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British government ministers have begun to battle in public about the country’s negotiating objectives on the terms of Brexit. Last June’s referendum afforded the electorate the opportunity to vote against continued membership in the European Union, and 52% of voters duly did so, in a pretty high turnout. Both the Conservative and Labour parties have committed to respecting the result and the minority Conservative government has finally begun exit negotiations in Brussels this week. The trouble is that, while the voters rejected continuing EU membership, they did not indicate what form of exit arrangement they preferred. They were not asked.
it is possible to be outside the EU and in the customs union
Britain is currently a member of three external relationships. It is a member of the EU, of the EU’s single market and of the customs union. It is possible to quit the EU while remaining in the single market: several non-members, notably Norway, are part of the single market. Similarly, it is possible to be outside the EU and in the customs union: Turkey is the only example. Strictly Turkey is not a member of the customs union, it has a customs deal with the EU’s customs union which makes it close to being a component of the customs union for many important purposes.
Note that membership in the Common Agricultural Policy is a feature of EU membership, not of single market or customs union
It is in principle open to the UK to quit the EU while staying in the single market, to quit and stay in the customs union, or even to quit and stay in both, the outcome which would best meet Irish concerns, north and south of the border. There is no current example of a non-member in both but it could be negotiated. Note that membership in the Common Agricultural Policy is a feature of EU membership, not of single market or customs union. So Brexit means no more CAP membership for the UK, even in the softest form imaginable.
A customs union is an arrangement of countries which levy no tariffs on goods (services are not covered) internally and identical tariffs on goods imported from outside. Thus merchandise can circulate freely without tariffs inside the customs union. The single market is much more ambitious. It covers services and aligns regulations so that products and services acceptable in any country are acceptable in all. It also provides for free circulation of both capital and labour and gives all persons and firms access to supranational dispute resolution systems, such as the European Court of Justice. All contribute annually to the costs of running the show.
The policy of the UK government is to negotiate a free-trade agreement (FTA) with the EU-27. This is not the same as membership in the single market or the customs union. The EU has FTAs with various non-members, including Canada and South Korea, and is negotiating one with Japan. Negotiations with Donald Trump’s US are in limbo.
Problem
The problem for British politicians is that membership of the single market and of the customs union deliver benefits for Britain which cannot be replicated in an FTA. But this is what they have been promising – the election manifestos of both the Labour and Conservative parties pretend that an FTA can somehow be fashioned which leaves existing trade relationships with Europe unchanged. It is not possible to stay in the single market while limiting free movement, or escaping from common regulatory standards. Nor is it possible to negotiate bilateral trade deals around the world while remaining in the customs union.
When the negotiations fail to deliver the existing benefits through an FTA, and they will because they must, this will have to be somebody’s fault. UK politicians will seek to blame the EU-27 but the fault lies with those who have promised what is simply not possible, namely withdrawal from single market and/or customs union with no negative consequences. There is no precedent for an FTA which would reproduce all of the features of both the single market and the customs union.
Staying in the single market, as in the so-called Norway option, would be popular with business but would abandon ambitions to take back control over free movement and implies ongoing payments to the EU budget and continued European Court jurisdiction. Staying in the customs union means no bilateral trade deals with countries outside Europe. However improbable such deals might be, the Brexiteer faction regards the freedom to pursue such deals as an article of faith and trade minister Liam Fox has been reappointed, in effect, to take the UK out of the customs union.
Should the UK alter course and opt for the benefits of continued participation in both single market and customs union, the entire rationale for Brexit begins to unravel. The simplest way to achieve this outcome is to stay in the EU, the course of action ruled out by accepting the referendum result.
SHARING OPTIONS: