Response from Margot James to the draft Withdrawal Agreement between the UK Government and the European Union
19th November 2018
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.
My position on the ‘Meaningful Vote’
15th January 2019
I continue to receive a steady flow of emails and other forms of contact about Brexit. Although I have already set out my position on the PM’s deal, which you can read on my website, I wanted to update constituents about the current situation regarding the meaningful vote being held in Parliament later today.
I shall, as promised, support the deal and the Government in all votes today. I took the decision to vote in Parliament in favour of leaving the EU, against my own judgement that Britain is better off in the EU, in December 2016, in response to the fact that two thirds of my constituents voted to leave in the Referendum. In supporting the deal today, I am following through on that commitment.
The deal is a compromise, but it does enable us to leave the EU whilst protecting our economy and people’s jobs. And importantly, the deal is supported by the majority of employers, many of whom, like the majority of Trade Unions, would prefer to remain in the EU and not leave at all.
Should the deal not be passed today I will continue to support efforts to find a deal between the UK and the EU, upon which Parliament can agree, and which will provide the basis for our leaving the EU on March 29th this year. A revised deal might take various forms, some of which cannot necessarily be anticipated even at this late stage.
There may be scope for the PM to obtain further concessions from the EU. However, the EU have been pretty clear that although they might give more assurances and clarifications, they are not prepared to reopen the negotiations that underpinned the agreement they signed before Christmas. Neither are they prepared to let Ireland, a small member state, down in order to pacify a large member state, the UK, which has decided to leave.
Some MPs in both the main parties are pushing the idea that the UK should instead try to negotiate a similar arrangement to that which Norway and other non-member states have with the EU. My view is that the PM’s deal provides a solution that respects the result of the referendum more fully than the Norway model.
Parliament needs to support this deal today in order to honour the wishes of the majority as expressed in the referendum, in a way which respects the views of the large minority who voted to remain. I hope the deal will pass because if it, or something similar fails to get the support of Parliament then the consequence might be our departure at the end of March with no deal, or an extension of Article 50 and preparations for a referendum.
Both these remaining options are undesirable, very much so, and I will do all I can to work with other MPs of like mind to make sure we don’t end up in either situation. Ultimately, however, I will never be a party to the UK leaving the EU without any deal whatsoever.
Boris Johnson’s claim the EU will offer us better terms than the PM’s deal is a gross exaggeration (written for Huffington Post)
19th January 2019
Boris Johnson set out the path to leaving the EU with no deal in his speech at JCB on Friday. He dismissed warnings about the impact of a no-deal Brexit, and said it was “overwhelmingly likely” that Brussels will offer better terms, ie the UK to have the right to decide unilaterally to leave the backstop. Finally, he proposed that we up the ante by threatening to withhold half of the £39billion agreed as the divorce payment until the terms of a deal are met to our satisfaction.
MPs that represent manufacturers know how worried these companies are about the possibility of no-deal. With complex supply chains involving components manufactured across Europe and “just in time” manufacturing meaning that some manufacturers have as little as two hours worth of components on site at any one time, companies large and small are united in condemning the prospect of leaving the EU without a deal. They are supported in their view by all the bodies that represent both businesses and workers.
Most of the attention being paid to the prospect of leaving without a deal has been on the short-term consequences; I am equally concerned about the long term. Global companies, with manufacturing facilities across Europe and beyond, will look less favourably on the UK as the destination for the manufacture of their next model – or a new model altogether – if we leave the EU without access to the single market having been negotiated. The effects of these decisions will not be felt for a few years; but they are likely to have a significant and damaging effect on our economy for years to come.
Boris’s statement that it is “overwhelmingly likely” that Brussels will offer better terms is a gross exaggeration. A change as significant as the right of the UK to come out of the backstop (assuming we had to enter it in the first place) unilaterally, would require the re-opening of the Withdrawal Agreement (WA) that has been signed off by all 27 member states. The EU have been very clear that they are not prepared to do this. Even if they were to change their mind would we want to take the risk that re-opening of that negotiation would give to those member states who think the terms of that WA are too favourable to us to demand changes (eg. Spain and France with reference to Gibraltar and fishing rights, respectively)?
I support the PM in her efforts to get improvements, or clarifications at least, to the operation of the backstop in a bid to make her deal more palatable to some of the more than 200 MPs who voted against it, but whatever she is able to achieve it might not be enough to satisfy Boris and some of his followers. So the time is fast approaching for the government to consider alternative options, which might include measures that complement the PM’s deal.
A ‘common market’ trading relationship, control of our borders, an end to payments in to the EU budget (apart from subscriptions to give us affiliate status to the many bodies that oversea EU wide initiatives and regulations), an end to the jurisdiction of the European Court of Justice and exit from the common agricultural and fishing policies – all underpinned by our leaving the EU institutions would constitute a real Brexit while protecting our trade, jobs and the wider economy.
The impact of a common market solution on an independent trade policy is an obstacle which I accept might be too much for a number of those who voted the PM’s deal down last week. However it is worth assessing the need for an independent trade policy objectively. Trade agreements are important and none more so than the one we already have, effectively, with the EU. (The single market being a lot more than a trade agreement).
Between 45% and 50% of all British exports are still destined for Europe; and a further 11% go to third countries with whom the EU has a Free Trade Agreement (FTA).
Trade deals are very difficult to negotiate and the negotiations usually take many years. Most countries, and all the big markets without exception, set challenging conditions. Countries like Brazil insist on a complex system of tariffs, quotas and the employment of local labour as part of any trade arrangement.
Britain’s largest single export market is the USA, with whom we have no trade deal but a good trading relationship. No doubt a good trade deal with the USA would grow the potential for exporters but it is likely to take many years to negotiate. A few years ago when the abortive negotiations between the EU and the US were underway, MPs received vast amounts of mail from constituents concerned about the negotiations. Some of it was misinformed – for example there was never any threat to the NHS – however, much of it was genuine and centred on America’s very different regulations governing processed food and intensive farming methods, many of which fall below Britain’s animal welfare standards. It will not be easy to conclude an agreement, which would be acceptable to the British public, involving these sort of issues.
Britain has had a negative trade balance for manufactured goods for many years and for many reasons. The fact that we sell less to so many of the growth markets in the world than do Germany, France and even Italy cannot be explained by a lack of trade deals. The success of German exports to China alone attests to the importance of factors, other than trade deals, in the winning of international business. Hence the negotiation of trade deals by the UK as part of an independent trade policy will not be a panacea. The fact is that global competition among exporters to the high growth markets of the world is very intense indeed, and no trade deal can mask the extent of that challenge to UK exporters.
There is also a mountain of evidence that most companies export more to markets close to home, and indeed global trade is growing faster between countries in the same region than average growth in trade across the world. So it is all the more important to protect our access to the EU single market at all costs.
Finally, I know the threat to withhold half the monies we have agreed if we don’t like the terms of the deal would be popular among some colleagues and parts of the electorate. However, it is worth remembering that the figure we accepted was based on spending commitments that were agreed by EU member states including the UK. The principles that underpinned the amount were that no EU member state should have to pay more or receive less because of the UK’s withdrawal from the EU; that the UK should pay its share of the commitments made during the period of its membership and that the UK should neither pay more, nor earlier, than if it had remained a member state. It would be wholly dishonourable to renege on a negotiated settlement to which we agreed over a year ago because we haven’t got all we want out of the negotiations to date.