Saturday 24 June 2017

Calls for weakened May to rethink customs union exit

The surprise result of Thursday’s general election has been swiftly followed by calls from the transport industry for the government to reconsider its approach to Brexit – specifically, its intention to depart from the EU’s customs union.

On Friday – as Transport Operator‘s June edition went to press, and prime minister Theresa May saw her number of MPs slashed spectacularly to below the threshold required for a parliamentary majority – the Freight Transport Association (FTA) called for the new minority government to review its decision to leave the customs union, citing “confusion” as a result of the hung Parliament, and what it called “a lack of clear mandate from British voters”.

The customs union applies to all EU member states, and ensures that no customs duties or administrative controls are applied to goods travelling within its bounds – while a common external tariff is imposed on all goods entering the EU from elsewhere.

Mrs May had confirmed her government’s intention to leave the EU customs union earlier in the year, as a key tenet of her vision for Brexit – while both FTA and the Road Haulage Association (RHA) had stressed the importance of prioritising post-Brexit customs agreements in order to avoid hauliers having to face new bureaucracy and potential logjams at the border.

“This morning, UK exporters and importers are waking thinking , ‘What does the election result mean for Brexit, and the potential impact on my supply chains?’” said FTA deputy CEO James Hookham on Friday.

“Exiting the customs union threatens the imposition of tariffs, border checks, customs declarations and huge amounts of bureaucracy for the significant number of UK businesses that trade in the EU, and the logistics organisations that deliver it for them.

“Negotiating a replacement trade deal that avoids these would require a strong and convincing mandate, which the election has now put into doubt.

“The importance of frictionless arrangements for UK trade with the EU, particularly with Ireland, means that the decision to leave the customs union should be reviewed as a matter of urgency, and other ways of achieving a positive outcome for Brexit should now be considered.”

He continued: “In order to ‘Keep Britain Trading’, exporters and importers and the international logistics sector need trading conditions which are as seamless and easy to navigate as possible. The decision to leave the EU customs union was always going to make this tough to deliver, and without a strong and convincing mandate, the government will find fulfilling its promise to do so almost impossible.

“The delivery of a seamless trading process between Northern Ireland and the Republic of Ireland in particular has confounded even the best trade and legal experts, and needs to be an urgent priority for government ahead of the start of Brexit negotiations.”

Having failed to secure an absolute majority in the new Parliament, Mrs May’s administration is now negotiating a so-called confidence and supply agreeement with Northern Ireland’s Democratic Unionist Party (DUP), in order to get its legislative programme and budget safely through the House of Commons.

The DUP has sent mixed messages on customs, having explicitly said it does not wish to remain inside the customs union. But the party’s stated desire for a “seamless, frictionless border” between the province and the Republic of Ireland has led many commentators to surmise that remaining within the customs territory may nonetheless prove one of the conditions of DUP support for the Conservatives’ Brexit strategy.

John Bruton, the former Irish Taoiseach, said that the DUP would “press, probably, for the UK to stay in the customs union”, adding that the party would realise it wasn’t possible to be “half in and half out” due to restrictions imposed by European and international law.

“If Britain is not in the customs union, tariffs would have to be collected on every one of those [HGV] consignments,” Mr Bruton told BBC Radio 4’s World at One programme yesterday.

“And you would have to know exactly what’s inside the lorry. And there will have to be checks somewhere, which means stopping and opening the lorries….

“For anybody who is doing business… that is going to make the business much less competitive. It is going to adversely affect jobs and many of those… will be the jobs of DUP supporters.”

The tight arithmetic of the new Parliament means that Mrs May could also face pressure from Jeremy Corbyn’s strengthened Labour Party to remain in the customs union – as well as from smaller parties such as the Liberal Democrats and Scottish National Party, and a number of her own pro-EU backbenchers, emboldened by the prime minister’s weakened position.

There are precedents for non-EU jurisdictions benefiting from the customs union. The principality of Monaco, and some of the UK’s own dependencies – namely, the Channel Islands, the Isle of Man, and the British sovereign base areas on Cyprus – are part of the EU’s customs territory, but not part of the EU proper.

But these are all micro-jurisdictions with close ties to member states, and it is not yet clear whether EU negotiators would welcome a scenario whereby the metropolitan UK would depart the EU and single market, but remain within the customs union.

Such an arrangement would likely come with strings attached – such as a fee, restrictions on free trade agreements with other nations, and/or continued jurisdiction of the European courts on trade matters.

A further option would be a separate bilateral customs agreement between the EU and the UK, such as the arrangement which currently exists between Turkey and the EU. But this may not result in comprehensive freedom from customs regulations for all types of goods.

FTA pointed out that £240 billion – around 44 per cent – of the UK’s goods and services exports were transported to the EU in 2016.

Mr Hookham added:  “Our members agree that the government’s aim of delivering a frictionless trade deal for British business outside of the customs union has now become much more difficult than before the election.

“We are therefore calling for a rethink of that decision, and for other options to be considered in which Brexit can be delivered whilst reducing the impact on British exporters and importers and the international logistics businesses that deliver the UK economy.”

Meanwhile, the aftermath of the election saw transport secretary Chris Grayling retain his post, in what has been widely regarded as a ‘continuity’ cabinet reshuffle designed to placate potentially rebellious senior ministers.

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