The Times, 15th December 2016
Although rarely mentioned before June 23, the idea of continued membership of the EU’s customs union has emerged as a dominant theme in the post-referendum debate.
Yet its importance has been vastly overrated, not least because the customs union has been confused with the separate process of customs co-operation. This confusion resulted from an erroneous statement in last April’s Treasury report on Brexit which claimed that membership of the customs union “means that there are no customs checks on trade within the EU”.
Another misunderstanding is the idea that within the customs union, the UK cannot make its own independent trade deals with third countries. This error has pitched Liam Fox’s international trade department against the Treasury, which is said to want to keep costs to businesses down by avoiding extra customs checks.
The supposed prohibition on carrying on an independent trade policy is easily dispensed with. The actual prohibition stems not from the customs union but from the parallel common commercial policy and the European Commission’s exclusive power to make trade deals. Turkey has a customs union with the EU, yet is able to make third country deals. There is nothing implicit in this type of relationship which prevents this.
As to the customs checks, the founding Treaty of Rome in 1957 outlawed customs duties between members and required adoption of a common external tariff (CET) — duties to be imposed on goods imported from third countries. These are the characteristics of a customs union.
Although the customs union was complete by 1968, customs checks at the borders continued. It was not until June 1984 that the Fontainebleau European Council — following an earlier go-slow by customs officials and a damaging French lorry drivers’ strike — agreed in principle to abolish customs and police formalities at internal borders.
Only then, on July 13, 1984, did the French and Germans sign the Saarbrücken Agreement committing the two nations to reducing customs checks and establishing joint control points.
The following year Belgium, Luxembourg and the Netherlands joined with France and Germany to build on this initiative, signing the Schengen Agreement. The five countries committed themselves to the gradual abolition of checks at shared borders and to facilitating the transport and movement of goods.
Then, in the White Paper on the completion of the internal market, also in 1985, complete abolition of frontiers was proposed. But only when adopted in the Single European Act (SEA) did the internal market became “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty”.
The SEA set the target of eliminating internal frontiers by 1992, more than 30 years after the launch of the customs union. Thus, the abolition of frontier controls came with the creation of the internal market — better known as the single market — rather than with the customs union.
On this basis, the idea that we must remain in the customs union to avoid customs checks is absurd — the issues are completely unrelated. For sure, if we leave the EU without an agreement on the single market, or a separate customs co-operation agreement, the UK would have problems, as the chancellor Philip Hammond warned last week.
But there are no adverse consequences from leaving the customs union. The only “loss” is a release from the obligation to send the proportion of CET we collect to the EU budget, which is a requirement of membership. Since that currently runs to about £2 billion a year, there is no case for remaining a member. In all respects, as an issue, the customs union is a red herring.