EU Tariffs: United States and Northern Ireland Economy

(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.