Richard North, 03/02/2018  
 


It is with a sense of almost indescribable despair that one watches the latest round of the sterile controversy about whether or not we should remain in a (or the) customs union after Brexit.

Making the running on this are two Tories, Anna Soubry and Ken Clarke, who have, according to the Guardian, "launched a bid to make Theresa May keep the UK in a customs union with the European Union, as the prime minister faces cabinet and party splits over the issue".

The issue, we are told, has become a dividing line between supporters of a hard Brexit, who believe it would limit sovereignty and stop the UK striking deals with non-EU countries, and supporters of a soft Brexit, who want to keep Britain's trading ties with the EU as close as possible.

Putting the cat amongst the pigeons here is Liam Fox who has ruling out staying in any form of customs union. Speaking in China at the end of the PM's three day visit he said it would not be "compatible" with striking trade deals around the world.

In fact, the controversy is totally spurious, with support for the concept resting on fundamental misunderstandings of the nature of the EU's customs union and its relationship with the Single Market. These are typified by a briefing document from Open Britain which perpetuates a series of myths which have dogged the Brexit debate since the referendum. The Customs Union, it says:
… ensures that customs duties at the borders between EU countries are eradicated, and customs checks are streamlined to ensure smooth passage of intra-EU goods trade. Within the Customs Union, goods can cross borders freely and without delay because each country has agreed to sign up to common rules over labelling, safety and packaging and therefore do not need to go through bureaucratic checks.
It is a measure of the low grade of scholarship displayed by the Open Britain group that it relies for its source not on original material but on a simplistic Janet and John explanation from the European Commission, part of the "European Union explained" series which, in itself, lacks the accuracy of legal documents.

The points, of which most readers of this blog will be fully aware, is that freedom from customs checks (at the border) are not a function of the customs union but of the Single Market, specifically the "common rules over labelling, safety and packaging".

Furthermore, it is not necessary to participate in a customs union in order to remove tariffs between the EU-27 and the UK. The EEA Agreement makes provision for removing tariffs between member states and there is even a mechanism for dealing with the vexed question of rules of origin.

In short, therefore, there is not the slightest need for the UK to continue a customs union relationship with the EU and no merit in attempting to maintain such a relationship.

The only person who seems to have got the point in high political circles is Stephen Kinnock who is ploughing his lonely furrow on the Efta/EEA option.

On this, Kinnock sees a six-week window. The British government, he says, has six weeks to decide on the basic model that will define the shape and nature of U.K.-EU relations for generations to come. Once the EU27 agree on negotiating guidelines for the next phase - on the future relationship - in late March, there can be no turning back.

In the meantime, he reminds us that Michel Barnier has repeatedly made it clear that we must make a choice. Either we go for a free-trade agreement such as the one between the EU and Canada, or we go for the EEA.

Once we have that basic model agreed then there will be some scope during the transition phase to add to or subtract from it, but to all intents and purposes the choice will be binary. And that, he also says, makes it vitally important that both the government and the Labour Party clearly state that the Efta/EEA is our preferred model for the future relationship.

Initially, through Flexcit, we were suggesting that this was the preferred interim option, allowing development of the EEA Agreement into a genuine European single market, covering the whole of geographical Europe, detached from the ambitions for political integration that have hitherto dominated the EU's version.

It was never the case that we advocated the EEA as final cover. It was never more than the least-worst option that could tide us over until we have put something better in place.

On the table at the moment is the "vassal state" transition period which amounts to Brexit in name only as we retain all the obligations of membership but no participation in any of the institutions and no decision-making rights, while still being required to make financial contributions and subordinating our courts to the ECJ.

If at the end of the transition period all we have is a Canada-style free trade agreement, then the Efta/EEA option still makes sense, and it would still allow us to transform the arrangement into the single market model set out in Phase Three of Flexcit.

To that extent, even if we could not succeed in securing an immediate shift to the Efta/EEA option and are forced down the route of Mrs May's "vassal state" transition, we would then have two years (or 21 months) to rejoin Efta and negotiate our way back in to the EEA Agreement.

From this end of the telescope, it seems unlikely if this option would ever be entertained by Mrs May's government. But the transition period does bring us to the end of 2020 and, as been mooted, an extension could bring us past the next general election.

All of a sudden, Kinnock's scenario could make sense. If he can convince the Labour Party to put its weight behind the Efta/EEA option, there will be "clear blue water" between the two main parties in the forthcoming campaign. And with the Tories split three ways, between Efta/EEA, a Canada-style FTA and the WTO option (or four if you add remaining in the EU), Labour could look electable, even with Corbyn at the helm.

Perversely – for the Tories – that makes Rees Mogg and his ERG supporters one of Corbyn's greatest electoral asset. This group is expending all its energies on promoting a "hard" Brexit, preventing the Conservative Party adopting a uniform front.

On the other hand, with the Soubry faction pushing for the customs union, division is inevitable and, as we have so often seen, "Tory splits" invariably prove fatal to the party's election prospects. If Labour unites behind a credible plan, it could cruise to victory.






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