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We are leaving the Single Market.  Theresa May suggested so to last year’s Conservative Party Conference, when she said that “we are not leaving only to return to the jurisdiction of the European Court of Justice”.  And Robin Walker, the Brexit Minister, confirmed so in a written answer issued just before Christmas: “as the UK is party to the EEA agreement only in its capacity as an EU member state, once we leave the European Union the EEA agreement will automatically cease to apply to the UK.”  The Government rightly believes that membership of the Single Market – a distinguishing feature of the EEA – is incompatible with regaining control of our borders.

With regard to the Single Market, May’s desired outcome seems to be drawn from her negotiation, as Home Secretary, over EU Criminal Justice measures.  She opted out of 133 criminal justice measures, only then to opt back into 35 of them, including the European Arrest Warrant.  The variant in the case of the Single Market is that the new arrangements – Single Market access, in the jargon – would not come within the juridisdiction of the ECJ (just as the access enjoyed by non-EU countries exporting into the EU does not come within it either).

Every signal that Ministers have given is consistent with Britain following a similar model with the customs union.  First, we would leave it.  Next, we would opt back into bits of it: for example, it would make sense to maintain the status quo with Ireland, under which there are no customs posts on the border with Northern Ireland (the consensus of the Lords’ EU Committee’s recent report on the matter is that it would be hard to avoid border checks were Britain to depart the customs union).

However, there is pressure from within the Government, especially from bits of the Treasury, to stay within the customs union altogether.  Hence today’s report by Change Britain, fronted by Michael Gove, arguing exactly the opposite.  The campaign group claims that if Britain leaves both the Single Market and the customs union, we will be “over £450 million a week better off through a mixture of taking back control of the money we give to the EU each year, lower regulatory burdens on British businesses and through striking trade deals with growing parts of the world’s economy”.  It is seeking to head off those Treasury mandarins.

The Irish example shows why the debate about the customs union is more finely balanced than that over the Single Market.  It would be damaging to relations with our nearest neighbour, and perhaps to the stability of Northern Ireland, to bust up the status quo on customs.  And more broadly, membership of the customs union does not automatically prevent the control of our borders.  The question is whether preserving the union should be the exception rather than the rule.  The balance of the argument suggests that it should.  Its nub is as Change Britain says: staying in the customs union would hold us back from striking new trade deals.

And if we can’t do so, the logic of Brexit is damaged.  Part of the point of leaving is better to grow our trade with non-EU countries.  Preserving our membership of the customs union would blunt it.  None the less, busting up the current arrangements is not to be undertaken lightly.  The key issue is supply chains – products made with parts from different sources.  Customs checks to establish exactly what comes from where, as goods seek to move between Britain and EU countries, have the capacity seriously to harm the easy flow of trade.

However, the pertinent example of a country which is a member of the customs union but not of the Single Market is not encouraging.  As Christopher Howarth has pointed out on this site, Turkey’s limited membership of the former results in it being unable to sign its own trade agreements with other states in most respects and losing customs duties if the EU strikes a tariff-reducing deal with third parties – not to mention accepting the jurisdiction of the ECJ over its domestic economy.

Common sense suggests that the best solution to seek, in most instances, is that which the EU already enjoys with non-member countries – free trade, no ECJ jurisdiction and no trade war fought by means of customs duties, with the flow of goods slowing to a trickle.  This bespoke solution appears to be what Downing Street wants and what leaves the Treasury unnerved.  None the less, a warning applies to it, as to much else.  What Britain wants from the coming negotiation may not be what it gets.  The peoples of Europe have every interest in a Brexit soft landing.  Some of their politicians do not, let alone the theocrats of the Commission.

279 comments for: Should Britain leave the customs union?

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