Temporary customs union?

John McDonnell: Labour will vote against government plan

Download Perspecs
Perspecs

Beyond the jargon: what actually is the customs union?

By Daniel J. McLaughlin

Britain's departure the European Union is surrounded by political jargon, some of which can be difficult to decipher for the novice.

Remember the early days when Theresa May said Brexit means Brexit, and we were still none the wiser what the prime minister meant? There was a hard Brexit or a soft Brexit, a red, white and blue Brexit or a Canada plus plus Brexit. Or, to keep the children awake at night, the horrifying prospect of a no-deal Brexit (don't have nightmares).

And then you start to get into the technicalities of Brexit: will Britain leave the customs union and the single market? Will there be a new customs union, or should that be a customs partnership - or none of the above?

For the time being, we will explain what the EU customs union is - and what the UK could be potentially leaving behind after March 29, 2019.

According to Politico, there are 15 customs unions worldwide, including the EU customs union and the two less-complete unions between the EU and Turkey and the EU and San Marino.

Simply put, a customs union is "a group of states that have agreed to charge the same import duties as each other and usually to allow free trade between themselves," according to Sky News. It reduces administrative and financial trade barriers - including customs checks and charges - between those states.

A customs union simplifies trade between states. Full Fact explains that outside of the customs union, countries have to pay tariffs; in free trade agreements (FTA), those tariffs could be reduced or removed; in the union, there are no tariffs. The single market is a broader agreement that includes the four freedoms of the EU: the free movement of goods, services, capital, and people.

A customs union also removes the need to provide proof of where and how their goods were made - known by the term 'rules of origin' to ensure the correct tariff is levied and that only products from the free trade partner would benefit from the lower tariff.

Full Fact writes: "Different products have different rules agreed between the parties setting out criteria for judging where it came from.

"The average car made in the UK purchases 44 per cent of its components from UK suppliers. But the proportion of this actually made in the UK is somewhere between 20 per cent and 25 per cent. For an average FTA it would need to meet a 55–60 per cent threshold to qualify for whatever reduction in tariffs had been agreed."

It also means all EU member states set the same tariffs on imports from non-EU countries. The Daily Mirror reports that "car imports from the US to the EU carry a 10 per cent tariff, while South Africa has to pay up to 16 per cent on the oranges which it exports to the EU".

The EU customs union, however, prevents members from negotiating their own trade deals elsewhere in the world, because they are tied to the tariff arrangements of the 28 - soon to be 27 - EU member states, along with Monaco (through an agreement with France). The British territories of Akrotiri and Dhekelia, Guernsey, the Isle of Man and Jersey are also not EU members, but they are part of the bloc's customs arrangements due to their relationship with full member states.

As the BBC notes, you do not have to be a member of the EU's single market to be in a customs union with the EU. The bloc has customs union agreements with Turkey, Andorra and San Marino - these vary in scope, such as type of goods covered. On the other hand, Norway is given access to the single market as a member of the European Economic Area (EEA), but it is not part of the customs union.

The Institute for Government warns that UK exporters could possibly face higher tariffs and other trade barriers. This is because Britain will no longer benefit from the EU’s 56 free trade agreements, which provide better access to markets outside of the EU, including Korea, Mexico and Chile.

The customs union with the EU can be a complicated affair. When Britain voted in the EU referendum, they were asked a simple, binary question - but in truth, it is much more difficult than should the Britain stay or leave. Even without the political jargon, the customs union can be tough to get your head around - and Westminster is certainly struggling to do that in their negotiations with Brussels.

Download Perspecs
The Times

Theresa May's secret deal to keep UK in customs union

British government sources say prime minister Theresa May has secured concessions from Brussels that will keep the whole of the UK in a customs union for a time, helping to avoid a hard border in Ireland.

UK negotiators are said to have succeeded in convincing Brussels to insert a "bare bones" outline of this arrangement in the withdrawal agreement, giving it greater legal standing. This is regarded as a concession to Britain, because the EU has been insisting that putting arrangements of this kind in the exit deal is legally impossible.

Read Full Article
Download Perspecs