The UK’s customs rules could still be imposed by Brussels after Brexit, the Government has revealed as it outlined plans for a trade “alignment” with the EU.
Ahead of the launch of a new paper on the UK’s future trading relationship with the bloc, the Department for Exiting the EU announced two possible solutions for life after leaving the customs union.
One scenario would see a border managed by the UK – which the Government describes as a “highly streamlined customs arrangement”.
The other would see no border with the EU at all, as the UK would be in a “customs partnership” with Brussels.
This arrangement, described as an alignment, could potentially see the UK mirroring the EU’s customs arrangements – meaning if Brussels makes changes, Britain would be forced to adopt them.
The paper also claimed the UK could be in a “temporary customs union” with the EU after March 2019 - seemingly contradicting a vow from Chancellor Philip Hammond and International Trade Secretary Liam Fox that Britain will be “outside the customs union” after that date.
Economist Ruth Lea – a former civil servant who campaigned for Brexit – branded the call for a temporary union “rather extraordinary.”
She told HuffPost UK: “That seems to fly in the face of what Liam Fox and Philip Hammond were saying in the Sunday Telegraph - I don’t know how they square it.”
“They do keep giving out conflicting signals.”
Prime Minister Theresa May confirmed the UK would leave the customs union – which ensures non-EU imports are subject to the same tariffs across the bloc – in her Lancaster House speech in January.
A House of Lords report published in March warned the imposition of customs checks could damage the annual £357 billion trade between the UK and the EU, and businesses could be hit financially thanks to increased bureaucracy.
If the UK is unable to strike a deal with the EU within the two-year period set out by the Article 50 withdrawal process, the two markets will fall back to World Trade Organisation rules.
This could see cars being sold to the EU hit with a 10% tariff, alcohol with an almost 20% tariff, and dairy products with a more than 36% tariff.
The Government’s “future partnership paper” on the customs union is set to be published on Tuesday, and will set out details of a “time-limited” transitional period before the new arrangements kick in.
“One possible approach would be a temporary customs union between the UK and the EU”, an overnight briefing said ahead of the full paper being published.
When it comes to the post-interim period arrangement, the briefing states:
“Our goal is to secure as frictionless trade as possible with the EU alongside the ability to forge trade deals around the world, and avoiding a hard border with Ireland.
“We are proposing two different ways that would best meet these goals achieve this:
A highly streamlined customs arrangement in which the UK would manage a new customs border with the EU, streamlining and simplifying requirements to the fullest extent possible through negotiated and unilateral facilitations which reduce and remove barriers to trade; or
A new customs partnership with the EU, based on alignment of our customs approaches, which would negate the need for a customs border between the UK and the EU.”
Lib Dem Brexit spokesperson Tom Brake claimed trade deals already mooted by the Government would render the “no border” option impractical.
Brake said: “Liam Fox’s plans to drop the ban on chlorinated chicken would mean customs checks by the EU. They will rightly want to stop dodgy chicken and other products coming in via the UK.
“The bottom line is we’re either in the customs union or not - you can’t be half pregnant.
“The only way to prevent barriers to trade with the EU is to stay in the Customs Union and Single Market.”
His comments echoed those of Labour’s former Shadow Chancellor Chris Leslie, who branded the paper’s suggestions as “wishful thinking of the highest order”.
The Open Britain supporter said: “It looks like the new unified position in the Cabinet is to return the Government to the territory of wanting to have their cake and eat it.
“Ministers claim we can leave the Customs Union and yet still achieve ‘the most frictionless customs agreement anywhere in the world’ but with absolutely no detail about how such a miraculous new system will be achieved.
“It is a fantasy to pretend we can have the freest and most frictionless trade possible with our largest partner when the Government remain intent on pulling Britain out of the Customs Union.”
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Leading business groups welcomed the report for providing much needed clarity in an area of concern for companies across the UK.
Josh Hardie, CBI Deputy Director-General, said: “It’s encouraging to see that these papers propose a time-limited interim period and a customs system that is as barrier-free as possible.
“We at the CBI have always been clear that new ideas on crucial issues like this should be brought to the table quickly.
“But the clock is ticking and what matters now is giving companies the confidence to continue investing as quickly as possible.”
Hardie added: “To secure frictionless trade, negotiations on regulation, tariff and non-tariff barriers will have to take place. All efforts should be made to deliver a single-step transition, so that businesses don’t have to adapt twice.”
Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), also called for a “smooth transition”, adding: “For most of the businesses we speak to, clarity on the UK’s future customs arrangement with the EU is significantly higher on their priority list than the swift negotiation of new free trade agreements.
“For that reason, business needs to see the government’s resources focused on the conclusion of a successful customs deal with the EU.
“At this stage, it is critically important to keep a number of different options open in order to achieve this goal.”