Tories damned if they back customs union, damned if don’t

by Hugo Dixon | 02.02.2018

One faction of the Tory party wants a customs union with the EU to protect jobs; another fears that would turn us into a vassal state. Both are right.

The more they tear into each other, the better. The greater the chance we’ll then end up with the only really good solution: deciding to stay in the EU. That would allow us both to protect jobs and to keep our place as one of Europe’s big powers.

Three officials have told the FT that the government is secretly looking at the possibility of staying in a customs union with the EU covering goods post-Brexit. There are two main reasons. First, our manufacturing industry – which depends on complex supply lines that criss-cross Europe – wouldn’t face trade turmoil. Second, it would be easier to avoid a hard border in Ireland, something Theresa May has already agreed to in her deal with the EU before Christmas.

Philip Hammond, the chancellor, is said to favour a close customs relationship with the EU post-Brexit. The prime minister herself hasn’t ruled it out.

Unhappy Fox

But hard Brexiters will go wild at the prospect. Liam Fox, the trade secretary, told Bloomberg: “It is very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we’d be following behind that.”

He’s right to be concerned. If we had a customs union with the EU, we would be unable to pursue our own trade deals for goods with the rest of the world. One of the main arguments used for having Brexit would be destroyed in one fell swoop.

Now, of course, Brexiters vastly exaggerate the benefit of doing trade deals with America, China and the like. The government’s own secret analysis, which leaked this week, suggests that a US deal would boost our economy by only 0.2% in the long run, while deals with other countries including China would together add only up to 0.4%. Meanwhile, quitting the EU would knock the economy by up to 8%.

What’s more, it’s quite likely the EU will do its own trade deals with many of these countries. After all, it has recently clinched pacts with Japan and Canada, to add to its existing list of over 60 countries. New EU deals will be better than any we can cut on our own because Europe has the clout to negotiate with America and China as an equal partner whereas we, as a much smaller economy, would risk being bullied into accepting bad deals.

If Brexiters lost the freedom to cut trade deals, it’s hard to know what story they would be able to peddle about the supposed benefits of quitting the EU.

Patriots shouldn’t rejoice

But patriotic pro-Europeans shouldn’t rejoice at the idea that the government might negotiate a goods-only customs union with the EU, for three reasons.

First, it would do nothing to protect trade with the EU in our world-leading services industries.

Second, we would have to try to copy slavishly any deal the EU did in goods with other countries, whether we liked it or not. We’d be in a weak position to get such pacts because other countries would have a backdoor route to send their products to the UK via the EU, without giving us the right to ship our goods to their markets.

Third, a customs union alone wouldn’t stop the need for border checks. Sure, there wouldn’t be tariffs or the need to figure out the ultimate origin of the goods. But the EU would still need to verify whether products entering its markets conformed to its standards. So manufacturers’ supply lines might still get gummed up; and there would still need to be some border controls in Ireland.

Battle royal over vassal state

The only way to solve these problems is to agree to align our rules with the EU’s as well as having a customs union. But we’d then become a vassal state on regulatory policy as well as trade. How’s that taking back control? Even if we did that, we still wouldn’t have full access to the single market for our services – as, to get that, the EU would demand that we paid into its budget and accepted free movement of people, again without a vote on how that money was spent or on its policies.

So the Tories are damned if they embrace a customs union – and damned if they don’t. And they are damned whatever they do on regulatory alignment too. No wonder that the prime minister hasn’t got a clue what to do – and has avoided saying what she wants.

But the good news is that the battle within the Tory party seems to be coming to a head. The party may then find it can’t get unity around any EU policy. The public, which is already concerned that the Tories are botching the talks, would increasingly realise that there is no good Brexit. And it would then be easier to explain that the only sane approach is to stay in the EU. That would protect both manufacturing and services, while giving us a powerful say in the EU’s external trade policy as well as its internal rules.

Let the battle royal begin.

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Edited by Luke Lythgoe

4 Responses to “Tories damned if they back customs union, damned if don’t”

  • I don’t say they don’t worry that they’ll become a Vassal state. But as usual with Brexshiteers, they speak from ignorance; not knowing what a Vassal State is.
    – Would the UK be able to make its own laws during this period?
    – Would it be able to make its own decisions about going to war?
    – Would it be paying for an EU army in this period?

    No? Then all we’re talking about is the possibility that they might be subject to a few new laws that could conceivably pass onto the EU statute book in the latter months of a transition period. That’s not “Vassal state”. That’s “Norway”.

    And another thing, Vassal states do not normally choose their fate, or have the ability to withdraw from their situation. The EU are not forcing the UK to enter a transition period. Nor would they prevent the UK from cutting it short.

    They would simply be surprised that the UK would act so much against its own interests. Or on second thoughts, maybe they’re not surprised about that any more.

