The Brexit vote was a surprise, but it should not have been. For 48 per cent of people asked just before the referendum about issues facing the United Kingdom, immigration was seen as the most significant. If the huge number of people who voted to leave because of their desire to curb European Union immigration are listened to, we will not remain a member of the single market because our EU partners will not agree. In September, the Treasury select committee went to Berlin and Rome to meet politicians, officials and key stakeholders to learn about their perspective and see what sort of deal might be possible. Over and over again we heard the same word – ‘precedent’. For the other member states, with the possible exception of Ireland, they have their own domestic political worries. No one wants it to look as if leaving is rewarded. So Panglossian claims such as those of the foreign secretary that ‘It does not seem to me that it would be very hard to do a free trade deal very rapidly indeed’ are totally misplaced.
I believe we can, however, remain a part of the customs union. The customs union is known to many as the common market and levies a common external tariff on imports to the EU, but within it goods move freely and the commission negotiates external trade deals. It was set up in 1968 and we joined in 1973. It is not traditionally an EU organisation that Brexiteers take issue with, and is in fact generally quite popular. Quite rightly too, as the customs union covers 48.1 per cent of our exported goods which equated to £133.5bn in 2015.
If Britain were to leave the customs union our exports to the trading zone would probably be subject to tariffs and would certainly have to comply with the highly burdensome bureaucratic rules of origin, which require businesses to account for the origin of all the components of a product. The rules of origin would require, for example, the last UK television producer, which is in my constituency, to show how much of the final product is Chinese, British and so on.
Leaving the customs union would also mean Britain negotiating its own international trade deals with third countries – something Brexiteers like Liam Fox are actually promoting. However, I believe his hopes are extremely unrealistic and reckless. The tariffs vary – many are around 5-10 per cent, but the OECD estimate that the rules of origin can add 24 per cent to costs. Hard Brexiteers like Liam Fox are against customs union membership as it prevents the UK from negotiating trade deals covering goods with third countries, which they are pinning their hopes on. I believe their prioritising of third country deals are wildly optimistic: world trade growth is slowing, there would be a time lag of several years between leaving the EU and getting these new deals and finally there is a huge question mark over whether the deals produce more exports that what we are risking.
This is particularly worrying considering that three million British jobs are accounted for by the 44 per cent of our exports which go to the EU through the customs union mechanism. As such, it is hard to realistically imagine that any new deals with third countries as envisioned by the liked of Liam Fox would be worth the cost of crippling our EU exports.
Helen Goodman is member of parliament for Bishop Auckland and sits of the Treasury select committee. She tweets at @HelenGoodmanMP
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