Advocates of Britain staying in the EU’s customs union have a hidden agendaHeat Profit
“The-single-Market-and-customs-union”. Count how often you hear the words machine-gunned out as though they represented a single concept.
It’s becoming what grammarians call a binomial phrase – a phrase whose constituent elements have been fused into an alloy, like “blood-and-guts” or “law-and-order” or “kith-and-kin”.
Listen to the way anti-Brexit politicians – Nick Clegg, Chuka Umunna, Keir Starmer – rattle off those ten syllables. Vince Cable has moved an amendment to the Brexit bill calling for Britain to stay in the SM&CU, which has prompted much nodding, but little analysis, from Remain supporters.
But we’re talking about two different things. The Single Market is a series of agreements on competition rules, technical standards, labour laws and environmental policies. Some of these are beneficial, some innocuous and some damaging.
There is a legitimate debate about to be had about which aspects of the Single Market we should aim to retain after we leave. Obviously, in a perfect world, we’d keep the good bits and ditch the bad bits, but the EU understandably has other ideas. Fair enough: you wouldn’t expect privileged access to a Market on the basis of having a permanent exemption from its social and ecological standards, for example.
There are, though, some aspects of the internal Market which are in the interests of all concerned, notably the rule that prohibits discrimination against the goods or products of another member on grounds of nationality. That, to me, has always been the real basis of the Single Market, and there is every reason to keep it. Obviously, as non-members, we would no longer be subject to direct rulings from the European Court of Justice, but we could replicate parts of the Single Market through a new arbitration mechanism (as Norway does, using the EFTA Tribunal) or through bilateral treaties (as Switzerland does).
The customs union is something else entirely. It is an agreement whereby all EU members hand over 100 per cent of their trade policy to Brussels and agree, instead of setting their own tariffs against third countries, to apply the EU’s Common External Tarff.
Britain, a global trader by history and inclination, has always been disproportionately penalised by membership of the customs union. For most of our membership, we were either the only state or one of only two to export more outside the EU than to it. The phased application of the Common External Tariff in the 1970s hit British consumers and Commonwealth exporters badly and, though there have been improvements since, our trade remains distorted.
One big advantage of Brexit is being able to strike our own trade deals. The EU currently has no free trade agreement (FTA) with the world’s largest economy, the USA, nor with rising giants like India, nor with close British allies like Australia. And even where it does have FTAs in place, they are often limited in scope. A former (and, I hope, future) Chilean minister told me in Santiago last week, “Don’t get too excited about the EU’s FTAs. We have a more comprehensive deal with China than we have with Europe”. The two of us then spoke in some detail about how, after Brexit, we could take the current EU-Chile deal as our starting point and liberalise further.
Staying in the customs union while being outside the EU would be the worst of all worlds. It would mean that we surrendered our trade policy to an often protectionist European Commission while having no input into what that policy should be. It would be worse than remaining members.
And that, I suspect, is Cable & Co’s game. They surely know how weak the case for staying in the customs union is. Britain sells a lower proportion of its exports to the EU – and a far far lower proportion of its overall output – than does any EFTA country. Yet no one in these countries (Norway, Iceland, Switzerland, Liechtenstein) proposes joining the EU’s customs union. Why would they? They have replicated most of the EU’s deals with third countries, but have gone further on their own, especially in Asia. They have, for example, negotiated an FTA with China, the world’s second economy, something the EU isn’t contemplating.
Why should Britain seek a worse deal than the EFTA nations? Why pursue a status shared only by micro-states that were already in a customs union with their larger neighbours, such as Monaco and San Marino? Even Turkey is only in a partial customs union with the EU, and complains frequently about it.
No, there is only one possible reason to remain in the customs union, namely as a way of transitioning back into full membership. That is what Cleggie and Chuka and the rest plainly want. I just wish they’d man up and say so, instead of insulting our intelligence like this.