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A customs union does not make it alright
21 Feb, 2018

Brexit would still mean Brexit

London4Europe Committee member and former HM Treasury Senior Civil Servant Michael Romberg looks at proposals for the UK to be in a Customs Union with the EU after Brexit. That would not solve the Irish Border or other economic problems. But it risks spreading complacency amongst Remainers.

Proposals under consideration

There are several proposals for the UK to stay in a customs union with the EU.

The Government is rumoured to be considering whether to enter a customs union with the EU on goods only. It is not clear whether agriculture and food would be covered. A customs union would reduce friction at the border. It would also allow the UK freedom to strike trade deals on services. However, as trade deals do not do much for services that would be breaking new ground, especially as we would not have anything to offer on goods as a balancing concession.

Labour MP Chris Leslie - a former shadow chancellor – and Green MEP Molly Scott Cato argue that Labour should take a stand on shaping Brexit and push for the UK to match the whole of the EU Customs Union. Chris Leslie is certainly right that Labour’s ambiguity and passivity is damaging party and country: “A sheepish silence in the hope that Brexit will just pass us by will not work any longer”.

Meanwhile Conservative Anna Soubry MP goes further, arguing for Norway Plus. That is, we would not only stay in the Single Market but also in the Customs Union. It would mean accepting freedom of movement. But Brexiteers would be outside the CAP and the political structures of the EU. It would of course mean becoming what Rees-Mogg calls a vassal state or – as Norwegians put it – being in a “fax union”, as they sit beside the fax machine waiting to be told what the EU has decided.

A Customs Union is not enough

There is no doubt that being in a Customs Union after Brexit would be less damaging than being outside it. The pursuit of free trade deals with the rest of the world will not replace lost trade with the EU. That is partly because of geography and partly because we make our money selling services – which is facilitated by the single market but not in practice by free trade agreements.

Being in a Customs Union would help our manufacturing as much of its output is integrated into EU-wide supply chains.

But it is the single market that ensures that products are made to the same standards. There are customs checks at the border of the EU and Turkey even though there is a customs union between them that covers goods. That is not just to ensure that prohibited items or items outside the customs union are not imported. It is because there is no guarantee that say toys made in Turkey meet EU safety standards. That guarantee comes from the single market.

Nor does a Customs Union mean that British drivers and lorries are licensed to work in the EU. Even if the UK did negotiate an open-access transport agreement it would be unlikely to include cabotage – the right to carry goods within a country as opposed to cross-border. That makes transport more expensive.

So Anna Soubry is right to push for Norway Plus rather than just a Customs Union. But even that would not solve the problem of the Irish Border. So much intra-Ireland trade relates to agriculture and food. If the UK was outside the CAP there would be barriers to be overcome. The UK (or NI) voluntarily following EU rules would not be enough, because the EU would need to ensure that the rules had actually been followed.

Given the breadth of issues that the Irish Border question raises it is not possible to see a solution other than Northern Ireland staying in the EU.

As Labour MP Phil Wilson puts it, Labour, in considering supporting a customs union while insisting on leaving the Customs Union which comes with EU membership, risks “reinventing the wheel, only to find it’s not as round as the one we had”.

A Customs Union brings problems of its own

If the UK was in a customs union with the EU as Turkey is we would be obliged to charge the common external tariff to third countries and give them the same access they had negotiated with the EU.

These countries however would not have an agreement with the UK, but with the EU. They could choose to give the UK the same access to their markets as they give the EU; but they do not have to.

If they don’t offer the UK access to their markets they won’t lose access to the UK market. So the UK might have to offer them something other than market access in order to be able to benefit from preferential trade with them.

The risk of complacency

The biggest danger of being in a Customs Union is not that it won’t work well – we are talking Brexit after all; nothing is going to work well.

The biggest danger is that some Remainers will think that Brexit is therefore going to be alright. It isn’t.

Not even Anna Soubry’s Norway Plus would be alright, not even if you went further to add in membership of the CAP in order to smooth the Irish Border. Because that would still be a deliberate rejection of the political commitments of the EU to international co-operation and harmony, to support for peace, democracy and individual freedom.

So, fine, let those who want a Better Brexit campaign for the UK to stay in a customs union. We need to be clear: Brexit means Brexit – and Remain means Remain.

 

 

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