The UK has accepted it will have to quit the EU customs union, a Government trade minister has suggested.
Lord Price, a minister at the Department for International Trade, has told a German newspaper that Britain understands the EU will not allow any “cherry picking” of the current tariff-free system for goods.
He signalled that customs would instead have to be covered by a comprehensive free-trade deal with the remaining 27 European states.
In her Brexit speech earlier this month, Theresa May announced that the UK would quit the European single market, but left open the issue of future membership of the customs union.
The Prime Minister suggested Britain could become an ‘associate member’ of the union, but her minister has now made clear that is unlikely.
Asked by “Die Welt” about the British position on the customs union, Lord Price said he did not expect to find a compromise.
“During the last weeks, I have met with many of my EU counterparts, among them German State Secretary for Business, Matthias Machnig,” he said.
“Most of them were very clear. There will be no cherry-picking. We have understood this message.”
Price added: “The aim must be now to agree on all questions through a free trade agreement with the EU 27. We hope to find a solution on that within the next two years.”
His remarks appear to confirm that the UK will opt for a ‘clean’ or ‘hard’ Brexit on customs, allowing it to strike new trade deals with non-EU countries.
In her ‘Lancaster House speech’ this month, which set out a vision for the UK after it quits the EU in 2019, May insisted that she wanted cross-border trade to be “as frictionless as possible”.
“I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position.
“I have an open mind on how we do it. It is not the means that matter, but the ends.”
Some non-EU countries, such as Norway and Switzerland, are outside the customs union but do the majority of their trade with it.
Cabinet ministers were warned last year that the UK pulling out of the EU customs union could lead to a 4.5% fall in GDP by 2030 - and possible backlogs at Britain’s ports as new checks had to be placed on goods coming in and out.
But the estimate, based on work by the Treasury and two think tanks, predicted the effect on the British economy if the UK was to opt for a Norway-style model of being in the single market but outside the customs union.
Some economists say the GDP loss could be even higher outside both EU systems, although Brexiteers insist such calculations are too pessimistic.
Shipping and road haulage associations have warned ministers that quitting the customs union would have a ‘profound’ impact on British firms trading with Europe and fear fresh red tape.