In less than 15 months the UK will be a third country, a non-EU member. A debate is currently raging about what customs relationship the UK should have with the EU after Brexit. The government’s view is we should leave the EU’s customs union, allowing the UK to sign new trade deals. Blairite figures and Corbyn critics, including Chuka Umunna, are keen to keep things after Brexit as similar as possible to before. They have already called for the UK to stay in the customs union (and the single market). A story in yesterday’s Times suggested that Labour was likely to switch its position “by spring” to back staying in a modified version of the European customs union.
The customs union allows goods to circulate freely without customs checks. Items imported into one member state do not need to clear customs when moved to another member state. Think of it as a version of an airport’s blue channel – suitcases can be pushed through without being stopped. But in return, members must impose the same tariffs on goods imported from outside. Also, they negotiate as a bloc when discussing trade deals with third countries such as Japan, China or the US.
Some have argued that it’s not possible to stay within the EU’s customs union after Brexit. With the exception of tiny Monaco, only EU countries are in the EU’s customs union. Even Norway, Iceland, Liechtenstein and Switzerland – those countries closest to the EU – are outside. And Britain looks set to have a looser relationship with the EU than, say, Norway.
It might be possible to agree a new customs agreement with the EU’s customs union. Turkey, Andorra and San Marino have such an arrangement. But the “Turkish option” doesn’t cover all goods. It’s a partial customs union. And it was designed for a country that was, at least at one stage, on a path towards EU membership.
Agreeing a “Turkish option” customs agreement with the EU has a substantial drawback. It would probably mean accepting that we couldn’t agree our own trade deals. As an EU member, trade policy is designed on a one-size-fits-28 basis, but we have a seat around the table in the EU institutions. After Brexit, we would lose that influence.
Labour’s shadow trade secretary sees another problem with the “Turkish option”. Barry Gardiner has argued that such an agreement should be ruled out because it “would give [the] EU power to decide our tariffs & quotas with 3rd countries. We’d be forced to liberalise our market but have no reciprocal access to theirs.” He’s right. We would have less power, less control, to determine our economic future.
The Times report suggests that the Labour position is evolving. Perhaps. Doubtless some Labour strategists are keen to open dividing lines with the government’s policy. But there’s a danger that the majority of the public – who either voted leave or want to see Brexit delivered anyway – conclude that Labour’s position is an untenable fudge.
For some time now Labour has tried to argue that it does not want to be defined by structures when it comes to Brexit policy. But international law and agreements are precisely about structures: either you are a member or you are not; either you have a trade deal or a customs union or you don’t. The idea that we could persuade the EU to agree to a modified customs union – allowing the UK a continued say over trade policy as a non-EU member – doesn’t seem realistic.
Unless a new customs agreement is reached, the UK will lose the advantages of the EU’s customs union after the transition period (probably at the end of 2020). Of course we should seek a deep trade deal with the EU, including full cooperation on customs. But politicians need to be honest about the fact that leaving the customs union will come with costs. As Open Europe has argued, in our Nothing to Declare report, a half-in, half-out approach would entail the worst of both worlds, so we should accept those costs and set about maximising the potential benefits of designing our own trade policy.
• Henry Newman is the director of Open Europe
