Tuesday, April 24, 2018

Tackling the myths about Brexit and the customs union

Published on CapX
Wild theories are doing the rounds about whether Britain should or should not join a permanent customs union with the EU after Brexit.
Unsurprisingly, Remain supporters have leapt at the idea as a way to soften Brexit. Some even hope that it would constitute such a bad deal that it might just lead to a reversal of Brexit.
Downing Street yesterday ruled out Britain either remaining in the customs union or joining a future customs union with the EU. Nonetheless, the spectre of the customs union continues to loom large. And there are a number of dangerous myths that are badly confusing matters.
Myth number one: Britain joining a customs union with the EU would solve the Irish border issue
The customs union issue refuses to go away because there still isn’t agreement on how to prevent a hard border on the island of Ireland after Brexit. But a customs union would not be sufficient to solve the issue.
If Britain were to remain in a customs union with the EU, there wouldn’t be any tariffs charged on goods travelling across the Irish border. But, given that Britain would have left the single market. there would be divergence in terms of regulation. As a result, goods would be subject to checks at the border. (That is one of the reasons why there are checks on the border with the EU and Turkey, which has a partial customs union with the EU.)
One could, of course, argue that the easy solution to all of this is for Britain to join the single market too. That would in effect deliver undisrupted trade, and many Remainers probably wouldn’t mind. But, as I explain below, that would be even more unsustainable than merely staying in the customs union.
Myth number two: Britain joining a customs union would at least keep the status quo for customs and trade
This simply isn’t the case. At the moment, as an EU member state, Britain can veto trade deals that the EU undertakes. That would no longer be possible if Britain was a in a common customs union with the EU. In such a scenario, Britain wouldn’t be able to block an EU initiative to, for example, start trade talks with Russia. Far from maintaining the status quo, such a scenario would effectively leave Britain powerless over its own trade policy.
Myth number three: Britain joining a customs union with the EU is a sustainable arrangement and would “soften” Brexit
Because single market membership seems to be beyond the realm of what is politically possible after the referendum, a customs union has emerged as the primary tool to “soften” Brexit.
While limiting the disruption the process will cause to both citizens and business of course makes sense, customs union membership would dramatically reduce British sovereignty.
Britain wouldn’t be able to veto and therefore influence EU trade negotiations, for example with China, as the EU would effectively be negotiating to what extent China would get access to the UK market. Moreover, China would not be obliged to grant Britain whatever access the EU would gain to China’s market.  Is there anyone who seriously thinks this is even remotely sustainable, even if it were enshrined in the British Withdrawal Agreement?
It isn’t hard to spot the recipe for trouble. Short of some farfetched strategy that this may convince Britain to reverse Brexit altogether, it would mean a lot of time and energy intended to soften Brexit would have been wasted.
More realistic solutions
Those who genuinely want to soften Brexit, should look at more realistic solutions. Switzerland, for example, isn’t a member of either the single market or a common customs union, while it has a lot of trade with the EU and a lot more daily cross-border travel.
Conservative MEP Daniel Hannan has been a vocal supporter of looking at the Swiss precedent, pointing out that “the Swiss border is crossed by around 2.4million people every day — a colossal figure for a country with a population of just 8.4million… Switzerland also manages to sell more than five times as much per head to the EU as Britain does.”
He has received quite a bit of pushback for this, but at least the “Swiss precedent”, which has been ignored for a long time, is now getting more attention.
There are some very decent reasons why the Swiss-EU border arrangements could only be part of the answer to Britain’s predicament. Some “physical infrastructure” is needed and there are some petty import restrictions for tourists as well as delays and lots of bureaucracy which small companies in particular find difficult to cope with. Even at the border between the EU and Norway, whose single market membership should make things smoother, trucks would face an average of 4 minutes delay to cross the border.
Nobody claims that there are no challenges in finding a solution. A border will bring some disruption. But there are some precedents to smoothen things out and make it work. In Switzerland, the challenges may be bigger than in Ireland, as there is ten times as much traffic as between Ireland and Northern Ireland.
Christian Bock, the head of the Swiss customs service, says that his experience suggests an “invisible border” in Ireland after Brexit is possible. Speaking to the UK Parliament, he has described how there are customs “control points” at locations away from the border, also stating that only about 2 per cent of consignments crossing the Swiss border have to be subject to physical checks.
That said, Britain will be in a common customs union with the EU during the transition period after Brexit and it may well be the case that Britain will stay in it for longer than until the end of 2020, as planned, even if that poses some legal problems.
This because a number of issues need to be solved before Britain can leave. Not only is there the Irish border, there are also the procedures at the Channel ports. Furthermore, what would be the point of Britain leaving the common customs union if no new trade deals have been agreed yet by the end of 2020?
It’s difficult to predict how long it will take Britain to agree trade deals, safeguard the trade access it has enjoyed to third countries as a result of trade deals negotiated by the EU and sort out customs procedures at its borders.
What we know without doubt is that remaining in a common customs union with the EU permanently is certain to reopen negotiations on the UK’s status after Brexit, due to the grave implications this would have for British sovereignty. That is surely also not something the EU would like.
And so rather than obsessing over the customs union, those on both sides of the channel who warn of the perils of a hard Brexit should focus on serious, realistic and sustainable ways of softening Brexit.

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