23 April 2018

Financial Times: The customs union is imperative for Britain’s future prosperity

The conclusion of a lengthy debate among policymakers, customs and trade experts and businesses should be clear. Both to fulfil its promises to keep the Irish border open, and to maintain Britain’s sophisticated just-in-time supply chains with the continent, the UK should seek a new customs union with the EU that in essence replicates current arrangements. On top of this, it should seek to keep those EU regulations, particularly in food and agriculture, needed to reduce the need for hygiene inspections as well as checks for customs tariffs and rules of origin.

[...]For the UK to be outside a customs union would undoubtedly mean some kind of infrastructure at the Irish border. Extensive investigations by a parliamentary committee have established that neither of the much-touted EU border arrangements between France and Switzerland, or Sweden and Norway, remove the need for physical border infrastructure.

Meanwhile, the UK government’s mooted “customs partnership”, whereby the UK collects tariffs on those parts of its imports destined for the EU, fails to pass the laugh test. It would be hugely impractical, and businesses have rejected it out of hand.

In theory, the customs union could be a partial one. There have been somecreative attempts to imagine a hybrid system where the UK would free itself to cut tariffs on some sectors, such as agriculture. In practice, the complexity this would introduce would probably not be worth it.

Certainly, remaining within a customs union will circumscribe the UK’s ability to sign bilateral trade agreements with third countries. But on plausible estimates they would not replace trade lost with the EU — particularly since Brussels has already done deals with big economies including Japan and South Korea, and is planning more with Australia and New Zealand.

And assuming the UK decides to leave the EU single market, it is still free to try to reach agreements either bilaterally or with groups of countries on services, investment and other new-generation trade issues.

True, since the UK will have to replicate the goods parts of any future trade deals signed by the EU, it should also seek to have some formal input, if only observer status, in the negotiation of those agreements. It also needs to persuade the EU to agree a customs union deal while not itself fully embracing the single market, including freedom of movement for workers. But with the goodwill created by maintaining an open Irish border, those efforts have a reasonable chance at succeeding. [...]

Full article on Financial Times (subscription required)

Related editorial: The Guardian view on the EU customs union: the start of the Brexit crunch

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