A customs union would not solve the Brexit conundrum2 April 2019 | 15:39 | The Guardian
Parliament has a little over one week to prove that it can do what Theresa May should have allowed it to do after her failure in the 2017 election, and come up with a plan that saves us from the Brexit cliff edge. The question is whether it can, without the constraints of Mrs May’s self-imposed red lines, agree a deal based on the creation of a permanent customs union, and perhaps also continuing membership of the single market.
Only a minority of the Conservative party, which now looks increasingly like the leave campaign, would buy into this, as most now want to leave the EU with as “clean” a break as possible, however painful. But we may find in the coming days that there is a cross-party majority of MPs – including possibly the DUP – who are willing to back a softer form of Brexit. Negotiations to see whether a compromise is possible are the only alternative to what the former Brexit minister, Lord Bridges, has described as the British public being asked to walk a gangplank into thin air.
Take a customs union on its own first. As a former EU trade commissioner and UK business secretary, I can see both the advantages and drawbacks of this proposal. A customs union would create far less friction to trade in goods. It would be easier to keep vital manufacturing supply chains intact and it would obviate the need for the customs part of the Irish backstop, as long as agriculture was included. But it would also mean that Britain could not operate an independent trade policy in respect of goods, because we would be obliged by the EU to operate its external tariff rather than vary our own in bilateral trade agreements with non-EU countries.
It is not true to say that we would simply have to adopt the EU-Turkey model, in which the rules require them to open their own market under EU trade deals without benefiting from reciprocal rights for their exports. The EU, in my opinion, could do better for the UK than that.
The biggest shortcoming of a customs union, however – and it is a major shortcoming – is that it does not in itself address the issue of regulatory alignment between the UK and the EU that single market membership gives us. This is the principal guarantee of the barrier-free trade we enjoy currently with the EU and why every alternative to membership will leave us worse off.
So a customs union is not a panacea. For this reason, many MPs are looking to a deeper agreement with the EU, one they call common market 2.0, which in addition to a customs union would mean continuing membership of the single market. The attraction is obvious: it would keep the UK close to its most important trading partner while fulfilling the mandate to leave the EU. It comes with a set of institutions based on the existing European Economic Area through which the UK could potentially influence (but not determine) EU policy and incur reduced UK payments for market access.
The disadvantages are equally clear. Britain would have to operate EU rules, without a vote or a veto, for both goods and services – becoming a rule taker – making it largely pointless to leave. Free movement of people would also continue. Yes, there is provision for an emergency brake on migration but this would not give Britain “control” of its borders. How important this issue is for UK voters is something upon which MPs will have different views.
Undoubtedly, maximising the trade benefits for Britain requires both continued customs union and single market membership and it would be hailed with relief by most of UK business except some in financial services who do not want to be regulated from Brussels. This route would be relatively easy to negotiate in contrast to May’s favoured alternative – her hybrid half-in, half-out Chequers plan, which is regarded as a unicorn by anyone with knowledge of how the EU works. EU member states would initially welcome it as a means of maintaining the close relationship they seek with Brexit Britain. Do not underestimate, though, the prospects over time for tension and argument as the UK pushes up against the boundaries of what is permitted, for example on questions such as subsidies for firms to advance industrial policy objectives and possibly corporate tax harmonisation.
Which leaves one, big question: would the British people buy it? My hunch is they would not.
Every politician will make their own judgement about the electorate’s likely choice between a pointless Brexit in which we leave the EU but continue to follow its rules – a sort of Hotel California Brexit – and an economically painful one. In 2016, there is good reason to suspect that most people thought it would be neither. It is this uncertainty about what was really mandated in the last referendum that makes it necessary, and democratically legitimate, for the choice of a particular form of Brexit to be validated through the ballot box. A general election would almost certainly fail to give a clearcut answer to any question other than who should form a government, and perhaps not even that.
Where I disagree with those wedded to the original 2016 result is their belief that voters would resent being asked to confirm that the deal on offer is the one they want. Democracy did not end in 2016. It shows an arrogance and a contempt for democracy to suggest otherwise.
Peter Mandelson is a Labour party politician and a former EU trade commissioner
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