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GP – RN > Brexit: Customs union is a red herring …
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Posted by:
Greg Lance – Watkins
Greg_L-W

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Hi,

Guest Post
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

Here are 40 comments from the newspaper’s online version!
The vituperative and personal animus shown in many of the comments, together with the total failure of those indulging in ad hominem attacks & the cowardly use of anonymity of critics would seem to indicate that Dr. North is presenting unpalatable facts that undermine the fantasies of many readers!
The comments of many of the correspondents are very clearly ill informed & lack the rigor of thorough research – research which Richard North is both trained and experienced to have undertaken, and shows to have understood, in both this article and in FleXcit CLICK HERE and his hugely informative BreXit Monographs CLICK HERE, of which there are 16 so far.

Roger Stapleton 2 days ago

 
 

Goodwill on the other side.You have to be joking.They are furious.They will play very hardball.

 
Peter De la Roche 2 days ago

 
 

This article seems to be self contradictary as:

–  On the one hand Richard North says the customs union does not by itself prohibit the UK negotiating trade deals with third party countries outside the customs union,

–  But on the other hand he says that a rule of the customs union is to apply common tariffs for imports from all third ountries.  Therefore, what is the point of being able to “negotiate” trade deals with third party countries if the imports from such third party countries to the UK have be at the tariffs as set by the EU?

If I’m missing something here perhaps someone could explain.

Tim Broomer 2 days ago

 
 

On this we agree. You have hit the nail on the head. What’s more Turkey have to accept the terms of all the EU’s trade agreements.

 
Edward Locke 2 days ago

 
 

@Peter De la Roche  I don’t know if it is the case, but in principle there could be a rule that imports into one of the members could be at a rate decided by that member, but not transferable to other members.

Tim Broomer 2 days ago

 
 

I think we can safely assume that is not the case. It doesn’t happen within the EU customs union.

Edward Locke 1 day ago

 
 

@Tim Broomer I did not say that it was the case, but that, in principle it could be. Given that the form of the agreement is yet to be decided, that is relevant. However, it is clear that we are not going to be in any form of customs union, so the debate over these points is somewhat “academic”.

 
Steve Jaques 2 days ago

 
 

It seems to me Locke and Wilson do not agree. Is one of them just wrong or is it more nuanced than that, a bit like the article 50 and the Royal prerogative? If so who decides-the ECJ? What fun. Seems this Brexit thing is a bit complicated but no doubt with goodwill on all sides we can get it sorted out in 18 months, then the other 27 can all agree and then off to the sunlit uplands, country back, control, just like it used to be and all that. 

Edward Locke 2 days ago

 
 

@Steve Jaques My understanding of the matter was in line with that of The Economist (amongst others). Indeed, perhaps that is where it came from (although not exclusively). The author of this piece held a significant and very relevant position at the EU, however, so I am inclined to believe him. I shall be interested to see what the government’s reaction is to this article.

Andrew Wilson 2 days ago

 
 

@Edward Locke @Steve Jaques

He has never held any position in the EU.

Edward Locke 1 day ago

 
 

@Andrew Wilson @Edward Locke @Steve Jaques  If what you say is true, then the description given at the bottom of the piece is incorrect. Surprising that you did not point this out at the beginning of these exchanges.

On reflection, not surprising at all. You select a few statements that catch your eye, and go into the attack based on those. You are evidently not a detail person.

 
Mike Ramsden 2 days ago

 
 

@Edward Locke @Steve Jaques The author has never worked in the EU. His academic background is in public sector food poisoning surveillance.

You cannot avoid custom union tariffs  which is what you need to strike your own trade deals without border controls and checks on exports and all the associated paper trail.

An example as to why not. Germany strikes a deal to import beef tariff free from Brasil rather than at the common tariff rate. Germany then prossess this meat and exports it across the EU market, undercutting all other producers because it didnt pay the common tariff on its imports. Therefore all beef exports from Germany need to be checked and verified at the border to ensure no Brasil meat content.

This is what happens at the Norway/Sweden border. Norway is in the single market but not the customs union. Goods are checked and smugglers chance their arm.

An interesting case study:

http://www.bbc.co.uk/news/magazine-20976887

Mike Ramsden 1 day ago

 
 

@Edward Locke @Mike Ramsden @Steve Jaques It is clear and always has been

That someone like North can be be so fundamentally wrong on a key issue such as this is staggering.

Another instance of where the die hard advocates on both sides of the debate have misled, whether wilfully or through ignorance.

 
Edward Locke 2 days ago

 
 

Interestingly, The Economist seems to think that membership of a customs union means that there can be no separate trade agreements:

http://www.economist.com/blogs/economist-explains/2016/10/economist-explains-6

We must remember, however, that smart as they are the people who write the articles are just journalists, and I would rather believe Richard North.

