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27 February 2018

Corbyn’s customs union plan is bizarre: what on earth is he thinking?

by David Paton

Originally published by Brexit Central.

Last July, Barry Gardiner, Labour’s Shadow Secretary of State for International Trade, warned in The Guardian that a separate EU customs agreement like that of Turkey “would preclude us from making our own independent trade agreements with our five largest export markets outside the EU (the US, China, Japan, Australia and the Gulf states)… as an end point it is deeply unattractive”.

With Jeremy Corbyn announcing that Labour will now campaign to stay in a customs union, Gardiner was forced to scurry around the radio and TV studios, desperately trying to find words to defend the policy U-turn. It was a sorry spectacle.

Once we legally leave the EU, the arguments for leaving the customs union are so strong that they should unite everyone including those who would have preferred to stay in the EU.

A customs union means tariff-free trade between countries within the union. Of course that is good for business, but exactly the same outcome can be achieved by a free trade agreement such as that between Canada and EU. Indeed, up till now, this has been a key aim of both the Conservatives and Labour.

The big downside of staying in a customs union is that all countries have to charge a common external tariff on exports coming in from other countries. This means several things. First, the UK would be unable to negotiate independent trade deals with fast growing economies around the world such as the US, Australia and China.

But it’s not just about formal trade deals. We would also have no ability to decide what tariffs we charge on imports from non-EU countries. At the moment we are forced to charge high tariffs on clothing and footwear imports from non-EU countries, mainly to protect industries in continental Europe.

Why, for example, would we want to continue to charge 17% tariffs on imported trainers once we leave the EU when all it does is to push up prices for hard-pressed UK consumers? Such tariffs tend to hit the poorest families for whom the Labour slogan of ‘For the many, not the few’ will surely start to ring hollow.

The tariff rules also force us to discriminate in favour of EU industries at the expense of poorer countries in the developing world. Continuing with such an approach is hardly going to be popular with most Labour supporters.

One argument being made is that staying in in the customs union will somehow help with the Irish border question. But this is a misconception. Just look at Turkey which is in a customs union with the EU. As it is outside the structure of the single market, the EU still requires border checks on goods coming in from Turkey to ensure they comply with broader EU rules. In any case, the Irish border question is something of a red herring – Jon Thompson, Chief Exec of HMRC has made clear that there is no need for a hard border irrespective of what deal we end up with.

There is another problem with Corbyn’s proposal. Say the EU strikes a trade deal to reduce tariffs between itself and a third country such as China. Being in the customs union means we would be forced to accept the lower tariffs on imports from China but without any guarantee that our exports would get the same tariff reduction.

Trade policy and negotiations potentially affects prices, wages and jobs for millions of UK workers and consumers. The idea that we should contract this out to a body representing the interests of workers from 27 other countries and on which we will have no representation is just bizarre.

With the economic arguments so strongly against remaining in a customs union, what on earth is Jeremy Corbyn thinking? We can only conclude that he is making a nakedly political calculation, hoping to attract Remain stalwarts who would otherwise not vote Labour.

Unfortunately for Corbyn, the move is just as likely to turn-off those many Labour-leaning voters who don’t want to see their democratic vote to leave the EU undermined. Even worse, plenty of Remain-leaning voters understand full well the practical arguments against staying in a customs union.

Many Labour MPs, not just those in the Midlands and North, will be deeply worried by Labour’s U-turn. Corbyn has made a risky political gamble – it may well be one that he will come to regret.



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