EU Tariffs: United States and Northern Ireland Economy

12:50:00

(Urgent Question): To ask the Secretary of State for Northern Ireland if he will update the House on the likely impact on the Northern Irish economy of EU tariffs on the US.

I am grateful to the hon. Gentleman for his question. As the Prime Minister has said, tariffs are not good news for anyone and no one wants a trade war. The Government are doing everything possible to keep Britain secure during this new era of global instability, and we will always act in the best interests of businesses in Northern Ireland. As part of our customs territory and internal market, Northern Ireland exporters are facing a general 10% US tariff and a 25% tariff on steel, aluminium and cars, like other exporters across the United Kingdom. Northern Ireland is not therefore uniquely disadvantaged. We are, of course, preparing for the EU’s next move and any possible retaliatory tariffs that it may or may not introduce, as well as considering the impact that new EU tariffs would have on Northern Ireland businesses importing from the United States of America, because under the Windsor framework, the EU tariff would apply. As hon. Members will know, however, because of the Windsor framework, businesses can reclaim any such tariff through the existing duty reimbursement scheme in cases where US imports into Northern Ireland do not then enter the European Union. The customs duty waiver scheme also allows duties to be waived entirely, subject to an overall limit. These schemes work in our national interest, and His Majesty’s Revenue and Customs is continuing to talk to and support any businesses that might be affected, to help them understand how to use the duty reimbursement and customs duty waiver schemes. The Minister for the Cabinet Office has talked about all this with EU counterparts in recent days, because the Government are fully aware of how sensitive this issue is for businesses in Northern Ireland. What we need in these circumstances is a calm and considered response, and that is what the Government will continue to provide.

I call the shadow Secretary of State.

Thank you very much, Mr Speaker, for granting this urgent question. It is incredibly important that this House has the opportunity to question the Government on this issue before the Easter break and before the implementation of these tariffs. I have enormous respect for my opposite numbers in the Northern Ireland Office, but it is totally unacceptable that we should have got to this stage in proceedings without a Minister coming to the House to update us on the likely impact on businesses in Northern Ireland of this emerging tariff war between the US and the EU. As the House will know, this comes off the back of the considerable damage done to the economy in Northern Ireland by the Budget last year, by the increases in national insurance contributions and by the changes to the national minimum wage, which have completely undermined business confidence and which are driving unemployment in the region. I ask the right hon. Gentleman to answer the following three questions. First, a week on from the United States’ announcement and some time after the EU’s publication of a 99-page draft of its tariff responses, have the Government now done an impact assessment of what this means for the Northern Irish economy and for businesses in Northern Ireland, and will he publish it? Secondly, he rightly mentions the duty reimbursement scheme, which would allow businesses taking goods from Great Britain to Northern Ireland and having to pay the EU tariff to reclaim that tariff. That scheme is now going to be put under enormous pressure. It is going to have to deal with volumes not foreseen when it was originally put together. Does the Secretary of State have complete confidence that it will be able to reimburse businesses in a timely fashion so as not to disrupt trade? Thirdly and finally, because Northern Ireland remains within the EU customs code, affected Northern Ireland businesses buying affected goods will have to pay EU tariffs, but the same competitive businesses in GB will not. What are the Government going to do to ensure that such businesses are not left disadvantaged, and that we do not see serious distortions of trade? With that in mind, will the Secretary of State confirm to the House that in the event that we see a major diversion of trade, his Government will be prepared to use article 16 of the Windsor framework, which allows the Government to take decisions to ensure that businesses in Northern Ireland are not damaged? It is incredibly important that businesses hear from the Secretary of State that the Government are prepared to protect them in the event that this tariff war creates a diversion of trade for business there.

I am grateful to the hon. Gentleman for his questions. I am slightly surprised by his initial comment, because of course we touched on this matter in Northern Ireland oral questions—

Only because I raised it.

