LEADING THE WAY OUT OF THE EU

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Tuesday 9 October

In its follow up to the August position paper on future customs arrangements, the Government has finally set out preparations for a no-deal with the EU. But while ‘Preparing for our future UK trade’, authored under Liam Fox’s stewardship at the Department for International Trade, marks a positive step forward, an accompanying customs white paper published by Philip Hammond’s team at the Treasury, takes us straight back to square one.

Sly Fox

Barely a minute passes without further signs of fraying relations between Brussels and London. Today, an exasperated Michel Barnier was recorded leaving the British Ambassador’s residence in the Belgian capital before barking, “Brexit is not a game”. Indeed it is not, but as the possibility of a “no-deal” looms ever larger it is encouraging for Leavers and Remainers alike to see shrewd Brexiteers like Dr Fox making contingencies towards that very outcome.

Furthermore, while today’s front pages were dismayed by the Government’s meaningful consideration of complete detachment from the EU, the rest of us can rejoice at much-needed pressure finally being applied to the bloc’s negotiating position following last month’s conditionless concession jamboree in Florence.

Time and again, Nigel Farage has reminded us, you cannot expect to reach a satisfactory negotiation if, under no circumstances are you prepared to walk away. The EU finally received that shot of adrenaline yesterday.

The Demon Chancellor

Pouring cold water on the UK trade white paper is Mr Hammond’s offering. The document’s stated purpose is to explain why the Government will require an added complement of Henry VIII powers in the area of customs and excise. The document labels the forthcoming legislation as the customs version of the EU Withdrawal bill, which is designed to ensure any EU shaped regulatory gaps on the state books are filled prior to Brexit. But choosing to switch from one customs regime to another is entirely different to vast swathes of the British economy not knowing what standards to adhere too. The EU changes its external tariffs twice a year, what difference does it make if Britain switches from the EU regime to its own the day after Brexit? So long as we are not slapping 100% tariffs on cars, none.

Tailoring the external tariff to the needs of the British economy was a major reason for leaving the EU in the first place, but the paper clearly states the Treasury’s intention to continue to apply the same set of tariffs as the EU. Under the heading, ‘a new customs partnership’, it proposes the UK form a second customs union, encompassing the existing EU one we will have just left:

One potential approach the UK intends to explore further with the EU would involve the UK acting in partnership with the EU to operate a regime for imports that aligns precisely with the EU’s external customs border, for goods that will be consumed in the EU market, even if they are part of a supply chain in the UK first. The UK would need to apply the same tariffs as the EU, and provide the same treatment for rules of origin for those goods arriving in the UK and destined for the EU.

How British customs would adapt in the event of a no-deal is addressed much later on, and comprises of a long list of all the dreadful changes that will need to be made before revealing that, “only around 30% of imported goods (in value terms) are subject to the Common External Tariff”. In which case, existing customs capacity only needs a relatively modest enlargement, a point the paper neglects to make.

Whichever the Government is obliged to eventually take, preparations at this early stage are broadly similar, that is with the exception of the customs union within the Customs Union alternative which has zero chance of implementation – one commentator described it is “unicorny”. The Government should already have started investing in real estate, IT systems and personnel, the trappings of an independent trade policy as outlined in Dr Fox’s paper. Has it done any of those things, no. At best, the Government is hoping in vain for a very cosy deal with the EU without properly planning for other outcomes, at worst, it is deliberately placing the British economy in a vulnerable position.

Brexit barely in name

Naturally, Hammond’s preferred options are all heavily contingent on European cooperation so we can expect the EU’s single market ‘access’ for cash demands to reach unprecedented levels when this long list of imaginative alternatives reach the negotiating table. Worse still is the convenience with which the heavier options fit into Hammond’s much-loved transition deal.

The paper’s authors have done a remarkable job of coming up with ways of effectively keeping the UK in the EU while being legally outside of both the Single Market and the Customs Union. This poses a serious headache for Brexiteers. Come the “around two years” mark of the intervention period, having left the EU only in name only, Britain will not have felt any perceptible change to her economic position, better or worse, while the majority of voters of all stripes will have been exhausted by five years of Brexit. Casual leave voters and Remainers will all argue the popular will has been honoured, time to move on, marginalising Brexiteers valiantly enduring for real independence and all the economic gains that entails. Hammond has to go.