Simon Clarke is the Conservative MP for Middlesbrough South and East Cleveland.
There is a view amongst some Remainers that clinging on to any aspect of the EU will be better than nothing. In other words, because they believe the EU to be good as a whole, they believe that each component part of the EU – such as the Customs Union – is also a good thing in its own right.
I can’t stress enough how flawed this logic could prove to be. Staying in a customs union with the EU, without full membership, would absolutely and unequivocally represent the worst of all worlds. This is for the following reasons.
First, as a member of such a union, the EU would have the right to negotiate all international trade deals on our behalf. However, as a non-member of the EU, we would no longer have any say over the negotiation or composition of those deals. What incentive, in this scenario, would the EU have to try and strike deals with the UK’s biggest and preferred trading partners? What incentive would the EU have to strike deals that included financial services? Think of it: Britain, the fifth-biggest economy in the world, voluntarily relinquishing all control over her trade and customs policy. This would be an extraordinary and untenable situation in which to place ourselves.
Second, being in a customs union without EU membership would mean a huge asymmetry in rights and obligations – with the UK on the losing side. Let me explain what I mean.
In a customs union without EU membership, the EU would negotiate trade deals with third-countries. As part of that union, we would need to open-up our markets to that third country (all straightforward so far). However (and here’s the kicker), whereas that third country would be obliged to open-up their markets to the rest of the EU, they would be under no such obligation to open their markets to us.
One need only look at the predicament of Turkey which, one suspects, only subjects itself to such an impotent state of affairs because it holds the vain hope that it will one-day progress to full membership. Turkey not only has all aspects of her customs and trade policy decided for her, but is also required to adopt EU regulations and ECJ case law in the area of competition law. The cynic in me suspects that those lobbying for a customs union know all this already. They know that staying in the customs union would be worse than being a fully signed-up member, and thus hope that a customs union will be a stepping stone back to full membership.
As a country, we really need to stop looking at the Brexit process as an exercise in damage limitation. I completely understand the concerns of those worried about the potential negative consequences of Brexit, but there are also huge opportunities that we must seize if this is going to be a success. We need to remind ourselves of why the Leave Campaign lobbied to leave the Customs Union in the first place.
To start with, the EU, on our behalf, has been incredibly slow at negotiating trade deals – not least because you have 28 different countries with competing interests on one side on the negotiation table. One example of the EU’s sluggishness can serve for many. EU trade talks with the US have been ongoing for 65 months with no sign of progress. In fact, they have now completely broken down. Is this because the US are obstinate or otherwise slow at trade deals? The evidence suggests the opposite: the US managed to negotiate trade deals with Canada in 20 months, Australia in 14 months, and South Korea in 13 months. The same trend can be observed with the EU’s negotiations with Japan.
Having control over our tariff schedules will also mean that we can cut EU protectionist tariffs on products such as food, clothing and footwear. These goods happen to be where the highest tariffs are concentrated – accounting for 37 per cent of total tariff revenue. They also happen to be the goods on which the poorest in society spend a greater proportion of their income. They thus constitute a regressive tax (yes, I have no idea why the Labour Party support this policy either).
Being in a customs union, of course, is not completely without merit – or else countries would never join them. However, it is important to understand exactly where those merits lie, and the type of country that they are likely to benefit.
Most obviously, being in a customs union abolishes the need for customs controls. In practice, this means that businesses do not need to fill in customs declarations. This no doubt makes life easier for businesses trading with the EU (hence why the CBI favour it). However – as I’ve written about before – the cost of this to businesses would likely be far less than is often reported. It is also worth bearing in mind that a huge number of businesses in the UK already do this when they trade with the rest of the world.
It is further wrong to assume that this extra form-filling will entail slower trade, or that goods would need to stop at borders for checks. I’ve explained exactly why this is true in a previous article in relation to the Irish Border.
Being in a customs union might well suit countries who perform the vast majority of their trade with other members of that custom union. In such circumstances, the fact that a customs union stops you from signing independent trade deals with third countries becomes relatively less damaging.
However, the UK is not in this position. In fact – apart from Malta and Cyprus – the UK is the only member of the EU that trades more goods with countries outside the EU than within it.
In sum, staying inside a customs union with the EU would be to cling on desperately to the worst aspects of the EU, whilst letting slip all those exciting opportunities and advantages that accompany being an independent and global trading nation.
The customs union might feel like a short-term panacea for those opposed to Brexit, but we need to look further; beyond the visible horizon. Where will the United Kingdom be in 50, 100 or 200 years’ time? Glued in perpetuity as a vassal state to a declining European market – or a free, flexible and prosperous nation, engaging and trading with allies right across the world? I, for one, will be voting for the latter – and I hope colleagues will join me when this historic choice comes before Parliament this week.