In what could be a Brexit game-changer, some ‘clear blue water’ has emerged between the UK’s government and the main opposition party, Labour, on the issue of the customs union.
Labour announced its support for the UK to become part of ‘a new and comprehensive customs union’ after Brexit. The adoption of this policy is aimed at avoiding the need for a hard border in Northern Ireland and promoting the continuation of frictionless trade with the EU. As part of its proposed new arrangement, Labour wants to the UK to have some say in future trade deals made by the EU. It also seeks exemptions from EU competition rules that may limit Labour’s plans for nationalisation and state aid if it regains power.
Conversely, the government wants the UK to leave the customs union and establish a new agreement that would give the UK freedom to negotiate of new international trade deals across the world. It also argues that leaving the customs union would honour the decision made by voters to leave the EU.
With crucial parliamentary votes on the Trade and Customs Bill due to take place in the coming weeks, pro-Remain Conservative MPs are threatening to rebel against this policy and could side with Labour to defeat the government’s plan for ‘managed divergence’ from the EU. Bearing in mind the government’s slim parliamentary majority, the threat that such an outcome poses to the government’s Brexit strategy is real.
Labour’s proposed customs model is similar to that adopted by Turkey, which allows it to access EU supply chains without triggering ‘rules of origin’ requirements. It also maintains Turkey’s independence from the EU’s free movement rules and EU budget payments, but also requires Turkey to pay the EU’s common external tariff and conduct lengthy border checks.
However, at this stage, it is unclear whether the EU would be willing to accept such terms. It might be considered unlikely given that the UK is leaving the EU, as opposed to Turkey – a country that was seeking to join the bloc.
Labour policy shift has come at a critical stage and could shape the immediate future of the wider Brexit debate. It has received a cautious welcome from the business world, desperately seeking certainty over future trading relationships, and from trade unions wanting reassurances that the current regime of EU standards and rights will be maintained. However, many Brexit supporters regard the proposal as being a betrayal of the vote to leave.
A further twist in the customs union issue was the inclusion of a ‘backstop’ clause regarding the Irish border contained in the draft legal text of the withdrawal agreement published by the European Commission at the end of February. This states that Northern Ireland would remain in a customs union with full alignment to single market rules in the absence of an agreed alternative arrangement. Should this come to pass, it would imply a customs border being created in the Irish Sea instead. Theresa May was swift to respond, saying that: “No UK prime minister could ever agree to it.”
Article published: 2nd March 2018
