The rumoured so-called “third way” solution to our future customs relationship with the European Union is little more than a rebrand of the “New Customs Partnership” which the Government presented last year. At the time, the proposal was unacceptable and this “new” approach, if true, retains all of the worst deficiencies of the old.
NCP Mk II, in effect, sees the UK remaining in the Customs Union in all but name. It would see the UK collect duties at our borders on imports at the rate of the European Union’s common customs tariff, making us, in effect, the EU’s tax collector without a say in its rules. On this 4th July, the famous rallying cry “No taxation without representation” rings as true as ever.
It would require alignment of product standards for goods and agricultural products, effectively replicating membership of the Single Market. This would see European laws and standards continuing indefinitely, along with a perpetual role for the European Court of Justice which would be completely at odds with the referendum result.
The UK has a deficit of £95 billion on trade in goods with the EU. We buy vastly more from them than we sell to them, as over half of our exports go elsewhere. According to the Observatory of Economic Complexity at MIT, we are the fourth biggest import market in the world. Why on earth would we do such a “deal” for goods, and receive nothing in return on services, where we have a £28 billion surplus with the EU?
It is infuriating that many on the Remain side still see the emphatic vote in June 2016 – the largest democratic mandate ever given in British history – as licence for a fudged, half-in, half-out Brexit. This would yield none of the benefits of independence and lumber us with all the disadvantages of membership. Why do they still seek comfort in the idea of a Customs Union as a benign economic version of NATO when it is nothing of the kind?
Often, they advance the UK remaining in the Customs Union – or a fudge which essentially does the same thing – as a solution to the supposed “problem” of the Irish border. It would certainly be absurd and completely unacceptable for Northern Ireland – which does 87% of its trade with the UK – to be cut off from the UK single market by remaining a member of the Customs Union while Great Britain left, as Michel Barnier proposed. But it would be just as ridiculous for the UK to remain tethered to a pan-European policy for the sake of the 0.7% of UK GDP which Northern Irish sales to the Republic represent.
A hard border would be completely unworkable. But Remainers must remember that a border already exists between our two countries in currency, VAT, excise duties and security. Intelligence-led spot checks to prevent illegal activity are routine. With the goodwill that exists on both sides of the border, these approaches – including technological improvements and an expanded Authorised Economic Operator scheme – will continue to work regardless of our membership of the EU.
If not used as a putative “solution” to the Irish border, its advocates cite the Customs Union as a shining example of free trade. Once again, they are wrong. Certainly, our membership has not substantially improved our ability to export to the Continent. When the think tank Civitas compared the rate of growth of exports from 40 countries to the EU between 1993 and 2015, the UK ranked a lowly 36th. Non-members have increased their exports to the EU at a faster rate than the UK has managed as a member.
It is true that membership of the Customs Union and Single Market grants us tariff-free access to the EU, worth around 20% of global GDP. But at the same time, imports from the other 80% are made more expensive (or kept out altogether) by an array of tariff and non-tariff barriers. 88% of our own economy is not accounted for by exports to the EU, but we continue to obsess over the 12% which is.
Yet the key point – which many still fail to grasp – is that the barriers do not only increase the cost of products from outside the EU; they also drive up prices on goods sold within the bloc as internal producers can bump up their prices under the shelter of its protectionist walls.
It is thus small wonder that goods sold within the EU are 20% more expensive on average than market prices outside, completely negating the benefits of tariff-free trade.
The costs of EU regulation are felt throughout the economy – by 100 per cent of consumers. We must show that in the contest between consumer and producer, we are on the side of the consumer. We must commit to lowering their costs and improving their living standards by using our freedom to remove tariffs.
To achieve this, an independent United Kingdom must embrace free trade with the rest of the world. That way, we can lower the cost of non-European goods which we do not produce ourselves – such as bananas – on which the EU currently imposes a tariff. It would also force European businesses – from Seville orange sellers to German car manufacturers – to reduce their prices to keep up with global competitors.
The benefits of this bold new approach would be significant. The team of senior economists, academics and financiers at Economists for Free Trade have calculated that a full, free-trading Brexit – using our new freedom to remove import tariffs – would reduce consumer costs by 8%. With the latest ONS figures putting the average weekly household bill at £554.20, that means an annual saving of £2,300 per household.
We cannot deliver any of the economic benefits of Brexit without leaving the Customs Union cleanly and completely, freeing ourselves to forge our own trade relationships with friends and allies across the world and committing to the principles of free trade. The Conservative manifesto at the last General Election – which secured the most votes of any party since 1992 – was unambiguously clear: “As we leave the European Union, we will no longer be members of the single market or customs union.” For the good of every citizen in the country, that promise must now be delivered.
To read Owen’s piece for BrexitCentral in full, click here.