Theresa May is reportedly preparing to accept a deal that would see the UK remain in the EU customs union following Brexit, in return for Labour support for her withdrawal agreement.
According to The Times, the prime minister is “close to signing up to a long-term customs union with the EU in all but name”, and yesterday gave her “strongest hint yet that she was prepared to give ground” on the issue.
The newspaper reports that May told MPs that both sides now agreed on “some of the benefits of a customs union”.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Under the proposal, the Government would enter a “customs arrangement” with the EU at the end of the transition period following Brexit. This would commit the UK to aligning all tariffs on goods with the EU and allowing the bloc to negotiate trade deals on Britain’s behalf, The Times says.
This arrangement would continue at least until “alternative arrangements” could be found to maintain “frictionless trade” between the UK and the EU.
Labour’s demand that Britain should sign up to a permanent customs union is one that has been “repeatedly ruled out” by May until now, and “would be fiercely opposed by the majority of Tory MPs” if put to a vote in Parliament, says the i news site.
Speaking to the 1922 Committee this week, the PM said: “I think actually there is a greater commonality in terms of some of the benefits of a customs union that we have already identified between ourselves and the official opposition.”
A Labour spokesperson said that May was now exhibiting “clear evidence that the Government is prepared to explore shifts in its position” on a customs agreement.
So what would joining a customs union with the EU mean for Britain?
Pros of leaving the customs union
Hard Brexiteers warn that staying in a customs deal with the EU will prevent the UK from negotiating future trade deals.
May herself has been vehement in her desire for Brexit Britain to be a “global leader in free trade”, arguing in her Mansion House speech that it would be a “betrayal of the British people” to stymie its potential by joining a customs union.
Environment Secretary Michael Gove has tweeted that “the referendum vote was clear - we need to take back control of trade - that means leaving the protectionist customs union”.
Arch Brexiteer and chair of the European Research Group Jacob Rees-Mogg has argued that staying within a customs union would leave the UK paying Brussels huge sums each year while having no say on rules and regulations imposed on business and commerce.
Rees-Mogg believes that, after leaving the union, the UK should phase out all tariffs in order to reduce consumer prices and stimulate competition.
The New Statesman’s Bush also argues that “staying in a UK-wide customs union but leaving the single market is hard to defend from a policy perspective”.
“You have the definite loss of trade and sovereignty, you don’t have the potential for your own trade deals [and it] doesn’t fix the Northern Ireland issue on its own,” he says.
Indeed, “although it would help [the border issue], there are other checks that need to take place at borders that have nothing to do with customs”, notes the BBC.
Cons of leaving the customs union
Those in favour of remaining in the customs union argue that cutting trading ties would severely damage the UK economy.
Last year, a leaked government report predicted that leaving the customs union would reduce the growth of the UK economy by up to 8% over the next 15 years.
The Confederation of British Industry has called for the UK to remain in the customs union, while the Labour Party has also backed a similar arrangement.
Leaving the customs union would also mean mandatory customs checks for every lorry between the UK and EU until a free trade deal is struck with Brussels, potentially causing major delays, Sky News reports.
“There seems zero chance of having infrastructure in place by 2019 to deal with the customs checks that would be required,” the broadcaster said last year.
Crucially, keeping the customs union would also “go some way to resolving the thorny question of the Irish border, and would allow the UK to keep its red line of controlling immigration”, says Bloomberg.
“Turkey has a customs union with the EU but isn’t in the bloc or the single market,” the news website notes.
A YouGov survey last July found that an independent trade policy was voters’ joint fourth Brexit priority, but “trade experts say deals get more contentious once they become real”, according to The Guardian.
“It is one of those things that sounds great but when it actually comes down to it trade has always been controversial because people always want something from you,” David Henig, who was heavily involved in negotiations on an EU-US trade deal, told the newspaper.
“New Zealand want to sell more lamb and Australia certainly want to sell us more lamb. That’s not going to go down very well in Wales or Scotland.”
Continue reading for free
We hope you're enjoying The Week's refreshingly open-minded journalism.
Subscribed to The Week? Register your account with the same email as your subscription.