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19 April 2018

Jim Rollo is Deputy Director of UKTPO, Emeritus Professor of European Economics at the University of Sussex and Associate Fellow, Chatham House. Dr Peter Holmes Reader in Economics at the University of Sussex and Fellow of the UKTPO.

On Wednesday this week, the House of Lords voted that after Brexit a customs union with the EU should not be ruled out. If it remains in the legislation, it would require the government to submit a report to Parliament on the Customs Union option. This blog discusses some of the key issues that would need to be considered in such a report.

What is a Customs Union?

A customs union under GATT Art XXIV is an agreement under which partners commit to removing all duties on products originating in each other’s territory and having a common external tariff. This might imply a common collection of customs duties but in some cases (e.g. MERCOSUR) this was not initially done. Customs unions under GATT XXIV cover goods but not services.

A formal customs union may still require border checks, including for tax (esp VAT or other sales tax purposes), technical standards, transport (e.g. cabotage).

A Customs Union with the EU versus membership of The EU Customs Union

We need to remember the difference between being in the European Union Customs Union which only is possible for Members States and territories that are effectively part of a member state (eg Jersey, Monaco) versus having a customs union with the EU, eg Turkey but also San Marino. Even a complete customs union does not by itself achieve frictionless trade amongst signatories.  This is because only a customs union combined with elements of the Single Market would obviate the need for border inspections, although a customs union would go some way towards reducing border formalities.  At the same time, countries that sign up to a ‘complete’ customs union forgo the ability to set their own external trade policy regime.

A UK-EU customs union

The key decision on a UK-EU customs union would be how complete it would be. GATT Art XXIV requires “substantially all trade” to be covered. This is generally taken to mean about 90% of trade but WTO recognised customs unions often are seriously incomplete. EU Turkey does not cover agriculture and allows anti-dumping duties to be imposed between the two parties. Nor is Turkey included automatically in EU Free Trade Agreements.

Issues to be decided in any UK-EU customs union

Would it include agriculture and fisheries? If not Rules of Origin will be required for excluded sectors and costs of compliance and delay will be incurred.

Would Anti-dumping duties be harmonised? If not, borders are needed; if so WTO compatibility issues arise.

How would trade with third countries be addressed? Turkey is not automatically included in EU Free Trade Agreements (FTAs): wherever there is an exception the CET is necessarily incomplete.

How is tariff revenue shared? Turkey and the EU do not share revenue. East African Community and Southern African Customs Union do. MERCOSUR now shares revenue but previously did not. This is not an issue for FTAs.

Implications for Northern Ireland

A comprehensive customs union including agriculture is a necessary, but not sufficient condition to ensure the absence of hard customs facilities and solve the border issue in Northern Ireland.

Single market participation is needed to avoid technical inspections and tax issues would also have to be dealt with.

April 19th, 2018

Posted In: UK- EU

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29 March 2018

Dr Ingo Borchert is Senior Lecturer in Economics and a fellow of the UK Trade Policy Observatory and Julia Magntorn is Research Assistant in Economics at the Observatory.

With one year to go until the UK will leave the European Union (EU), sorting out Britain’s trade relation with the EU is the most important task.  Yet the design of the future UK-EU agreement has implications for trade policy towards non-EU countries.  On account of this, the British Prime Minister in her Mansion House speech ruled out forming a new customs union with the EU because this “would not be compatible with a meaningful independent trade policy.”  Indeed, having sovereignty over its external trade policy post-Brexit has been at the forefront of the UK’s negotiation agenda, and consequently, the provision in the current draft Withdrawal Agreement that the UK may commence Free Trade Agreement (FTA) negotiations with other countries during the transition period was perceived as an important concession won. (more…)

March 29th, 2018

Posted In: UK - Non EU, UK- EU

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2 March 2018

Alasdair Smith is an Emeritus Professor of Economics at the University of Sussex, and is a member of the UK Trade Policy Observatory.

The European Commission has this week published its controversial draft of the withdrawal treaty for the UK’s exit from the EU. The draft includes the EU’s proposal for dealing with the issue of the border in Ireland – Northern Ireland to remain in a customs union with the EU and to retain all the elements of the Single Market that support free movement of goods. (more…)

March 2nd, 2018

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2 March 2018

Dr Michael Gasiorek is Senior Lecturer in Economics at the University of Sussex and Director and  Managing Director of InterAnalysis respectively. He is a Fellow of the UKTPO.

