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Nadhim Zahawi portrait

Nadhim Zahawi is a member of the Foreign Affairs Select Committee and MP for Stratford On Avon.

During last week’s Budget, the Chancellor of the Exchequer announced £12 million of funding for a range of excellent causes that seek to help women. There was welcome funding for cancer charities and anti-domestic violence campaigns, but where did it come from?

The money came from the Tampon Tax Fund – set up to collect the five per cent VAT charge on tampons that campaigners have seen as an example of misogyny within the tax system. George Osborne listened and signalled that that the Treasury does not wish to profit from taxes on tampons by creating a fund to benefit worthy causes instead.
But the Government shares the desire of campaigners for it to be removed entirely. David Gauke, the Financial Secretary to the Treasury, committed to making the case to the European Commission that tampons should be zero-rated last year.

The European Commission has now apparently listened – but the recommendation will still have to pass through the European Parliament, and could still be stopped or delayed. So months after the Government agreed that tampons should be subject to no VAT, the European Commission – the unelected, unaccountable Commission – might decide to allow us to do it if the European Parliament agrees.

But we must remember this is not a huge change. We are not ripping up huge parts of our tax system. We are not undermining the single market or competitiveness in the European Union. We’d simply like to be able to change the rate of tax on tampons from five per cent to nought per cent, but the Commission gets to make the decision, and they get to delay it by months and years, only moving with any sort of speed when threatened by the loss of £350 million a week from the UK.

Many constituents asked me to tell the Government to cut the tax on tampons. When I responded saying the Government would put the case to the Commission, my constituents were disappointed. And, frankly, they were quite right. One asked: what’s the point of having MPs if they can’t make this sort of decision?

We often hear that we must sacrifice accountability and sovereignty because it’s necessary to regulate the terms of the single market, and that this in turn will protect jobs. But what efforts does the EU really make to protect jobs?
A stark contrast has been visible in recent weeks in the responses by various countries to clear and obvious dumping of steel onto world markets by China. Every steel operator on the planet was suffering from the subsequent crash in prices, and factories closed around the world.

The price drop was on such a scale that, if as some suggested, the Government had just provided direct funding for plants, it would still have been ineffective – action could only be taken on the supply itself.

The European Union took the step of imposing a tariff on Chinese steel imports in January, at a rate between 9.2 per cent and 13 per cent. The USA too decided that China had gone too far, and also took the step of imposing a tariff. The tariff that the US Department of Commerce imposed was 265.79 per cent.

The EU tariff, almost 30 times lower than the USA, was chosen because under its own anti-dumping directive, they apply the ‘Lesser Duty Rule’. This means that the lower of either the dumping margin or the amount of duty required to eliminate injury is applied.

As Axel Eggert, the Director General of the European Steel Association said: “The high preliminary tariff set by the US demonstrates that the administration takes seriously the need to re-establish a level playing field for its domestic steel industry. In contrast to the US, the EU continues to apply the Lesser Duty Rule (LDR) in its anti-dumping methodology. This cuts down the applicable anti-dumping tariff to a level that does not even address the injury to the industry, let alone actually deter dumping”.

America can take greater steps to deter Chinese dumping because although the lesser duty rule has been described as ‘desirable’ by the World Trade Organisation, it is not a requirement. Frustratingly, the Government agrees that EU tariffs are too low. In a debate on the 29th February, Sajid Javid, the Business Secretary said:

‘The Honourable Gentleman is right that it is suggested that tariffs should be higher to right the detriment. We agree; that is what our analysis shows. That is exactly what we are pushing with the EU Commission, as I did only last week when I met the Trade Commissioner while she was in London’.

It is wrong that when our most senior Cabinet Ministers identify a problem, and identify a solution, their only course of action is to ask the European Commission.

We have always been a trading nation, and we always will be. The British Government will always favour lower tariffs and freer trade; however, the reciprocal responsibility to free trade is that you do not act in an unfair manner. When this happens, we must be able to stand up for ourselves, as America has done, and we must be able to make these decisions quickly.

If my constituents disagree with me or the Government I support, then they can replace me with someone they do agree with.  But when my constituents ask me to cut the tampon tax or to do more to protect the steel industry, my answer, as their Member of Parliament, is that the Government would like to, but will have to ask the Commission. A European Commission that they did not choose, that they cannot influence, that they cannot throw out, and that mostly moves with less dynamism than a particularly weary snail.

Our Government must be in control of the rules that effects the lives and jobs of our voters, so that they can decide whether we’re managing them correctly and decide whether to vote us out.

If a Government free from Europe chose to keep the tampon tax, or to keep low tariffs on Chinese steel, then that would be their choice. They could put that case forward to the people, and they would live or die by what voters thought of their decision.

This is a simple but absolute requirement of democracy. Our only option to cast off these shackles and take back control is to vote to leave in June, and that is what we must do.

27 comments for: Nadhim Zahawi: Tampon taxes, steel dumping – and why the time has come to leave the EU

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