Greg Lance – Watkins
By: Dr. Richard North
Brexit: Customs union is a red herring
Although rarely mentioned before June 23, the idea of continued membership of the EU’s customs union has emerged as a dominant theme in the post-referendum debate.
Yet its importance has been vastly overrated, not least because the customs union has been confused with the separate process of customs co-operation. This confusion resulted from an erroneous statement in last April’s Treasury report on Brexit which claimed that membership of the customs union “means that there are no customs checks on trade within the EU”.
Another misunderstanding is the idea that within the customs union, the UK cannot make its own independent trade deals with third countries. This error has pitched Liam Fox’s international trade department against the Treasury, which is said to want to keep costs to businesses down by avoiding extra customs checks.
The supposed prohibition on carrying on an independent trade policy is easily dispensed with. The actual prohibition stems not from the customs union but from the parallel common commercial policy and the European Commission’s exclusive power to make trade deals. Turkey has a customs union with the EU, yet is able to make third country deals. There is nothing implicit in this type of relationship which prevents this.
As to the customs checks, the founding Treaty of Rome in 1957 outlawed customs duties between members and required adoption of a common external tariff (CET) — duties to be imposed on goods imported from third countries. These are the characteristics of a customs union.
Although the customs union was complete by 1968, customs checks at the borders continued. It was not until June 1984 that the Fontainebleau European Council — following an earlier go-slow by customs officials and a damaging French lorry drivers’ strike — agreed in principle to abolish customs and police formalities at internal borders.
Only then, on July 13, 1984, did the French and Germans sign the Saarbrücken Agreement committing the two nations to reducing customs checks and establishing joint control points.
The following year Belgium, Luxembourg and the Netherlands joined with France and Germany to build on this initiative, signing the Schengen Agreement. The five countries committed themselves to the gradual abolition of checks at shared borders and to facilitating the transport and movement of goods.
Then, in the White Paper on the completion of the internal market, also in 1985, complete abolition of frontiers was proposed. But only when adopted in the Single European Act (SEA) did the internal market became “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty”.
The SEA set the target of eliminating internal frontiers by 1992, more than 30 years after the launch of the customs union. Thus, the abolition of frontier controls came with the creation of the internal market — better known as the single market — rather than with the customs union.
On this basis, the idea that we must remain in the customs union to avoid customs checks is absurd — the issues are completely unrelated. For sure, if we leave the EU without an agreement on the single market, or a separate customs co-operation agreement, the UK would have problems, as the chancellor Philip Hammond warned last week.
But there are no adverse consequences from leaving the customs union. The only “loss” is a release from the obligation to send the proportion of CET we collect to the EU budget, which is a requirement of membership. Since that currently runs to about £2 billion a year, there is no case for remaining a member. In all respects, as an issue, the customs union is a red herring.
To view the original of the article CLICK HERE
My thanks to an associate with a commercial membership who has provided a copy of this excellent article for us, from behind Rupert Murdoch’s pay wall!
Richard North is a former research director in the European parliament and author of ‘Flexcit’, a study on leaving the EU
Goodwill on the other side.You have to be joking.They are furious.They will play very hardball.
Vicuna 2 days ago
The Economist is wrong. The EU is in a customs union with Turkey and can negotiate free trade agreements with other countries from which Turkey may not fully benefit.
Vicuna 2 days ago
@Andrew Wilson @Vicuna @Edward Locke
No. The EU is in a customs union with Turkey, but is not prohibited by that from negotiating trade agreements with other countries.
The EU can and does negotiate trade agreements with other countries. Turkey is in the uncomfortable position of having to receive the products of those countries under those agreements, while not being able to have the same access to the markets in those countries enjoyed by EU members.
This is explained here. http://voxeu.org/article/eu-turkish-customs-union-how-proceed
Vicuna 2 days ago
This is 61 pages long. Please could you identify the relevant paragraphs.
Is it the case that goods flow freely between Turkey and the EU, but there is no movement of people?
Vicuna 2 days ago
Thank you for the reference.
Quotas and non-tariff measures appear to be prohibited by articles 5 and 6.
EU technical standards have to be applied, and there are rules relating to imports from third countries.
The Agreement appears to have helped Turkey to become an important intermediate manufacturer http://voxeu.org/article/eu-turkish-customs-union-how-proceed
The Turkey deal does not appear suitable for the UK, but it and the other EU trade deals (e.g. Ukraine) indicate that there are many arrangements to remove tariff and non-tariff barriers which do not involve free movement of people.
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