Customs Partnership

A Customs Partnership

A customs partnership, without single market membership, is the declared Brexit policy of the UK Labour Party. The Labour Party indicates that it would seek to negotiate a new comprehensive UK EU customs union, in order to ensure there are no tariffs or customs requirements on UK EU trade. It would help to avoid the need for a hard border in Northern Ireland. The Labour Party policy indicates that such an arrangement would need to ensure that the UK would have an appropriate say on any new EU trade agreements.

The exact scope of the customs partnership which is intended is not clear. By way of example of the possible arrangements, the withdrawal agreement backstop contemplates two classes of customs arrangements. The EU Northern Ireland arrangement under the backstop would be a customs union (with Northern Ireland continuing to be part of the EU customs union). The EU GB arrangement under the backstop would be an undefined customs partnership (without membership of the EU customs union).

A customs union or close customs partnership between the EU and UK might avoid the need for customs declarations and certificates of origins on imports and exports. However, without membership of the single market, there would still be the possibility of checks on regulatory standards for goods at the frontier.

Common Trade Policy – Limits Trade Policy

Membership of the customs union requires a common trade policy. This means common external tariffs and rules in relation to the treatment of goods entering the customs union. Membership (or effective membership) of the EU customs union, severely limits and on some views, eliminates the possibility of the UK entering its own trade agreements with third countries. At best such trade agreements would be severely limited in the practical benefits that could be offered to the UK or the other state.

It is not clear whether the EU would be prepared to give the UK a significant say in new third countries trade deal terms, as contemplated by the Labour Party policy. The junior party in existing EU customs union is usually in a weak position, playing catch up in the context of existing free-trade agreements. It largely involves giving reciprocal access when the EU enters free-trade agreements with third countries. It effectively requires the partner state to negotiate an equivalent free-trade agreement with the third country, after the EU agreement has been entered.

Further Limitations

A customs union without membership of the single market would cover trade in goods only. Without single market membership, there would still be significant scope for divergent regulatory rules which may lead to continued friction in trade. The customs union proposal does not provide for a common self-executing system of laws and courts which is a basic building block of the European Union. This is, therefore, no guarantee of barrier-free trade.

The EU is already in a customs union with Turkey and some other very small territories. This is effectively the present status of the Isle of Man and Channel Islands which are part of the EU customs union, but not are part of the single market. Much EU trade policy in goods applies. For example, the Isle of Man is treated for VAT purposes of it as if it is part of the EU. However, it applies independent policies in relation to financial services

The customs union proposal would not facilitate the free movement of persons, services and capital. The basic freedoms to provide sell goods and provide services in other EU states to open branches and subsidiaries would no longer be available to UK citizens and UK domiciled companies.

Avoids Border Checks?

In the absence of very high alignment equivalent to the single market, significant controls at the border may be still difficult to avoid, in particular, in the agricultural sector. There are significant delays at the Turkey EU border that can extend up to 24 hours, notwithstanding that there has been a customs union for very many years. Turkish trucks bound for the EU still must show documents, invoices and transport permits for each EU state to which they travel despite there being some element of legislative alignment with EU single market rules.

There may be some measure of mutual recognition of goods and standards. The EU has concluded a number of mutual recognition agreements with non-EU countries giving bodies in other states, the rights to certify products for the European market. Equally, European assessment bodies may certify products are selling those markets. Similar arrangements are likely to be entered with the UK. It is very unlikely that the EU would replicate anything like the single market freedoms for the UK given that it has repeatedly said that the single market freedoms are indivisible.