EU Referendum

Brexit: confusion reigns


David Jones, Minister of State for Brexit, has told a House of Lords committee the UK's negotiating position may not be "totally crystallised" by next spring. The government was "at an early stage of the process", he said, and thinking was "developing".

But then, if this recent report in the Guardian (and a parallel report in the Mail) is any guide, this should not come as a surprise. The debate seems to be going backwards, sowing confusion in place of clarity, adding needless complications to an already complex issue.

For a start, these two newspapers don't seem to know whether they are coming or going. Both apparently report on work submitted to the Cabinet by the Treasury, the think-tank NIESR, and the Centre for Economic Performance at the London School of Economics, but both seem to have a different idea of what it involves.

The Mail, on the one hand, has the work focusing on "a Norway-style model where the UK exits the single market but stays inside the customs union", whereas the Guardian has it that we remain "inside the single market but outside the customs union".

The Guardian then confuses the issue still further by suggesting that a customs union sets common external tariffs – which is fair enough – but then, bizarrely, asserts it "does not require customs checks".

There, we seem to have the newspaper confusing itself as both the Single Market and the Customs Union have the effect of abolishing internal trade barriers. Customs unions, traditionally, deal with tariffs - removing tariffs between members and settling a common external tariff to third countries. The Single Market goes further, abolishing qualitative and quantitative barriers to trade, between members.

There is, however, a degree of overlap, in that a free trade area (of which the Single Market is an example) also abolishes internal tariffs (in whole or part), so the main residual function of the EU's Customs Union is to set the Common External Tarriff (CET). Both the Customs Union and the Single Market require customs checks at the external border.

Unfortunately we cannot check the original reports as these do not seem to have been published, but the issues they raise are not at all helpful. Rather, they add to the more general confusion about customs unions, which should perhaps not have been raised at all in this post-referendum period.

The point is that, when there is a discussion about whether the UK should remain inside the EU's customs union, this begs the question as to whether we can do this and still leave the EU. In all probability, this is not possible. 

At issue is a rather stark problem. The EU's customs union is underwritten by a legal code which gains its authority from the EU treaties. To countries outside that treaty framework, it can have no direct effect - any more than US federal law can apply to other countries, turning an outside country into part of the United States customs area. 

There is a contrast here with the Single Market. That is also underwritten by a body of law, which gains its authority from the EU treaties. But there is also a parallel a treaty system in the EEA Agreement. Through this, the EU Single Market acquis can be transposed into EEA law and thereby apply to to non-EU members (as in the Efta states). Thus, it is possible for them to participate in the Single Market and not be a members of the EU. They do not obey EU law. They obey EEA law. 

As regards the EU's Customs Union, there is no parallel treaty system by which EU law can apply to countries outside the EU. Therefore, there is no mechanism by which non-EU members can adopt Customs Union law, and become active members of the Customs Union with a common customs area.

By all means, we can agree a separate customs union with the EU (once we have left the EU), as have Turkey, Andorra and San Marino. But these are customs unions between the EU and third countries. That is not the same as being part of the EU's customs union. Its customs union was embedded in the founding treaties and carries through to the current EU treaties (Article 28 TEU). 

Article 28 states: the European Union "shall comprise a customs union". The customs union is an integral part of the EU – with duties collected paid to the EU, which become part of its income. To be in the customs union, you have to sign up to the EU treaties. To add non-EU members would require in all probability the EU treaties to be amended. And it is hard to see that happening. It is hard to see how that could happen.

Furthermore, the Union Customs Code - which is the key executive instrument of the customs union - is also applicable only to Member States. There are 97 references to Member States in the Code, imposing rights, duties and obligations. The Code could not easily be made to apply to third countries: it would impose obligations which would have no legal force on parties outside the EU treaties.   

Nevertheless, if for the purposes of argument the Code was adapted to allow continued UK participation, it would still be judiciable by the ECJ and would remain so. Unlike the Single Market, there is no separate court for non-EU members, such as the Efta Court, to adjudicate on the specific body of law. If the UK wanted to stay in the customs union, it would have to accept ECJ jurisdiction, post-Brexit.

Doubtless, that would keep the UK so closely embedded in the EU institutions that it would be hard to argue that we had completely left the EU. Contrary to EEA membership – where Efta states are decidedly not in the EU – UK membership of the customs union might make it only a semi-detached member. It is unlikely that that could be taken as fulfilling the referendum mandate.

Yet, perversely, this whole issue has only emerged after the referendum. I certainly don't recall discussing the customs union during the campaign – certainly not in any depth – and had always regarded it as a non-starter. All it is doing now is adding to the confusion. The sooner it drops out of the discussion, the better. 

There is no real prospect of the UK remaining in the Customs Union, and neither would we want to.