The ‘New Customs Partnership’ – untested for a very good reason

The ‘New Customs Partnership’ – untested for a very good reason

The Government certainly made waves with the first of its series of papers on Brexit. The paper on customs – released on Tuesday – drew controversy, primarily for its proposal of an ‘interim’ Customs Union with the EU after March 2019. Thankfully, Liam Fox and Boris Johnson have since insisted such an ‘interim’ period must end in 2020, frustrating Remainers who gleefully claimed the period could extend until 2022.

Amid all this furore, another concern has been overlooked. The Government offers two options for customs relations with the EU after Brexit. One of these would be either disastrous or totally unworkable. This option of “a new customs partnership with the EU” is what the Government calls an ‘innovative’ and ‘untested’ attempt to remove all customs controls between Britain and the EU, while stopping short of a Customs Union.

Removing the need for customs checks at UK-EU borders would require the UK to essentially do the EU’s customs checks for them. Otherwise, if the UK has a lower tariff than the EU on Chinese goods, for example, the Chinese product could enter the EU via the UK while only paying the lower UK tariff.

The ‘new customs partnership’ would, therefore, mean the UK applying exactly the same import regime as the EU – the Government calls this ‘one potential approach’, but it is difficult to see how it would be anything but a necessity. This would, as the Government again concedes, include tariffs.

The United Kingdom – if it were to pursue an independent trade policy at all – would have to apply the highest tariff (UK or EU) at the border, and then provide a refund if the product’s ultimate destination turns out to be the final country with the lower tariff rate.

The Government also admits all this would require an elaborate tracking system to be put in place to ensure importers weren’t falsely claiming to be eligible for the refund. It is difficult to see how this alone would not be so costly and unwieldy as to outweigh the costs of having customs checks at the UK-EU border.

This is, however, the least of the problems with the ‘new customs partnership’. Convincing the World Trade Organisation these ‘refunds’ are not in fact subsidies – and convincing them the real tariff rate is not what’s applied at the border – would be an achievement in itself. The ‘partnership’ would also severely curtail the Government’s control over trade policy. The novelty and complexity of the system could disrupt free trade negotiations, and foreign exporters might be discouraged by the additional paperwork the system would involve.

The Government would also be extremely reluctant to move our tariff schedules out of step with the EU, for fear of making the system even more complex. If, in the future, the EU were to raise its tariffs across the board in a fit of protectionism, then the system would give us a strong inclination to follow suit.

Needless to say, the EU will have to play its role too. If they do not reciprocate and apply the UK’s customs checks for us, then countries with free trade deals with the EU, but not the UK, would be able to avoid UK tariffs by going through the EU. This is something the World Trade Organisation would certainly have something to say about.

Essentially, the ‘new customs partnership’ would be a sort of Customs Union Lite between the UK and EU, where instead of sharing the same tariffs, we would have an elaborate system of refunds and tracking.

It seems unlikely the EU would ever bend over backwards for us and agree to any of this. Even if they do, they would probably demand this to be overseen by EU courts – which is totally incompatible with us taking back control of our laws. Likewise, it is difficult to see the EU consulting the UK when doing anything at all in the future which might affect the ‘partnership’ – we’d inevitably just have to adjust to suit them – as would never be in our best interest.

This ‘new customs partnership’ proposal, all in all, is a classic Whitehall proposition. Another example of unelected mandarins going to extreme lengths to avoid the natural consequences of Brexit. This is an overly elaborate, inevitably costly, and probably unworkable idea, borne out of a Remain mindset, which prioritises preserving as much of our current relationship with the EU over seizing the benefits of Brexit.

Eurosceptics should prefer the other customs option detailed in the paper – a ‘highly streamlined customs arrangement’. This would be a normal system of UK-EU customs checks, but streamlined through technology and various common-sense mutual agreements. After all, the UK’s new customs infrastructure is due to be rolled out in early 2019, just before we get Britain out of the EU.

The Government calls the Customs Union Lite option ‘innovative’ and ‘untested’. They are certainly right to say nobody has thought of it, let alone tested it, before – but this is for very good reasons. If we want to make the most of our exit from the Customs Union, then the only option is the ‘highly streamlined customs arrangement’.