Think Tank: Customs Union with EU Will Hurt Long-Term International Trade Opportunities

SOUTHAMPTON, ENGLAND - NOVEMBER 20: A lorry passes shipping containers that are stacked at Southampton Docks on November 20, 2018 in Southampton, England. As the date for the UKs departure from the European Union approaches, uncertainty still remains regarding the future trading relationship and how this will affect exports and …
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A think tank has warned that remaining in regulatory alignment with the European Union — in a customs union — would hurt the United Kingdom’s longterm global trade opportunities.

“A customs union with the EU would come with significant costs to the UK’s economic, trade and foreign policies,” wrote Shanker Singham from the Institute for Economic Affairs (IEA), adding it would “would foreclose the opportunity of an independent trade policy to the UK, as we would be unable to vary tariffs from the EU’s Common Commercial Tariff.”

Those lawmakers backing a soft Brexit, where the UK is as closely aligned economically to the EU as possible, favour retainment of a permanent customs union, arguing it would facilitate the smooth movement of goods between the EU and UK. However, the director of the think tank’s International Trade and Competition Unit explains, “Any short-term benefits of securing supply chains and reducing disruption would be heavily outweighed in the long run by the loss of trade opportunities, asymmetric agreements, higher prices for UK consumers, the inability to defend UK producers from unfair trade practices and the loss of foreign policy influence.”

Mr Singham stated that agreeing to a customs union would ultimately “fail, by itself, to eliminate trade ‘friction’ with the EU” as it would still “require alignment with the Single Market rules for goods.” As Eurocrats insist the Single Market requires all four ‘freedoms,’ this would mean accepting the free movement of people, also — a matter Brexiteers would not support.

The trade lawyer also said a customs union would come with “significant risk” to British consumers who would be vulnerable to price rises to protect EU manufacturers whilst the UK would be “required to follow the EU’s trade defence policies.”

The IEA’s warnings come after similar comments from International Trade Secretary Liam Fox, who said that agreeing to a soft-Brexit, Labour-backed customs union would kill any prospect of international free trade deals because the UK would have to apply the EU’s Common Customs Tariff (CCT) to third-country goods.

Dr Fox had also warned that a customs union would allow the EU to “negotiate access to UK markets as part of EU trade policy…. i.e., it will be able to grant access to the world’s fifth largest market as part of any EU offer, without the need to balance this access by negotiating on key UK offensive interests.”

“The key question is that if a trading partner already had access to the UK at no cost, why would it be interested in negotiating a further bilateral agreement?” Dr Fox asked.

After Prime Minister Theresa May failed to pass her controversial withdrawal treaty for a third time at the beginning of April, she opened up negotiations with the Opposition in hopes of gaining support for her bill from Labour, with senior party members backing a post-Brexit customs union.

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