Tuesday, 20 December 2016

So what's a Customs Union when it's at home, eh?

Journalists who have suddenly discovered the term customs union and who seem to think it differs from the single market have taken to asking politicians whether we can remain in one but not the other.

For those who may be confused:

(1) A Free Trade Area is a number of countries which sell each other goods without imposing tariffs, quotas or other restrictions on such transactions.

(2) A Customs Union combines a Free Trade Area with a Common External Tariff, effectively discriminating in favour of other members and against non-members.

(3) The EU Single Market combines both of the above with a common regulatory and standards regime enforced by the European Court of Justice.

Not only is there no advantage to system (2) over system (1), it is disadvantageous because it prevents members doing separate, advantageous deals with non-members.

The reason for having (2) tends to be the price you have to pay to get (1), since various individual members may want protection against specific non-members or their products. Rather than a complicated mishmash of bilateral deals you end up with the same external tariff against all outsiders.

Therefore the question at issue is not 'Can we manage to stay in the Customs Union?' but 'Might we be forced to stay in the Customs Union as the price of keeping free trade with The EU?'

True, The EU is at present our largest trading partner, but it is also a sclerotic low-growth market with a moribund single currency permanently on the point of collapse, to which threat the only reply to date has been more and more debilitating austerity.

On top of this the single market regulations stifle innovation and investment in cutting-edge technologies which is the true remedy to stagnation.

The only thing we should want from The EU is free trade (in services as well as goods.) Having the government pay to get this (out of taxpayers' money) is futile; you might as well let the taxpayers pay tariffs directly.

Being cut off from the ability to strike deals with non-members defeats the whole objective of leaving the EU. It guarantees a worse position than we had before Brexit.

But as I've pointed out before, we already have free trade with the EU. We are not going to start a tariff war, since it's not in our interest. It's not in their interest either but they might still do it out of pique. Nobody would accuse the Present EU administration of acting sensibly. If and when they do raise tariffs, we decide how to respond.

Note to all those demanding a plan - You just read the only sensible plan. Until the EU decides what, if any, tariffs it will impose, NOTHING WHATSOEVER needs to be done or indeed can be done in response.