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Theresa May faces devil’s choice over customs union

by Hugo Dixon | 17.11.2016

Boris Johnson told a Czech paper this week that the UK will probably leave the EU’s customs union post-Brexit. But Downing Street says no decision has been made.

The customs union allows goods to pass freely between EU states without tariffs or internal customs controls. All 28 countries also have to apply the same tariffs on goods imported from the rest of the world.

The EU’s customs union is often confused with the single market, but it is different in two main ways. First, the customs union only enables free trade in goods, not services – whereas the single market allows for free trade in both. So Turkey, which is in the customs union but not the single market, has access to the EU market for its goods not its services.

Second, being in the single market doesn’t mean the absence of customs controls. Imports to the EU from Norway, which is in the single market but not the customs union, are subject to customs checks even though they don’t face tariffs. These controls are needed to ensure that imports from a third country, say China, are not routed via Norway to the EU and avoid tariffs.

If the UK stays in the customs union, our manufacturers will face no disruption on their exports to the EU. A further bonus is that there will be no need to impose border controls between Northern Ireland and the Republic of Ireland – unless they were needed to control the movement of people rather than goods. The government is rightly anxious to avoid the return of a hard border between the Republic and Northern Ireland.

But remaining in the customs union has downsides. Because we would have to impose the same tariffs on goods imported from the rest of the world as the EU does, we would have little freedom to cut our own trade deals with other countries. We would be worse off than at present because we would have no vote on the EU’s tariffs – we’d just have to copy whatever it did. That’s hardly taking back control.

Faced with such an unappealing dilemma, it’s no wonder May is dithering. But there is one way in which all our industries could continue to have full access to the EU market and our government could continue to have a strong say on the bloc’s trade policy. We could just stay in the EU.

Hugo Dixon is co-founder of CommonGround as well as editor-in-chief of InFacts. You can sign up as a supporter here.

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Edited by Michael Prest

3 Responses to “Theresa May faces devil’s choice over customs union”

  • ‘We could just stay in the EU’

    Absolutely – if only they showed willing to compromise a little on fair and balanced freedom of movement.

    • @Margot

      of course, there are plenty of ways to negotiate.
      but essentially, the less responsabilities you want to take on, the less decision-making you’ll be endowed with.

      for example, restriction on european citizens to the UK (and vice-versa for british citizens in the EU), against loss of European Council and Parliament representation.
      something akin to current Norway’s EEA status