Andrew Wilson 2 days ago

 
 

If you rather believe this ass than the Economist you are beyond help.

Edward Locke 2 days ago

 
 

@Andrew Wilson Does the EU normally employ “asses” at director level? Oh, come to think of it, maybe they employed you at such a level, although you have never told us that, have you? Were you at director level, because if so that proves my point? If you were not, that proves a different point (after all, you were there for thirty years).

Andrew Wilson 2 days ago

 
 

@Edward Locke @Andrew Wilson

Richard North has never been employed by the EU – he would have no chance of passing the entrance exams.

He was employed by ukip’s political group in the European Parliament, a job which he got through his friendship with Farage.

 
Edward Locke 1 day ago

 
 

@Andrew Wilson @Edward Locke If what you say is true, then the description given at the bottom of the piece is incorrect. Surprising that you did not point this out at the beginning of these exchanges.

On reflection, not surprising at all. You select a few statements that catch your eye, and go into the attack based on those. You are evidently not a detail person.

 
Mr Alan Fox 1 day ago

 
 

@Edward Locke @Andrew Wilson  North was previously research director in the European Parliament for the now-defunct political grouping Europe of Democracies and Diversities, which included the UK Independence Party (UKIP).

He worked IN the EU, not FOR the EU and was employed, as this entry said by EDD which included UKIP, to which he belonged for a time, and even was a (failed) candidate.  There is no lies in the description at the bottom, just a sentence that is “economical with the truth”. 

https://en.wikipedia.org/wiki/Richard_A._E._North

MrsF

 
Vicuna 2 days ago

 
 

@Edward Locke

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.

Andrew Wilson 2 days ago

 
 

@Vicuna @Edward Locke

Wrong. The Economist is right.

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

 
Mike Ramsden 2 days ago

 
 

@Edward Locke You can have your own trade deals if youre not in a customs union but in a single market. You cannot however have free movement of goods without substantial border checks and proof of origin requirements. See Norway and Sweden.

 
JRS 2 days ago

 
 

It is not about goods. It is services that matter to the UK.

Edward Locke 2 days ago

 
 

@JRS So it would not matter if the car manufacturers shut up shop, would it?

Andrew Wilson 2 days ago

 
 

According to North, Minford et al it wouldn’t matter if UK manufacturing and agriculture were shut down.

 
Andrew Wilson 2 days ago

 
 

See Article 16 of the EU -Turkey Customs Union Decision to understand why North is wrong – Turkey has to align its external tariff with that of the EU, so it can only make deals within this tariff boundary, just like any EU member state.

http://www.avrupa.info.tr/fileadmin/Content/Downloads/PDF/Custom_Union_des_ENG.pdf.

He is also wrong about the persistence of customs checks. Border checks certainly persisted until abolished by the SEA, but they were not customs checks. They were checks on conformity with standards.

Edward Locke 2 days ago

 
 

@Andrew Wilson You seem to have overlooked the most interesting claim that he makes; that all that is needed for the free flow of goods is a customs cooperation agreement. In other words, forget the customs union, forget the single market, neither of which are needed to keep trade must as it is now (apart from the separate tariffs issue). Yet this is the very issue that exporters make such an issue of. Explain why he is wrong.

Andrew Wilson 2 days ago

 
 

You have understood nothing.

I can’t, in a short post, explain the basics of international trade to you.

Reflect on why countries go to all the trouble of spending years negotiating complex trade agreements when they could just have “customs cooperation agreements’.

Edward Locke 2 days ago

 
 

@Andrew Wilson You have not answered the question, as usual. Tariffs are a separate issue to the absence of physical and administrative barriers. You invariably distort what others say when unable to give a satisfactory response. I did not say that such an agreement would be sufficient on its own. Answer the question. 

 
Vicuna 2 days ago

 
 

@Andrew Wilson

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?

Edward Locke 2 days ago

 
 

@Vicuna @Andrew Wilson The answer to the question is “yes”, if by that you mean so-called freedom of movement, which is to say the right to work in the other entity.

 
Andrew Wilson 2 days ago

 
 

See Article 16.

No, it is not the case. Goods do not “flow freely”. They are subject to quotas and non-tariff measures.

There is no free movement.

Vicuna 2 days ago

 
 

@Andrew Wilson

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.

 
Tim Broomer 2 days ago

 
 

A free trade agreement for one. Almost certainly our only option left.

 
Andrew Wilson 2 days ago

 
 

@Vicuna @Andrew Wilson

No, non-tariff barriers still apply.

For example, they are the reason why Turkey cannot export animals or animal products to the EU.

 

Regards,
Greg_L-W.

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