Sunday Telegraph: New Customs Partnership is ‘unworkable’

Last week, after a marathon session, the “Brexit war cabinet” rejected the so-called New Customs Partnership. Good. The NCP is ill conceived, convoluted and unworkable. It is ridiculous the Government ever proposed it.

Under NCP, Britain remains part of the EU‘s customs territory, collecting tariffs for Brussels and applying EUrules at its ports. The scheme relies on an untested “track-and-trace” technology to determine if goods are ultimately destined for UK or EU markets. This requires, in turn, enforcement and repayment mechanisms, with differences between UK and EU tariffs settled at a later date. There is no precedent of one country collecting another’s revenues, while maintaining its own tariff policy, anywhere in the world. Even the EU has dismissed NCP as “magical thinking”.

NCP means accepting many EU single market rules and European Court of Justice jurisdiction. The Byzantine complexity, and need to pay higher EU tariffs then hopefully get a refund, would discourage non-EU nations from signing post-Brexit UK trade deals – jeopardising a major benefit of leaving.

So why was NCP championed by arch-Remainer civil servants surrounding Theresa May? Because, to them, Brexit is a disaster not an opportunity. They want to drown the process fudge so we get BRINO – “Brexit in name only”.

Cocooned in the public sector, oscillating between Whitehall and Brussels, what do these “gifted amateurs” really know about global commerce and the shifting shape of the world economy? What they do know about is creating a huge mess, in the hope Britain loses its nerve and abandons Brexit.

Ministers need to promote, loudly and often, the case for leaving the customs union. It puts a tariff wall around the entire bloc, imposing charges on exports from the rest of the world. So UK shoppers pay more – particularly on food, clothing and footwear, goods making up a high share of poorer households’ incomes – often to protect inefficient EU producers elsewhere.

Some 80pc of these tariff revenues then go directly to Brussels – a fact I’m yet to hear on a mainstream UK news bulletin. And because Britain does much more non-EU trade than other members, we get a uniquely bad deal.

The sums are large – which is why the EU is fighting so hard to maintain the status quo. Over the last seven years, Britain has sent Brussels £15.7bn in customs union tariffs, that money coming, disproportionately, from poor UK households over-paying for imports from outside the EU.

The customs union removes tariffs on goods within the EU – helping complex supply chains, particularly in manufacturing. But such tariffs generally apply only to finished goods, not components. And outside the customs union, “frictionless” trade is largely doable under a UK-EU free-trade agreement (FTA) – what the Government should have been discussing with Brussels in recent months, not this NCP madness.

But the customs union means we benefit from the EU‘s “60-plus” FTAs with other nations? Er, no. Only around 30 of those deals are in force. Some are with sizeable economies – like South Korea, Mexico and South Africa. But these nations all now want bespoke bilateral UK FTAs.

Most EU FTAs are actually with minnows and microstates. All EU deals combined cover less than 10pc of the global economy. The EU is bad at negotiating trade deals as member states’ interests often conflict. That’s why, after years of trying, there is no EU FTA with the US, China, India or any really large economy.

Britain has a better chance of securing FTAs negotiating alone – as Switzerland did with China in 2014. London can cut deals favouring sectors where we’re strong, like services, not skewed towards French and German interests as EU deals often are.

When the UK joined the EEC in the early 1970s, the bloc comprised 30pc of global GDP. Once Britain has left, it will be just 15pc – despite now having over four times more member states. It makes no sense for a diverse, competitive economy like Britain to hide behind a tariff wall harming our consumers and discriminating against 85pc of the world economy.

To read Liam Halligan’s piece for the Sunday Telegraph in full, click here.

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