Now that crucial decisions have been taken by EU27 leaders on a six-month ‘flex-tension’ to the Article 50 process, focus at Westminster will doubtless shift back to the contours of the final relationship which could be negotiated between the UK and EU. This future relationship is outlined in the Political Declaration that must be agreed with the EU alongside the Withdrawal Agreement (which addresses the separation issues). This relationship has been widely debated by MPs, not least through the recent indicative votes, but as of yet there is no consensus.
Unfortunately, the debates in both Parliament and the media have sometimes conflated the customs union with the Single Market. The Single Market, which came into operation in 1993, eliminated the border checks on many goods across all EU member states. It provided common rules, enforcement, monitoring and judicial oversight on many goods, giving consumers confidence in the safety and quality of those goods. In that sense the customs union is the delivery mechanism for the Single Market. For food, chemicals and many other supply chains, the Single Market is the more significant of the two in terms of eliminating non-tariff barriers and regulatory checks.
Within a customs union, trade is not frictionless. Typically, checks for tariffs and origin of goods are eliminated if a common set of tariffs exists between the contracting countries. There can still be trade remedies applied between the parties, as is the case in the EU-Turkey customs union agreement. In terms of UK-EU27 trade, there are 63 potential regulatory, taxation and customs checks applicable to goods moving across trade borders (other than continued membership, no off-the-shelf solution deals with them all for the UK, but the backstop would for NI). Only two of these checks are removed by a customs union. The BRC has long called for frictionless and tariff-free trade in the UK’s future relationship with the EU – a customs union alone offers only the latter.
Politically, the debate around a customs union has provided a launching pad for cross-party talks on a potential agreement that could pass in the House of Commons. In the absence of any extraordinary technological leaps on customs facilitations in the years ahead, it is also an essential part of ensuring there is no hard border on the island of Ireland. The Commission has indicated it is prepared to alter the Political Declaration to directly refer to the negotiation of a customs union should this gain the agreement of Parliament. Nonetheless, such an outcome would still not provide for frictionless trade, seeing many non-tariff barriers going up, and potentially raising prices for consumers.
Now that a longer extension has been granted, it is time for Government to talk to business in a more structured way about the path forward. Retailers are already spending hundreds of millions of pounds mitigating the risk of a ’no-deal’ Brexit. At a time when shops are closing and jobs are being lost, retailers cannot afford to continue to pay the cost of Brexit uncertainty ad infinitum. Nor does this uncertainty benefit consumers, who are already spending more cautiously.
Nonetheless, there is hope. The indicative votes process earlier this month suggested several different options for the UK’s future trading relationship. But comments from Parliamentarians show that many still do not understand some of the implications of these options – but businesses do. That is why the British Retail Consortium is calling for Government to engage in serious consultation with businesses to inform the debate about the future relationship between the UK and the EU.
William Bain is Europe and international policy adviser at the British Retail Consortium and a former Labour MP