Tuesday, 15 August 2017

The government's customs proposals are a vacuous deceit

Earlier on I realised how much I hate agreeing with Guy Verhofstadt, a president among hundreds in the European Parliament and one of the smuggest to occupy the offices of Brussels. But, having read enough of David Davis' fanciful Paper on future Customs Arrangements, I was left with no real alternative. He described being in and out of the Customs Union, with invisible borders and having not yet agreed to a financial settlement or provisions over citizen's rights as a 'fantasy'. I prefer 'big fat nothing burger', having fallen in love with the phrase ever since CNN's Van Jones used it to describe the Trump-Russia collusion story.

His summary of the government's proposals for a new, UK-EU Customs agreement more or less hits the nail on the head. If this is what the Brexit Secretary is referring to when he describes negotiations as going 'incredibly well' then I despair. I wouldn't be surprised if Brussels suspended talks indefinitely after reading yesterday's rubbish. Readers will hardly need reminding that Britain's wants do not necessarily equate to Britain's gets. And what Britain appears to want simultaneously is the ability to have free and frictionless trade with the European market and to adopt 'third party' status as a result of leaving it. 

Seeking a customs union agreement post Brexit is, don't get me wrong, perfectly achievable. But it isn't necessary to productive trade continuity. Turkey enjoys a comprehensive customs union agreement with the European Union, though note that they are not of the EU Customs Union (EUCU) itself. The difference is simply a matter of jurisdiction - a little like Switzerland's arrangement with the EEA. And, despite widespread belief that being in a customs union prevents the signing of independent, bilateral FTAs, the UK can conclude a customs union agreement and retain independent trade policy. I used to believe that to be in a customs union means, in principle, to lose the ability to sign bilateral trade deals, but this is not the case. Mercosur, for instance, is a customs union but its signatories can trade bilaterally and of their own accord. I should therefore clarify that it is in fact the EU's Common Commercial Policy (outlined in Article 207 in the Treaty on the Functioning of the European Union) which precludes us from doing so. Here there is a crucial distinction. 

And while we're on the subject of misconceptions surrounding the EUCU, it must also be pointed out that we are separating issues that ought not to be separated. If a member state leaves the EU, it leaves its Customs Union. No ifs, no buts. The EUCU is an integral part of the treaties which form the provisions we are bound by. I am tired of reading commentators in mainstream publications calling for us to leave both the EU and the CU. That is like saying: 'I am going to lock my front door as I leave the house today. And I'm going to lock it with my front door key.' If we discuss the CU in the context of Brexit, then we are discussing one and the other. There is no way of staying within the CU and leaving the EU. At least the Department for Exiting the European Union understands this.

The paper they have produced, whilst not mentioning the single market, draws quite obvious attention to the fact that upon leaving the EU and EEA, the UK becomes what Brussels perceives as a 'third party country', meaning we are forced practically immediately to work with significantly worse trading terms. The publication outlines two, apparently workable routes for continued cooperation over customs:

  • A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on UK-EU trade as possible. This would aim to: continue some of the existing agreements between the UK and the EU; put in place new negotiated and unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. 
  • A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU's requirements for imports from the rest of the world where their final destination is the EU. 

Notice immediately how unhelpful much of the language is. It's all about trying our best to 'simplify' and 'remove barriers', as if the authors haven't recognised that this is exactly the point of retaining membership of the single market. Article 10 of the EEA Agreement tells us that "customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the Contracting Parties." It is as if this document was written about the single market and an error was made when typing up the title page. Also, rather more peculiarly, this paper has virtually no relevance to the current standing of negotiations. We haven't even reached a conclusion over the financial settlement yet. 

One of the things that stands out most from the paper is the government's continued assertions that it is on some kind of level playing field with its closest and largest market. Take this arrogant, wishful thinking, for instance, in paragraph 30:

"The promotion of the free flow of trade in both directions between the UK and the EU would also require the EU to implement equivalent arrangements at its borders with the UK. The Government believes that collaborative solutions would benefit all parties and will work closely with European partners to negotiate and implement such arrangements." 

We appear to be working under the impression that we can just bypass the 'third party' status phase and carry on as normal. What is striking is how mixed up the authors of this document appear to be when differentiating between Customs Union and customs cooperation. The lack of capital letters in the latter phrase should alone be enough to signify important difference. The Customs Union is a fundamental feature of EU membership, comprising of an external tariff wall (CET), whereas customs cooperation, according to UNECE, relates to "improving control of trade flows and the enforcement of applicable laws and regulations through the exchange of information on Customs aspects such as export and import declaration data, trader-related information, origin and valuation-related information."