Indeed, but we touched on this matter in Northern Ireland orals last week, and the Business Secretary made a statement to the House last week. To answer the hon. Gentleman’s questions, of course the Government have been preparing for and looking at all eventualities, but until we know what the EU retaliatory tariffs are, it does not make much sense to publish speculation about their potential impact. On the duty reimbursement scheme, I have met HMRC officials, because I agree with the hon. Gentleman that it is important that the scheme works effectively, depending on the number of Northern Ireland businesses that are affected, to reimburse tariffs. I would just say, however, that Northern Ireland imports about £800 million-worth of goods from the United States of America, which is about 2% of Northern Ireland’s total purchases. That impacts upon his third question. We are going to have to take this a stage at a time. The Prime Minister has made it quite clear that he will do what is in the national interest to protect our businesses, our companies and our economic future, but it is precisely because of the Windsor framework that the duty reimbursement scheme exists.

I call the Chair of the Select Committee.

The EU is currently consulting its member states on the goods that it may target in response to the US tariffs. The Secretary of State has spoken about there being no need to make an assessment yet, but in advance of the EU imposing retaliatory measures, has he made any assessment at all, if there is any point? Is he engaging with the European Commission to ensure that the interests of Northern Ireland businesses and consumers are fully taken into account in determining how the EU responds to the US tariffs?

As I indicated in answer to the Opposition spokesperson, of course the Government have been preparing for all eventualities, but as I also indicated, there is no point in publishing something that is not based on the actual tariffs that the EU decides to impose. Therefore, it is sensible to wait until that moment arrives. Secondly, the EU will take such action as it determines to be in its interests in response to the 20% tariffs that the United States of America has imposed on the EU in addition to the tariffs on steel, aluminium and cars. Let us not forget that the Windsor framework gives Northern Ireland businesses unique access to the European market, which is not something that is enjoyed by businesses in Great Britain.

I call the Liberal Democrat spokesperson.

As the Financial Times reported at the weekend—and as I think the Secretary of State has just confirmed—in the event of EU retaliatory tariffs, goods imported from the United States into Northern Ireland will by default be effectively forced down the red lane. That, of course, means additional customs checks, time and red tape and, in the event of their imposition, EU tariff rates for goods coming into Northern Ireland, irrespective of their ultimate destination. That risks a scenario where Northern Ireland importers are penalised more than almost any other businesses in either the UK or the EU, first at the border and then in administering the reclamation of those costs. Let us be clear: this chaotic situation is entirely the consequence of Donald Trump’s destructive trade war. What are the Government doing to ensure that President Trump and the US Administration are alert to the deeply destabilising effects of their tariffs policy on the Good Friday agreement and the prospect of peace in Northern Ireland? What active steps are the Government taking to mitigate the potential disruption to Northern Ireland businesses that are now unwittingly caught up in Donald Trump’s trade war?

The single most important thing we can do for those businesses in Northern Ireland is, as I indicated a moment ago, to ensure that the duty reimbursement scheme works speedily and effectively—provided that those businesses can demonstrate that their goods are not moving into the European Union, for the obvious reason that otherwise Northern Ireland would become a back door for goods seeking to avoid the retaliatory tariffs. The Government will take all necessary steps to protect British businesses in the very difficult circumstances that we are facing, including by continuing to seek to negotiate an economic deal with the United States of America, which we have been engaged in for weeks now. What comes out of that remains to be seen, but it is part of the Government’s calm and considered approach.

The complexity of trade relationships on the island of Ireland is a result of Brexit. Working north-south is as important as working east-west. Does the Secretary of State agree that strengthening relationships not just with the European Union but with the Republic of Ireland Government can put Northern Ireland into a pivotal position to navigate this new uncertainty?

We are all having to navigate this new uncertainty as a result of the decision that the US Administration have made. It is certainly true that leaving the European Union has created new complexities. The reason why there is a Windsor framework is that there are two entities—the United Kingdom and the European Union—with different trading rules but an open border, and some method therefore had to be found to deal with the consequence of that. As I have said to the House before, trying to wish away that basic fact has not really worked.

