As the Brexit countdown clock ticks ever louder, Westminster’s gaze has once again swung around to the issue of whether or not Britain should remain in a customs union. But the political focus can easily obscure rather than illuminate more fundamental issues at stake.
What is a customs union?
This is an agreement by a group of countries, such as the EU, to all apply the same tariffs on imported goods from the rest of the world and, typically, eliminate them entirely for trade within the group. By doing this, they can avoid the need for costly and time-consuming customs checks during trade between members of the union. Asian shipping containers arriving at Felixstowe or Rotterdam, for example, need only pass through customs once before their contents head to markets all over Europe. Lorries passing between Dover and Calais avoid delay entirely.
What does it matter?
Customs are not the only checks that count — imports are also scrutinised for conformity with trading standards regulations, security and immigration purposes — but they do play an important role in determining how much friction there is at the border. A strict customs regime at Dover or between Northern Ireland and the Republic of Ireland would lead to delays which will be costly for business and disruptive for travellers. Just-in-time supply chains in industries such as carmaking could suffer. An Irish peace process built around the principle of entirely unfettered travel between north and south could be jeopardised.
Could the U.K. stay in a customs union?
Britain will necessarily leave the existing EU customs union as a direct legal consequence of Brexit, but it could strike a new customs union deal that would replicate many of the advantages. Much like the deal Turkey has negotiated, this would, however, limit the freedom Britain would have to negotiate other trade deals independently of the EU. A future U.K. government could, in theory, diverge from the common external tariff, but foreign importers would know that they could always fall back on EU ports of entry to access our market. At best, therefore, it would require close collaboration between the EU and U.K. when negotiating third-party trade deals. At worst, Britain would lose any new negotiating clout.
