Britain’s Brexit debate has been reignited after more than 100 MPs backed a bill put forward by the centrist Liberal Democrats, which has the third-largest number of seats in the UK parliament, calling for a bespoke customs union between the UK and the EU.
The Liberal Democrats say such a deal would reduce red tape and trade barriers between the EU and the UK by coordinating customs procedures.
But the bill will need government support to become law, which remains unlikely despite receiving support from more than a dozen MPs from the ruling centre-left Labor Party.
Mr Starmer ruled out rejoining the customs union, bespoke or formal, arguing that doing so would “dismantle” trade deals the UK already has with other countries such as the US.
What is the current UK-EU free trade agreement?
At the end of December 2020, more than four years after the 2016 Brexit referendum, the UK signed a trade and cooperation agreement, officially leaving the EU’s customs union along with the single market.
Under the agreement, goods moving between the EU and the UK will be subject to zero tariffs as long as they meet rules of origin criteria. This means it must be composed primarily of parts from the EU or the UK. Nevertheless, many regulations and customs inspections are still in place.
Unilateral decisions were also made not to impose certain checks.
And as part of a push to strengthen ties with the EU after relations deteriorated severely under previous right-wing Conservative governments, Mr Starmer promised a series of plans at the UK-EU restructuring conference in May, including a phytosanitary agreement to reduce food inspections.
Lib Dem MP Al Pinkerton, who tabled the bill on Tuesday, believes his proposals will free British businesses from the onslaught of additional red tape due to Brexit. “British businesses have been begging for this,” Pinkerton told Euronews fact-checking team The Cube.
“Two billion pieces of red tape have been added since 2021, adding millions of pounds worth of costs to UK businesses,” he said.
Mr Pinkerton added that he had received “very positive” feedback from European businesses dealing with rising costs due to post-Brexit border checks.
For Mr Pinkerton, his proposals aim to “force the government to start a negotiation process” on the idea that the UK can conclude a new tailored deal with Brussels.
“When I struck a match, it gave off a little bit of light and a little bit of heat,” he said. “But the truth is, it only works if something else comes to light as a result. Now, one of the things that’s really encouraged me over the last few days is the level of public discussion that this has generated.”
Is a customs union economically advantageous? For whom?
Economists are divided over what a hypothetical new customs union would achieve, and it is unclear what kind of settlement the Liberal Democrats would support.
The Liberal Democrats claim their proposals would boost Britain’s GDP by 2.2% and bring in £25bn (€28.5bn) in extra tax revenue. They acknowledged that this figure was an estimate and that details of the proposed framework were unclear.
Jonathan Portes, professor of economics and public policy at King’s College London and senior fellow at the Institute for the Study of Britain in a Changing Europe, said the £25 billion figure was based on pre-Brexit modeling, which predicted that leaving the customs union would cost the UK “around 1 per cent of GDP” and was “not completely unreasonable”.
“On the other hand, we assume that we will be able to negotiate a customs union that is broadly favorable to us relatively easily,” Ports told The Cube. “I think that part is fantasy.”
The benefits of an agreement for both parties depend on its content.
Portos argues that the deal could have both benefits and drawbacks for the UK, given that it is similar to the deal between the EU and Turkey, which removes tariffs and removes tariffs on most industrial goods.
Turkey, for example, needs to bring its rules in line with the EU, but it does not automatically benefit from EU free trade agreements. Under the 1995 EU-Turkey customs union, goods can move between the two regions without tariff restrictions, but the agreement excludes sectors such as agriculture.
Portos said a similar deal would leave Britain vulnerable to political backlash. “It would probably not be politically acceptable for the UK to accept that we are an important but third country country, that we may be important within the EU but that we have to follow EU rules on most things,” he said.
On the other hand, there is also evidence to suggest that the benefits of entering into such an agreement are modest, particularly for the EU.
“A customs union can be helpful, but trade between the EU and the UK is already highly integrated. We don’t have the domestic barriers that would make a customs union so effective,” Fabian Zurig, CEO of the European Policy Center, told The Cube.
He added that while the EU would benefit to some extent, the UK would ultimately benefit more from such a deal, potentially limiting the EU’s appetite for a deal.
In reality, the EU applies checks to most goods, while the UK doesn’t apply checks to as much as it could, Zurieg said. “From a European perspective, these costs are more theoretical than real.”
He said: “While it is vitally important for British businesses to have as free access as possible to the European market, the need for it is even less so if the reverse were the case.”
Will the EU agree to that?
At the height of Brexit negotiations between 2017 and 2019 under then-Prime Minister Theresa May and EU chief negotiator Michel Barnier, EU officials argued that the UK could not “cherry-pick” favorable terms in its agreements with the EU that non-member states normally do not have access to.
However, the relationship between the two It has become warmer in recent yearsGermany’s Social Democratic Party lawmaker René Lepaci attributes this to Keir Starmer’s Labor government coming to power in the UK.
“The Starmer government is much more serious and of course that has a positive impact on the EU side. They think they have a government on the UK side that can do serious negotiations,” Repasi told The Cube.
“While we believe the EU has every path open to the UK’s return to full integration, it is difficult to justify its special status,” he said. “So it will depend on the details. We have to be politically realistic.”
A European Commission spokesperson declined to comment on the hypothetical agreement.
