UK’s confusion on Customs
After weeks of division and a holiday in the Alps, Theresa May returned to Downing Street on Monday to sign off the publication of the Government’s “position paper” on Britain leaving the Customs Union once it leaves the European Union in March 2019. After a three week cabinet debate held in full public view between Chancellor Philip Hammond and International Trade Secretary Liam Fox on the proposed transition deal that would facilitate a “smooth and orderly Brexit” set out by Theresa May in January, the position paper – along with a strange show of unity from Hammond and Fox on Sunday – attempted to show a united front in the face of cabinet divisions.
Ministers have come together that for a limited time period, Britain should be a member of a Customs Union between the U.K. and the European Union – but crucially leave the current Customs Union in March 2019. It is clear the May’s cabinet – and Liam Fox and the Department of International Trade in particular – want the United Kingdom to get on with building the “Global Britain” and signing Free Trade Agreements to soften the blow of leaving the Single Market and the EU. In order for that to happen, we need to avoid a cliff edge and have a buffer period between being in the EU’s economic institutions and being able to legally operate as an independent setter of trade and customs policy.
While that is impossible to create under EU law, (being in the Customs Union prohibits states from setting their own customs and trade policy) the British Government is offering little justification for this proposal, other than to make Liam Fox’s job of globe trotting to establish trade arrangements more worthwhile. Indeed, it is for the UK post-Brexit to begin to make these arrangements and not for the EU to soften the blow. The Trade Arrangements, such as with South Korea, that the UK is part of by nature of their EU membership, will all have to be re-negotiated and re-affirmed, state by state, as well as new ones that Fox hopes to break – including one with the European Union itself.
Developing such a mess on the formation of a new Customs Union makes it seem as though the UK Government’s position lacks any influence from reality. While it is understandable, in light of former PM David Cameron’s failed renegotiation, that the Government will wish to start big and negotiate down, it seems odd to suggest situations that are illegal under EU law and would require mass treaty change that would take longer than any EU negotiation.
Beyond that, the UK Government seems to have ran out of ideas when it comes to what the UK’s Customs arrangements will be when we leave the EU. With the insistence that a new Customs Arrangement be in place by 29th March 2019 now gone, the UK has proposed technology-heavy ports and spot checks – presumably in line with their proposals for the Northern Ireland border – and a tarried reimbursement scheme for people selling their goods to Europe via the UK, in which goods will be tracked and companies will be able to claim the difference back from the UK Government upon proof of the lower tariff being applicable.
Most of this is unworkable; spot checks leave gaps for the black market and smugglers to utilise that the EU simply won’t be able to accept in any arrangement and there is no evidence that technology will help crack down on this. The tariff reimbursement scheme also offers little reassurance to European officials worried about tariff wars with the UK, and this arrangement would actually damage the case to lower tariffs – a key part of the future trade deals we wish to strike – in the UK because wouldn’t even be paid upon goods entering the UK. Indeed, the added bureaucracy is likely to deter business and increase their costs, as well as the costs of UK Customs forces.
Much of the Government’s proposals for the border between Northern Ireland and the Republic of Ireland bend over backwards to fix the contradictions they are trying to seek. It is difficult to see how these proposals take in the reality of EU law, even as someone who is supportive of the Government’s plans to leave the EU Single Market and Customs Union. What we can only hope is that the wider Brexit strategy means negotiating from a state of impossibility down to a deal; because this, so far, is largely unworkable.
