22nd May 2019
Rt Hon Theresa May MP
10 Downing Street
London SW1A 2AA
Customs arrangements and ceramics
Dear Prime Minister
Last week 14 Conservative MPs signed a letter to you explaining why they didn’t want a customs union. They said they were concerned about a democratic deficit. Ceramics was mentioned in this letter and it is important that on behalf of the sector some myths are dispelled.
The reality of the UK having its independent trade policy has been really concerning for our sector so far. It’s not been ‘vote leave and take back control’.
The first example of the democratic deficit here was Government wanting zero import tariffs in the event of a no deal Brexit. We took a very strong stand against the proposal. Zero tariffs give a leg up to foreign competitors, swamping our home market while our manufacturers would still be paying other countries’ import tariffs including, in the event of no deal, EU Most Favoured Nation tariffs and other countries’ Most Favoured Nation tariffs, where we will have just lost our preferential access. This will have an adverse effect on balance of payments and threatens British manufacturing jobs. It also weakens the UK’s hand making free trade deals: if we give away access to Britain for free, why would anyone do a trade deal with us?
There was no comprehensive formal consultation, no comprehensive impact assessment and no prolonged transition proposed. Such a significant decision has far-reaching consequences for the UK economy and demanded full parliamentary scrutiny.
Government has now agreed to maintain current import tariffs on tiles and some ceramic tableware product lines where anti-dumping tariffs are also in place. However, all other products in our sector would have zero import tariffs for 12 months initially. Coupled with cash flow pressures from a no deal Brexit, many businesses could struggle to stay afloat.
The second example of a democratic deficit is on trade remedies.
Trade remedies are needed when overseas manufacturers don’t play by the rules, there are import surges, or we need to deal with the fallout from trade wars. The MPs say in their letter about trade remedies “it would even be possible for Brussels to make a decision that was actually harmful for the UK.” This is ironic, as it was the UK Government that resisted the implementation of anti-dumping duties for ceramic tiles in 2011 and abstained when the EU took action on tableware in 2013. Moreover, within the last couple of months, the EU has initiated an investigation to take strong action against Chinese tableware companies who circumvent duties. We are not yet sure whether the UK Government will vote in favour of a renewal continuing tableware anti-dumping tariffs despite the overwhelming supportive evidence in the European Commission’s disclosure last month. Current EU anti-dumping measures cover almost 6,000 UK manufacturing jobs in our sector and support 2,500 jobs in UK materials suppliers to our industry. This is in addition to many thousands of indirect jobs.
In contrast, when Greg Hands, one of the signatories to the letter, was Trade Minister he proposed the formation of a new UK remedies system which would have been far less supportive of manufacturers than the EU equivalent. That the UK rules are workable for manufacturers at all is down to an alliance of eight manufacturing trade associations, three unions and the TUC that I chair, the Manufacturing Trade Remedies Alliance (MTRA). We bridged political divides and succeeded, with Government improving the Taxation Act. But much of the detail is in secondary legislation and guidance. Statutory instruments were laid before the house and came into law the next day. Even the SIs continuing the import ban on cat and dog fur had more parliamentary scrutiny. Further important details will be in statutory guidance which has not yet been published. This lack of scrutiny in the UK contrasts strongly with the effective role that MEPs played in recently amending the EU legislation.
Our position on customs arrangements
A no deal must be avoided. It is extremely damaging for our sector. Not only are there the problems above on tariffs and trade remedies, but there are major challenges around managing a surge in import and export customs declarations, a crash in consumer and customer confidence at home and abroad and cash flow problems associated with money tied up in stocks of raw materials and finished goods.
Our Confederation’s board has discussed Brexit extensively in the last four years. We supported your deal because it was the only option available in November. However, if a Parliamentary consensus were able to coalesce around a permanent customs arrangement this is something our board would strongly support, and for that matter a framework that doesn’t fall behind the EU in workers’ rights or protections for the environment.
We know a customs union isn’t perfect. However, it provides more frictionless and closer trade with the EU where 57% of our members’ exports are sent. And in Northern Ireland – a customs union or arrangement can only help. A customs union, by definition, has a common external tariff on goods. So we must ask in our bespoke customs arrangement, for retention of our current EU trade agreements. We also need to ask for dynamic alignment with future agreements but be realistic in how much power we will have here in leaving the EU.
We know many Conservatives want an independent trade policy. However, the reality is for a no deal Brexit there are now only 10 continuity trade deals. Missing for our members are South Korea (our 3rd largest export market), Japan (4th), Canada (8th). And in a no deal Brexit we’ll have much less to negotiate with – zero import tariffs.
Use of our industry to try and nudge you, the Cabinet and the Commons away from a Customs Union option is disingenuous to say the least, particularly when a no deal Brexit and independent trade policy has already shown such a horrendous democratic deficit for our sector. It’s this sort of proliferation of rhetoric that is fuelling the current political crisis and threatening to drive the UK economy off a cliff edge.
We need MPs of all parties to put aside their narrow ideological and party differences. They need to work together at this time of national crisis for the good of the country to find a consensus. This requires give and take by everyone, and we appreciate your moves towards this in your speech yesterday. Jobs, businesses and investment are at stake.
Dr Laura Cohen MBE, Chief Executive