Tuesday 9 April 2019

A customs union does not mean frictionless trade

Trade policy is extremely complex and even professors of European law get it badly wrong. The best source of information I know of is Richard North's irascible blog in which he speaks contemptuously of the crass ignorance of politicians and journalists on the subject. In fact the tone is very unattractive but the contempt seems often to be justified. Almost all British MPs are scandalously ignorant about the EU, as are leading columnists.

Michel Barnier and European leaders hope Theresa May and Jeremy Corbyn will agree to leave the EU with "a" customs union (a non-EU country cannot be part of "the" EU customs union, apparently) and thus avoid a long delay to Brexit. But it is important to understand, in spite of what you have read, that exiting the EU on customs union terms does not mean "frictionless trade" between the UK and EU or even prevent customs being levied at the Irish border. 

Anyone who has crossed the land border between Bulgaria and Turkey, which is in a customs union with the EU except for agricultural produce, coal and steel, should know this. 

Also, of course, a customs union does not cover services, which make up three quarters of the UK's economy but this is a different point. No tariffs are levied on services. Regulatory alignment is what matters with services.

The Economics Editor of the Guardian argues that the value of the customs union to the UK is overrated here

Richard North has always been in favour of leaving the EU and Britain having a status like Norway's, with no customs union but part of the single market. It seems he and his collaborator Christopher Booker (and Daniel Hannan, MEP) were right, even though that would mean free movement of EU and EEA citizens. Mr. North said recently that Theresa May's terrible proposal, which might be dead by now, is the least bad option left open. 

I am absolutely no expert but prefer leaving with no deal - which will not happen - or possibly staying in to cause trouble, before leaving one day, which might happen.

The reason why Labour backs remaining in a customs union is not because Mr Corbyn or his front bench understand what a customs union means, but because Theresa May and her front bench oppose it. It is a way of splitting the Tories. In theory, if the government accepts Labour's proposals in full, this would justify Labour agreeing to Brexit without a second referendum. In practice this would badly split Labour and lose them votes.

Mr Corbyn will try to split the Tories without splitting his own party and without taking the blame for any eventual outcome. In general, however, he wants a bad deal, which he can blame on the Tories.

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