finally on the upside, and I do agree these are upsides, Britain will be leaving the Common Agricultural Policy and the Common Fisheries Policy. And the legal text also secured the rights of UK nationals living elsewhere in the EU, and EU citizens living in the UK.
The Withdrawal Agreement agrees the terms of a time-limited implementation period, during which businesses and other organisations will be able to make necessary adjustments to ways of working ready our final departure on December 31st 2020. Herein lies one of the most controversial aspects of the deal.
In the event that all the details of our future relationship are not ready by the beginning of 2021, the UK will either have requested an extension to the implementation period or we will enter a temporary customs union with the EU so as to avoid a border being established again between Northern Ireland and the Irish Republic. Such a border would run counter to the British-Irish Agreement.
The PM has been very clear that she does not wish to fall back on this facility (known as the ‘backstop’) and neither does the EU. The legal text of the Withdrawal Agreement binds both parties to us their “best endeavours” to get the future relationship in place by the end of December 2020.
There has been some misinformation put about regarding this aspect of the deal so it is worth spelling out the legal background to what is, for now, a hypothetical scenario. If we do have to use the facility of a temporary customs union, when both sides agree the future relationship is ready we will come out of the arrangement. If there is a disagreement about the future arrangement a special conference would be called to resolve the differences. In the event of the disagreement persisting the matter would go to independent arbitration. This is not unusual in the world of trade agreements and I am quite surprised that the EU agreed to independent arbitration, as such matters are usually be resolved by the European Court of Justice.
The likely alternative to this hard-won compromise – no deal at all – would, in my view, cause serious harm to our prosperity, especially in the short to medium term.
Having been a Minister at the Business department, and now in my role as Digital Minister, the conversations I have had with senior people across multiple sectors of our economy – from retail to technology – have been worrying. EU tariffs would immediately apply to our imports, like food and drink, of which we import over 70% from EU countries. Barclays has calculated that retailers will face on average a 27% tariff. That cost will largely be passed on to consumers. EU tariffs would also be immediately payable on our exports. As well as other things, that would mean more than 10% extra charged on food, and the same for clothes and some manufacturing, like cars. Furthermore, there are other non-tariff barriers that would cause problems to exporters.
We would also leave the EU’s legal framework completely, which would mean some of our products would no longer be accredited for sale across the EU. I think that would be likely to result in many smaller companies simply ceasing to export to the EU at all. This may all sound quite technical, but ultimately, it means jobs and growth would come under very serious pressure. Aside from the economic cost, it most certainly does nothing to solve the Irish border problem.
All things considered, it appears to me as if ground has been given on both sides. Indeed in at least two major areas I have mentioned – free trade and the Irish backstop – the EU has given away much more than I had expected. It is certainly a compromise, but one which delivers on the referendum whilst protecting jobs and the economy. I believe now it is our job as MPs to get behind the deal so that we can focus on the many other challenges we face and will continue to face in the future.