Remaining in some form of EU customs union is not the answer to the Brexit deadlock

Remaining in some form of EU customs union is not the answer to the Brexit deadlock

Following the Easter break, Parliament may soon once again debate our future relationship with the EU. Despite numerous votes against the idea of the UK being in a or the Customs Union with the EU, it appears many still believe that some form of customs union is necessary to break the Brexit deadlock. This seems to be because of the perception that, in a customs union, there are no tariffs or non-tariff barriers to trade between its members. Unlike a free trade area, members of the Customs Union impose a common external tariff on all goods entering the union.

However, a customs union does not, by itself, lead to frictionless trade (only rules of origin checks would be avoided, and in the case of a partial customs union, some checks in the form of movement certificates would still be required) because the bulk of the checks come from other rules to be found in the EU’s Single Market. In the case of Turkey – the non-EU country that does have a partial customs union with the EU – not only are movement certificates required, but Turkey has committed to the EU acquis. The Turkish arrangements were intended as a way-station en route to full EU membership.

But there are strong reasons not to be in a customs union with EU.

Firstly, it is a myth that the UK would have any significant say in the operation of the EU Customs Union if we are not a fee-paying member of the EU. Those who believe we would have a say seem to assume that we would have more of a say than we currently have as one of 28. Since it is unlikely that the Commission has fallen asleep, there is no reason why a departing member state would be rewarded in this manner.

Secondly, the EU would set the common external tariff and the trade policy to suit them, not the UK. They would prioritise protecting French and German agricultural goods, and put in no effort to open up markets outside of Europe to UK financial services or even Scotch whisky.

The UK would also not be able to have its own meaningful and independent trade policy, and this would lead to a huge loss in British influence around the world. Trade is a big part of foreign policy, and the UK frequently uses its ability to change EU trade policy with various asks we might have in security cooperation when talking with other countries. Trade is a vital instrument of diplomacy.

Furthermore, the EU would run our trade remedies (or trade defences) against dumping of goods, most frequently from China. It is very doubtful that the EU would give much priority to defending our industries – those who pay the bills would be the priority.

Finally, and most importantly, in new trade agreements the EU would be able to offer – via the Customs Union – access to Britain’s 65 million consumers, without any equivalent access for UK goods and services. The US and the EU have announced their intention to re-start trade talks with each other. Even though the US is our largest single trading partner, we wouldn’t have a seat at the table. Worse still, if the EU lowered tariffs for US goods, or changed its regulations to allow in particular US goods which were previously not allowed, the UK would have to follow and seek to negotiate for ourselves what we need with no leverage.

Many say that we could agree a customs union with the EU and have a greater say than we have now. This is pure fantasy. The EU would not give the UK a greater say outside the EU than the member states have themselves. We will not be able to defend our interests better in a customs union than we could as members of the European Union. If we are also to align our regulations closely to the EU’s in a number of areas, we will certainly not have a say in how those regulations are made. 

Currently, in the European Economic Area, members must accept the EU’s acquis in the relevant areas and do not have the ability to veto or change those regulations. Norway discovered this to their cost when they refused to implement the third postal directive and found themselves punished in unrelated areas like fishing. Even the Swiss, who are not even EEA members but have a series of agreements with the EU, have found themselves at the short end of EU negotiations. It would be this way for the UK in these types of arrangements – and the UK would be powerless to resist.

The real solution to the Brexit impasse is this: to find alternative arrangements on the Irish border; and to negotiate a deep and comprehensive Free Trade Agreement between the UK and the EU as equals. The UK and the EU can remain friends, while the UK also has its own independent free trade policy going forward, to take advantage of growing markets in Asia and around the world.