As the Committee considered a customs union and our post-Brexit trading relationship, I highlighted that the problem with customs Union without the Single Market is that it wouldn’t deliver free movement of trucks! Border checks can result in 30 hour queues! Turkey used up it’s Austrian permits early, so for 10 days in February it put lorries on trains via Slovenia at a cost of €1,000 each!
Stephen Kinnock: I had a question to follow up on what Pat McFadden was asking earlier about the free movement of lorries. This is the issue around trucks, particularly at the Turkey Bulgaria border. It seems to be the case that a customs union or a form of customs union delivers free movement of goods to a large extent, but it does not deliver the free movement of trucks. It seems that the main issue there is around free movement of people and free movement of labour. You cannot have the free movement of trucks if you do not have the free movement of people; by definition, they are driven by people.
My understanding is that you have a certain number of transport permits there. The only countries the EU has open access road transport deals with are the European Economic Area countries. Can you say a bit more about how this issue of road transport would work if the UK were to leave the European Economic Area?
Dr Artiran: At least from the experience of Turkey, you need to negotiate independently with the members of the European Union. For instance, take the case of Bulgaria or Romania. Turkish trucks have also had problems with Romania. These quotas or permits that you mentioned are the living examples of the problem. Basically, a Turkish lorry that starts its trip in Istanbul goes through Bulgaria and Austria, which had the same issue. You need to negotiate with the country how much quota or how many licences or permits a day they will provide to you. For the other countries in the EEA, yes, there is the potential, but you are not going directly to the EEA countries; you have to pass through the border. Therefore, as it stands, that is a bleeding problem. After the decision of the European Court of Justice, we are hoping that things may improve. This way, you can have some say over the independent member states because there is a court judgment, but as it stands I cannot offer you a perfect solution. To that extent, this policy will be in the hands of the independent member states.
Stephen Kinnock: If the UK were to leave the European Union and have a standalone customs union and not an EEA style relationship, we would then have to negotiate quotas with each one of the member states on whether or not our trucks can go through those countries.
Dr Artiran: Perhaps we should not generalise that much, because after all you are dealing with 27 countries. In Turkey’s experience, we have problems only with two or three countries. It is not to say that every country will create the same problem. It will depend on to whom you are shipping your products and on what kinds of arrangements you have. I cannot speak for France or Belgium. It truly depends on their policy regarding road transportation.
Stephen Kinnock: I have one final question on this issue of the difference between goods and services eliding. Back in September, Michel Barnier described the single market for goods and services as an ecosystem that has grown over decades. “You cannot play with it by picking pieces. There is another reason why I strongly oppose” the Chequers proposal. “There are services in every product. In your mobile phone, for example, it is 20% to 40% of the total value”. This question is to anyone on the panel who would like to address it. Would you agree with Monsieur Barnier’s comments there that a customs union without a single market is not really worth the paper it is written on?
Sam Lowe: No, I do not agree, because it still has benefits. All free trade agreements in essence split services and goods, insofar as they do not do very much on services and they do quite a lot on goods. Switzerland is in the single market for goods, effectively, and not the single market for services.
The general point about how services and goods are intertwining is absolutely right. If you think about UK goods exports, it has been estimated that about £50 billion of the value of our goods exports is actually made up of services inputs to them. That is quite significant. It is around the same as financial services exports, so it matters. What are the consequences for the EU of, say, a customs union when it comes to the services value added in goods? For example, there could be a Rolls Royce contract whereby they lease the engine and it comes with a contract to monitor and maintain it. On the services issue, we could still provide the engine from the UK, but the legal contract would probably have to be signed in the EU, with the person who maintains and monitors it established in the EU.
In a sense, on the services side at least, it would benefit the EU insofar as that economic activity would have to be located there. Does it make it less beneficial for the UK to have a customs union without everything else? Of course, yes. We are talking about degrees of disalignment. How do you ensure there is no or very little negative economic impact? You stay as close to what we have now as possible. The further you go away from that—a customs union is on the FTA end of the spectrum; it is not on the single market end of the spectrum—the more damage you have.
David Henig: The general problem with trade agreements at the moment anyway is that they are falling a little bit behind the nature of the modern economy and the intertwining of services and goods. What do you do with data? If you talk to the car industry, for example, at the moment, yes, they are worried about trade, but they are also worried about who owns all the data in the car. There are so many questions that we are all still trying to get to grips with. There are conversations other than Brexit going on in some industries that are just about managing.
Dr Lea: If a mobile phone is made with stuff from services, it will be defined as a good. If you look in the Standard Industrial Classification, it will be defined as a good.