It is important that we keep cool heads. There will be attempts, subsequent to my question, to relitigate the Brexit wars. The fact of the matter is that the 2019 Brexit deal and the Windsor framework give Northern Ireland a unique competitive advantage: 10% exports and access to the single market. Will the Secretary of State consider a rapid automatic reimbursement scheme, as the shadow Secretary of State alluded to? That scheme is at the centre of easing tensions should there be retaliation on the EU side.

The right hon. Gentleman is absolutely right about the benefits that the Windsor framework has given businesses in Northern Ireland in terms of access to the EU market. I would just say to him that, in the event of EU retaliatory tariffs, “rapid automatic” does not quite square with the needs of businesses in Northern Ireland that import American goods, because they have to demonstrate that those goods are not then moving on to the European Union. That requires them to provide evidence to HMRC in order to get the tariff reimbursed.

I thank the Secretary of State for his initial response to the urgent question. Of course, this situation is a reminder that the people of Northern Ireland were absolutely right to oppose Brexit in that referendum. I am really disappointed that the shadow Secretary of State started his supplementary question by complaining about the lowest-paid workers in Northern Ireland getting a pay rise—absolutely incredible. The Secretary of State touched on the trade negotiations between the UK and the United States. Can he reassure us that the situation in Northern Ireland is absolutely at the heart of those negotiations?

I am very happy to assure my hon. Friend that the interests of all parts of the United Kingdom, including Northern Ireland, are uppermost in the minds of all Ministers in trying to deal with the situation we now find ourselves in.

The Secretary of State says that the EU will take action on tariffs in its best interests, but businesses in Northern Ireland expect the Government to take action in the best interests of the United Kingdom—including Northern Ireland, which is part of the United Kingdom. He talks about how this can all be resolved by the reimbursement scheme. The fact of the matter is that the reimbursement scheme has failed. Businesses have to produce masses of information, and there are delays in payments—some businesses have to wait for hundreds of thousands of pounds to be reimbursed in taxes. That is not the answer. Surely, the answer is for the UK to collect the taxes that we impose on American goods and leave the EU to collect the taxes that it imposes.

What the right hon. Gentleman proposes ignores the reality that faces Northern Ireland as a result of the United Kingdom’s decision to leave the European Union, and the fact that there was a problem that had to be solved. The duty reimbursement scheme owes its existence to the Windsor framework. It is important, as I have said to the House, that the scheme works effectively, but businesses do need to provide information to demonstrate that the goods have not subsequently moved into the European Union, for reasons that I think he understands.

I am particularly concerned about the cash flow of small businesses in Northern Ireland in the event that the EU increases its tariffs. In his discussions with HMRC, has the Secretary of State established what the average waiting time is for the duty reimbursement scheme to kick in? Is there any prospect of shortening that time if the amount of money out of the door increases in the event of EU tariffs?

The hon. Gentleman raises an important point for businesses in Northern Ireland. As he would expect, I have had precisely that discussion with HMRC. The honest answer to the question of how long it takes is that it depends on how quickly businesses provide the necessary information to demonstrate that goods have remained in the United Kingdom and have not moved to the EU. Once that information is provided, the scheme should work effectively. It may help him if I point out that the customs duty waiver scheme—a separate scheme—allows up to €300,000 per company over a three-year rolling average, which will obviously benefit small businesses. If they come within that heading, they do not have to pay the tariff up front.

Sadly, I have heard nothing today that will give businesses in my constituency any reassurance that the UK Government are prepared to protect them. I recognise that it is not good practice to comment on speculation, but it is and would be good practice to leave businesses in no doubt that the Government—their Government, to whom they pay hefty taxes—will protect them from EU tariffs. We cannot be left in a scenario where businesses are reliant on a duty reimbursement scheme that does not work—it takes months to get repayments. Will the Secretary of State give more clarity to businesses in Upper Bann that he will protect them?