  • I don’t know if this is super-relevant, but it is a bullet-point list of topic raised at a meeting Cambridge recently with A.C. Grayling. I found it reassuring, but there is much to do.
    The theme last night was “Cambridge Stays” (in the EU) and it was hosted by A.C. Grayling, and lasted about an hour.

    He approached the topic from several directions, but I have just bullet-listed them below.

    1) The execution of the EU referendum may not have satisfied EU law, and ECJ is looking into this (It must be very risky, politically).

    2) It was clear that the referendum was advisory (although that particular horse does appear to have bolted, but why does it appear no longer relevant?)

    3) There is a government paper stating that the UK, is and always has been, a sovereign state. Whether that will satisfy the swivel-eyed, I don’t know.

    4) Grayling chairs an association of groups focussed on keeping the UK in the EU. He said that over the next few days we should see some actions from this organisation.
    see https://www.theguardian.com/politics/2018/feb/01/groups-opposed-to-hard-brexit-join-forces-under-chuka-umunna

    5) He discussed the role of Cambridge Analytica in the Brexit referendum and Trump’s election. (See https://en.wikipedia.org/wiki/Cambridge_Analytica). Apparently, their logic was to dismiss appealing to the hard right or left but to focus on the waverers in the center. Then by judicious directing of news, false or otherwise, stories, and communications, each subgroup is turned in the required direction. This is still going on!
    Another technique they used was to reassure the Remainers that the vote for Remain was safe, no one would vote to leave… and hence to encourage them not to bother voting.

    6) The Labour Party leadership is having an “away day” soon, where some of the party hope to convert Corbyn and his closer allies to staying within the EU. There may have been a fundamental misunderstanding of EU rules which could have impeded their Marxist agenda!

    7) There are a large number of MPs who are pro-EU and desperately seeking a way to express this (at minimum risk to themselves).

    8) The gov. seems bent on leaving the EU as a way of keeping its party together rather than addressing the economic concerns of the country. This is likely to be challenged as it is not correct behaviour….at least not for a friendly power!

    9) May wanted to resign after the recent election but pressure from the party stopped her. The general idea is to keep her around for Brexit ..as someone to blame if it goes wrong. Then one of them can take over. She is seen as a hostage rather than PM..and the Brexit T&Cs are not hers to control…hence her lack of specifics…she is balancing between the two groups to keep the party together.

    10) The economic argument for staying in the EU is accepted in the House, but much of the drive for Brexit is emotional…and the Tory party have had a long-standing anti-EU group which believes their time has come.

    11) As has been much reported, the pro-Brexit leaders, Boris, IDS, Rees-Mogg, Fox, etc are all wealthy men. Their general direction is a low regulation, low tax economy for this country, which would bring their particular areas (and of their colleagues) into more profit.

    12) The general strategy of rubbishing any (economic) reports which contradict the pro-Brexit views fits with what has been coming out of Cambridge Analytica (see 5 above).

    Useful actions suggested:
    Basically write to your own MP expressing your concerns., Also, write to other MPs to challenge their stands. They did ask for younger people to get more involved in marches (another body-blow!).The country is supposed to come first….you might remember the MP Phillip Lee arguing that the gov. does not have the right to lead the country onto a path which is expected to diminish the country’s wealth. He got beaten up by the Whips, but he clearly has a point which might surface again. What he is suggesting is that the gov. is operating like an enemy power!
    A key recommended action was to engage in tactical voting at the May elections. Abandon your political allegiances and vote for your local Remain candidate. This migh result in enough MPs feeling empowered to get off teh fence.

    Some interesting points;
    The news editor of the Today program is ex-Daily Mail and Telegraph.
    The BBC, as an organisation, has decided that Brexit is not to be challenged, so not accepting Brexit is off the agenda of all programs. Hence no news about this at all!

    I guess the hall was over 80% full. It was not standing room only, unfortunately. The meeting was held by http://www.cambridgestays.org.uk/

    So, basically, the outcome, for us at least, was to agitate MPs to provide enough ammunition for them to take the actions they would like to take. and to use tactical voting to support our case. It was clearly stated that there is a majority in both houses for remaining in the EU. They just need to believe that there is enough support, in spite of the Mail, Express and Sun distortions!


  • This was all decided in Phase 1.

    The only way to solve the GFA / Ireland issue is to stay in the Single Market and Customs Union.

    It is just a matter of time before the Government (Kicking and screaming) accept this.

  • I don’t see what the problem is.

    So we leave the EU, and our remaining manufacturing and financial services bugger off to the Continent or ME. Chancellor Rees-Mogg also takes position of PM and Foreign Sec, and his extreme Austerity ensures 90% of the Public get MUCH poorer.

    However, because Rees-Mogg pushed May’s “fake news” censorship even further to block all leftie web-sites, the Mail and Murdoch’s toilet outflows reach across the Land.

    This means that mega-millionaires and billionaires get ever wealthier.

    And as that all trickles down, we ALL become millionaires!!

    Like Zimbabwe.