There is much talk about the UK not being able to “cherry-pick” and “have its cake and eat it” with regards to post-Brexit trade policy with the EU. There are a couple of issues here. First, all EU agreements are different and hence by definition bespoke. Cherries are picked by both sides. This will also be true of a future UK-EU agreement. The question, therefore, really is to do with the extent to which the EU will grant the UK a bespoke deal in serious and substantive ways. The second issue is that it is far from clear that the UK government currently knows what all the ingredients are and what the recipe is for the cake it is hoping to share with the EU. (more…)

March 2nd, 2018

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15 December 2017

Alasdair Smith is an Emeritus Professor of Economics at the University of Sussex, and is a member of the UK Trade Policy Observatory.

The deal done on Friday December 8 in the Brexit negotiations has already been subject to conflicting interpretations. The UK has committed to having no hard border in Ireland, and committed in terms which seem to admit no rowing back. (more…)

December 15th, 2017

Posted In: UK- EU

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8 December 2017

Jim Rollo is Deputy Director of UKTPO, Emeritus Professor of European Economics at the University of Sussex and Associate Fellow, Chatham House. Dr Peter Holmes Reader in Economics at the University of Sussex and Fellow of the UKTPO.

The agreement to proceed to the next phase of  Brexit talks is a step forward on the road to a softer Brexit. But it does not offer a definitive solution to the status of the Irish border, which will depend on the nature of the final agreement on the UK-EU trade relationship. At best, it represents an exercise in constructive ambiguity designed to allow the shape and length of any interim agreement, which will help determine the shape of the long-term agreement and, in turn, will be the basis of any permanent solution to the status of the Irish land border with Northern Ireland. (more…)

December 8th, 2017

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Photo of Emily Lydgate7 December 2017

Dr Emily Lydgate is a lecturer in Law at the University of Sussex and a fellow of the UK Trade Policy Observatory.

How can the UK uphold its commitment to leaving the EU Single Market and Customs Union while also preserving the invisible intra-Irish border? Leaving aside crucial questions of political feasibility, this post looks at some of the options and their trade and border implications. Notably, there are limits to ‘flexible and creative’ solutions that involve turning a blind eye to customs and regulatory checks solely on the intra-Irish border: trade rules leave little room for such ad hoc approaches. (more…)

December 7th, 2017

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26 October 2017

 

Nicolo Tamberi is Research Assistant for the UKTPO and Charlotte Humma is the UKTPO’s business manager.

Leaving the Single Market and the Customs Union will require the implementation of new border controls between the UK and the EU that will surely increase transport time and therefore costs. However minimal they may be, these new procedures will negatively affect trade between the two parties.

According to a study by EY, Economic footprint of the Channel Tunnel fixed link, trade between Folkestone and Calais via the Eurotunnel was estimated to be £91.4 billion or 24.8% of trade with the EU in 2014. Goods transported through the Channel Tunnel are exported from and imported to every region of the UK.

Today, transporting things from one shore to the other requires minimal controls such as those that exist between Surrey and Somerset. Businesses on both sides of the channel increase their efficiency by integrating their supply chains and by relying on the prompt connection across the channel. So, what about Brexit? If one thing is clear in the impenetrable mist surrounding the future UK-EU relations, it is that exiting the Single Market and the Customs Union will require increased border controls. (more…)

October 26th, 2017

Posted In: UK- EU, Uncategorised

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Michael Gasiorek11 October 2017

Dr Michael Gasiorek is Senior Lecturer in Economics at the University of Sussex and Director and  Managing Director of InterAnalysis

Reading the Government’s White Paper on trade, and the Customs Bill on future customs arrangements, together with Monday’s statement from the Prime Minister seemed like a Groundhog day moment.  In other words, this is somewhere we have been before – repeatedly. (more…)

October 11th, 2017

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Erika SzyszczakImage of Alan Winters26 September 2017,

L. Alan Winters CB, Professor of Economics and Director of UKTPO. Dr Peter Holmes Reader in Economics at the University of Sussex and Fellow of the UKTPO, Erika Szyszczak is a Professor of Law at the University of Sussex, independent ADR Mediator and a Fellow of the UKTPO.

Now it’s official. More than a year after the UKTPO said that it would be necessary (see Briefing Paper 2 and NIER paper), the Prime Minister has announced that the UK wants a transitional deal that preserves the status quo. Namely, membership of the Single market, a customs union with the EU, free mobility of labour, jurisdiction of the Court of Justice of the European Union (CJEU), budget payments and no external trade deals. Sad to say, this seems like progress.

Despite the language and some of the press commentary, Britain is not ‘opting for’, still less ‘agreeing to’, a transitional deal; it is asking for one in the negotiations. The Florence speech still uses the language of an ‘implementation period’. This implies that between now and 2019 the UK can both negotiate a final settlement to be implemented after the transition and the transition itself.  But the Prime Minister has made no proposals about how to construct such a deal, other than that the UK leaves the EU on 29th March 2019, so that the transition requires agreement(s) between the EU (27 remaining members) and an independent UK. (more…)

September 26th, 2017

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