Good debate yesterday on the Taxation (Cross Border Trade) Bill in the House of Commons with excellent contributions especially by Ken Clarke, although our MP Nigel Adams disrespectfully sat through the former chancellor's speech tapping away on his phone and didn't appear to be listening at all. A pity, he might have learned something. Read the debate HERE.
However, I hope you'll forgive me if I dwell on a couple of small exchanges because I think it sums up a lot of the Brexit debate and in particular the confused mind of Sir Bernard Jenkin MP. Here he is (Column 83) during the debate;
I think the point that my right hon. Friend did not want to take is that there are plenty of businessmen who are in favour of leaving the European Union.
The point that I wanted to raise with my right hon. Friend is that her whole argument is passionately based on the fallacy that one cannot have just-in-time supply chains crossing international customs frontiers. In fact, that is the way that most of the rest of the world trades. At Toyota in her own constituency—I met Toyota last week—quite a substantial proportion of its componentry arrives from outside the European Union to be bolted on to its cars. She is putting up these completely false fears that just-in-time supply chains are threatened by trading across customs frontiers.
Anna Soubry
I have to say to my hon. Friend that that is absolute codswallop. When I went to Toyota, we were shown exactly the places where the parts had come from. For example, some parts had come from Japan. There was a special arrangement with Japan whereby the parts come into the factory and sit in a bonded warehouse. Those parts number less than 1% of the total. Toyota has 2.5 million parts coming into that factory, and the vast majority come from the European Union—it relies on frictionless trade.
Jenkin (Note he has to have a slightly different version of the name Jenkins to show how superior he is to ordinary people with the much more common surname) minimises the problem of adding cost, time and friction to the border and seems to think Mrs Soubry doesn't understand the difficulties for what is almost certainly the largest and most important employer in her own constituency.
Later in the debate, he then demonstrates again (Column 89) his capacity for bending the truth in an exchange with Chris Leslie:
Chris Leslie
[...] Let me quickly go into detail on why a customs union really will have to apply in this situation. There may be Conservative Members who agree with me on this point. The facilitated customs arrangement may well apply if we have a free trade agreement with the EU, but only a customs union gets rid of what is known as the rules of origin requirements—the local content thresholds needed to prove whether an FTA is in place to qualify for preferential tariff arrangements. Under a customs union, we do not have to have rules of origin checks. That is a massive advantage of the customs union.
Sir Bernard Jenkin
That is not actually correct. It is quite common in a free trade agreement to have what is known as an auto-pact, so that there can be frictionless arrangements, for example for the motor industry. The same could apply for aerospace.
You can Google Auto-Pact and quickly find that such a pact (HERE) was agreed between the USA and Canada in 1965 but was "abolished in 2001 after a WTO ruling declared it illegal".
You can find on line the 431 page WTO panel judgement dated 11th February 2000 (HERE), concerning the Auto-pact, which in the conclusions, inter alia, says:
Canada acts inconsistently with Article I:1 of the GATT 1994 by according the advantage of an import duty exemption to motor vehicles originating in certain countries, pursuant to the MVTO 1998 and the SROs, which advantage is not accorded immediately and unconditionally to like products originating in the territories of all other WTO Members.
The US/Canada Auto Pact, far from being "common" was in fact illegal. Reading further you can see the that Auto pact was effectively superseded when NAFTA came into being and rendered it irrelevant as well as illegal. Auto pacts, if they are anything at all, are forerunners of free trade agreements and don't help with Rules of Origin at all as far as I can see.
To me this is the most troublesome aspect of Brexit. Brexiteers keep pushing the fantasy that all will be well and we can leave the EU without serious damage to our economy. Blinkered by ideology and with hatred for anything that has European in the title they rush ever onward to the cliff edge. Let us hope one day they face the men whose jobs will be lost by Brexit.
