The customs union is a key part of Brexit – but what is it?

The customs union is a key part of Brexit – but what is it?

Thursday, May 3, 2018

As Britain negotiates its way out of the EU, one component of that deal causing disagreement is the subject of coming out of the customs union.

Prime Minister Theresa May has drafted up two options for the customs union, which have both reportedly been rejected by Brussels.

The first would see a “customs partnership”, which favours closer ties with the EU avoiding a hard border in Ireland, or a “streamlined arrangement” with looser customs ties, but a harder border.

But what is the functionality of the customs union, and why does it play such an integral part in the Brexit negotiations?

An anti-Brexit sign on the Irish border

What does 'customs union' mean?

A customs union, in simple terms, is a bloc or a collection of countries that can trade freely with each other without customs duties and have agreed to charge the same tariff on imports from outside the bloc.

The customs union was implemented into the EU through the Treaty on the Functioning of the European Union (Treaty Of Rome) in March 1957, reducing the rates of import tariffs between members.

This also means that the union limits checks and costly bureaucracy at borders.

On the flip side, members cannot negotiate their own trade deals with countries outside the bloc.

If the UK does come out of the customs union this would allow it to trade and set up new import tariffs with countries outside of the EU, with the likes of the US, Brazil and China all appealing destinations.

Even though the UK could still trade with EU countries, it would face tariffs, but also implement them, which could push up the cost of some goods and services.

The UK will also have to negotiate new trading deals with the EU, which all member countries would have to agree to. 

Leaving completely would create a hard border with checkpoints between Northern Ireland and the Republic of Ireland, hindering the Good Friday Agreement which saw the physical border being removed to promote peace.

In March, chief EU negotiator Michel Barnier said the Brussels and the UK must reach an agreement on the Irish border by June.

What do the experts think?

Dr Mark Field, Senior Lecturer in Politics and Public Policy at the University of Portsmouth explains: “If Britain leaves the Customs Union, it could, in theory, sign trade deals with countries such as US and China. But, in practice, there are a few problems.

“Firstly, trade deals are highly technical and can take years to negotiate.

“Secondly, the EU has been responsible for Britain’s trade negotiations for the last 40 years. So Britain actually has very few experienced trade negotiators.

“Thirdly, committing to leaving the customs union before signing new trade agreements as it must, does not leave Britain in a strong negotiating position.

"Fourthly, politicians keep fudging the Irish border question. If Britain leaves the customs union, border checks will be needed between the Republic of Ireland, which will remain in the EU, and Northern Ireland which will be outside the EU. But these border checks were removed as part of the Good Friday agreement. The lack of a ‘hard’ border between the North and South of Ireland is seen as fundamental to the ongoing peace process.”

Michel Barnier, pictured, says an agreement on Ireland must be reached by June

How could it affect consumers in the UK?

Field, who also holds a PhD in European Politics, has also warned of the potential challenges that could be facing British businesses.

“British businesses that export to the EU could be hit badly because the EU could impose tariffs,” he adds.

“This would increase the cost of British goods in the EU, making them less attractive. But then the UK would also impose tariffs on goods coming from the EU.

“Realistically, introducing tariffs would probably not happen because it would not be in the interests of either party.

"Leaving the customs union will mean the introduction of customs checks at ports such as Dover and Calais, with all the associated delays and paperwork. This will add significantly to the cost of doing business.”

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