I have done my level best to set out the situation. We all understand the reasons. Northern Ireland gains from the Windsor framework because of its access—[Interruption.] Well, it does gain from access to the EU market that other parts of the United Kingdom do not enjoy. But there is a consequence, which is what we are discussing in relation to the imposition of tariffs by the United States of America. That is a decision that the US Administration have taken, and we all have to deal with the consequences. HMRC has of course already been talking to businesses that might be affected to ensure that they understand how the tariff reimbursement scheme and the customs duty waiver scheme work.

The Government’s advice to Northern Ireland businesses seems to be, “Keep calm and carry on.” Well, that creates an awful lot of uncertainty for small and medium-sized enterprises in Northern Ireland. Will the Secretary of State put a little more meat on the bone in relation to what the Government are doing? As he said, the EU will take action in its interests, but that action may not be in the interests of Northern Ireland businesses or consumers. What will the Government do?

In the circumstances in which this country and many countries around the world find themselves, we are having this discussion because of a decision that the United States Administration have taken. We do not control that. What we do have to seek to control is our response to it. I have tried to lay out for the House today what the position is and what is available to support businesses that may be affected by the EU tariffs, once we understand what those are. We will see how extensive they may or may not be, and then businesses will start to work out for themselves what is the consequence and how we can use the mechanism of the reimbursement scheme in the Windsor framework to get back the money that they have to pay in a tariff.

Businesses require clarity and certainty. Will the Secretary of State undertake to come back to the House as soon as we have that clarity and certainty? Will he ensure that the EU understands that the open border he keeps talking about is an unclosable border and tries to give businesses more certainty so that they can develop in the future?

Notwithstanding what we have been discussing today, Northern Ireland imports about £800 million-worth of goods from the United States of America, which is about 2% of the total purchases made by Northern Ireland. The rest—98% of the purchases—is unaffected by any EU retaliatory tariffs relating to goods brought into Northern Ireland. As I travel round Northern Ireland, I see that there are great business opportunities and lots of investment coming in. As I said to the House last week, Northern Ireland has a higher rate of growth than the UK as a whole and the lowest unemployment.

As Secretary of State for Northern Ireland, is the right hon. Gentleman not embarrassed that he and his Government have no control over the tariffs in respect of goods imported into Northern Ireland? Is the obvious and inevitable answer not to repatriate to the United Kingdom control over trade laws? What happens if Northern Ireland is used as a conduit by the Republic of Ireland or the EU to export goods to the US? Who checks those goods and where?

As I think I have said to the hon. and learned Gentleman before, I would not have started from here myself in relation to the cause that led eventually to the negotiation of the Windsor framework, which was a huge improvement on the Northern Ireland protocol. We do not control the decisions that the United States Administration have taken. What we have to do is make sure that we stand with businesses, including in Northern Ireland, to provide them with support, and a mechanism that allows them to reclaim the tariff is the most practical step we can take. It is already in place because of the Windsor framework.

The Secretary of State has outlined the case, but I am afraid he has not given any answers, and that is disappointing. The promise was made to Northern Ireland MPs that we would not be disadvantaged by any EU retentions. That is clearly not to be the case, and Government need to address that directly. Will the Secretary of State set out when discussions to extricate Northern Ireland from EU rules will begin and when we can expect to see our interests looked after, as was promised by both the Prime Minister and the Secretary of State? I was here last week when we got those promises, but today, unfortunately, we do not.

The situation that Northern Ireland businesses may find themselves in if there are EU retaliatory tariffs is a product of the Windsor framework, which gives benefits to businesses in Northern Ireland as well as requiring the payment of the tariffs that can be claimed back. The single most important reason for sticking with the implementation of the Windsor framework is that we want to negotiate closer economic relationships with the European Union, including a sanitary and phytosanitary and a veterinary agreement. Members from Northern Ireland have on many occasions raised the consequences of the current arrangement. Things could be a lot easier if we get that agreement, but as I have pointed out to the House many times before, if we do not honour the last agreement that the United Kingdom as a country signed under the last Government with the European Union, how exactly do we expect to get a new agreement—in particular an SPS and veterinary agreement, which would help many businesses in the movement of goods across the Irish sea?