Throughout the government's paper on customs proposals is the running assumption that an entirely separate negotiated Customs Union agreement will achieve the 'free and frictionless' trade cited in the executive summary. This is not the case. My belief is that EFTA membership under the aegis of the EEA is the only way to meaningfully achieve this. If the UK does indeed leave the single market, which appears to be the desired course of action and will be immediately regretted, we will need a customs cooperation agreement to be put in place, whether through an FTA or negotiated as part of the Article 50 settlement. If we are to focus on anything over the next year and a half it should be making progress on a customs cooperation agreement. 

A customs cooperation agreement would attempt to re-standardise different facets of trade flow. This will mean things like agreeing upon measures to mutually recognise and approve certificates or dealing with paperwork and administering computer systems which identify customs fraud. This stuff is far too complicated for me to get a full grip on, but I can only pass on the basics as I understand them. Which is a hell of a lot more than can be said for the civil service. 

As for leaving the Customs Union, indeed a necessary part of the Brexit process, it needn't be over-complicated. The only residual feature of the EUCU is a Common External Tariff (CET) and a mechanism through which funds are collected by member states and paid to Brussels as a condition of membership. The Customs Union actually predates the establishing of the single market, and has subsequently had much of its aegis hijacked by the single market. Principally, the single market took over the responsibility of abolishing internal duties and quotas between member states (again, Article 10 of the EEA Agreement). 

I can't wait for this autumn's Customs Bill. No doubt it'll follow much of the emerging pattern with Brexit negotiations: we'll do our best to pretend that pursuing anything other than EFTA and the EEA is worth the light of day. For the EFTA states, customs cooperation tends to be organised on the basis of exchange letters, which seek to speed up trade flows between each bloc. Such agreements can be read here. I think agreements like this are entirely appropriate and perfectly adoptable from a UK perspective, in the unlikely event that we end up in the right corner of the EEA. My fear about a separate Customs Union agreement with the EU is that it will narrow any scope we have left for other deals we negotiate in the future, in that we won't be able to adjust unalterable tariffs. That is if we ever find our way out of this depressing maze.

Much of the reaction to the release of yesterday's proposals espoused that irritating 'cake and eat it' line. I think this is entirely missing the point. The more worrying takeaway is the inability to distinguish between our terminology. Do we mean Customs Union or do we mean customs cooperation? The SNP even managed to rebuke the paper by making themselves look foolish. They appear to be arguing for the UK to stay in the EEA and the Customs Union, but outside the European Union the latter is not possible. They never did know anything about the nitty gritty. They have about as much use in the Brexit debate as I have on a catwalk. I await their inevitable electoral dissolution with uncontrollable salivation. 

And speaking so fondly of control, as we ex-Vote Leavers much like, I am more fearful than ever of all this getting away from us. The more incompetence our leaders display, the more easily counter forces can mobilise and put a stop to the greatest chance we'll have of leaving the European Union. I'm starting to sound like a revolutionary Marxist, but if only we'd followed a more workable guide we wouldn't be nearly as stuck as we currently are. The government's proposals for future customs arrangements are deceitful and arrogant. They conflate and confuse concepts, safely in the knowledge that most people simply won't read them. The Department for Exiting the European Union is, with irritating futility, trying to craft a bespoke deal that gives us everything EEA without the setbacks of the EEA. Here's a radical suggestion: why not just go with the EEA?


  1. "This stuff is far too complicated for me to get a full grip on.."
    "The government's proposals for future customs arrangements are deceitful and arrogant. They conflate and confuse concepts, safely in the knowledge that most people simply won't read them. "

    Wasn't the above the successful strategy of Leave campaign?
    BoJo is a clown but in a perverted way he is right, UK wants to have the cake and eat it. That is why is trying to come up with ridiculous suggestions that can not possible work in the real world.

  2. The above is the strategy for all campaigns in contemporary politics. Referenda are fundamentally a PR battleground.

    1. Yes and now vote Leave has to deliver. Whatever happens with Brexit, the Leave vote owns it (including you).
      Everyone in politics should remember the golden rule: "Under promise and over deliver"!!!

    2. How do you under promise in a referendum of such magnitude?

    3. "How do you under promise in a referendum of such magnitude?"

      Well, given the "magnitude" of the potential outcome a good start would have been to offer the electorate a plan for leaving, but we know Vote Leave rejected a plan, preferring instead to bang on about immigration and extra money for this and that.

      So it was a combination of "over promising" on the deliverables of both the extra money to public services and the reduction in immigration, which anyone with half a brain knows is not going to be the result of "taking back control" but of not being "in control" of the eventual fallout of exiting the EU without a plan.

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