The customs union – a binary decision?
ISSUE OF THE DAY
When Boris Johnson spoke to the Czech press last week, he didn’t quite say that he wanted the UK to be part of the single market, but rather that it should be out of the customs union. But is that a straightforward question, with a simple ‘in’ or ‘out’ answer? And was Theresa May right to say that ‘the customs union is not just a binary decision’?
On the face of it, it may appear so. For example, Turkey is in a customs union with the EU for non-agricultural goods, but it is not a member of the EU or the single market. When seen through this lens, and if put in literal terms, membership of the customs union apparently is a straightforward ‘in’ or ‘out’ choice.
There is no evidence that membership of the single market and customs union has hampered the UK’s trade with non-EU states. But there is evidence that UK trade with non-EU states is growing faster than trade with EU states. Although this is not by any means an argument against the virtues of the single market, it does mean that outside the customs union, the UK would be free, just like Norway and the other EFTA members, to enter into trade agreements with other countries. It also appears that, under WTO rules, custom unions are designed to cover a ‘substantial’ amount of trade between the participating states. The UK would, therefore, be limited in its ability to pick and choose which goods were subject to the customs union.
However, with complexities surrounding rules of origin and tariffs, and with the various post-Brexit models now available to the UK, it isn’t quite so simple. Ultimately, membership of the customs union is not a simple ‘yes’ or ‘no’ question. There are a raft of other considerations to take into account, such as which sectors and goods are affected by it, what the tariffs and regulations are for particular goods, and so on. Importantly, leaving the customs union does not have to mean leaving the single market.
The EEA secures membership within the single market whilst not requiring membership of the customs union, meaning that the UK can benefit from EU free trade whilst being able to strike its own deals with non-EU states. It is this model, of a reformed EEA that accommodates UK membership of the single market, outside the customs union and with more national control over free movement, which the UK should advocate for in its negotiations with the EU.
Daniel Thornton – Leaving the Customs Union – what is involved?
Stephen Castle – Why is the UK struggling to find the path towards Brexit?