UK suggesting “temporary customs union” with EU

As part of its preparations for exiting the European Union, the UK government has published a new position document and put forward a strategy which could include a “temporary customs union” to maintain the “freest and most frictionless possible trade” during the transition. The UK is scheduled to leave the EU in March 2019.

David Davis, Secretary of State for Exiting the European Union, said he envisaged the temporary accord being “as close as we can to the current arrangements” and added that the transition phase could last for about two years.

The temporary customs union proposal has been floated in response to concerns about the dangers of the UK leaving on a “cliff edge” (i.e. exiting the EU without new trade accords and customs arrangements already in place).

Perhaps predictably, the UK’s opposition parties have criticized the government’s plans but the Confederation of British Industry (CBI) welcomed the them as “encouraging”.

In a statement issued today (15 August), Josh Hardie, CBI Deputy Director-General, said: “Companies will welcome the progress Government has made today in publishing these papers.  Over the past year, businesses have been providing policymakers with the evidence, ideas and solutions to make a success of Brexit.

“So it’s encouraging to see that these papers propose a time-limited interim period and a customs system that is as barrier-free as possible.

“We at the CBI have always been clear that new ideas on crucial issues like this should be brought to the table quickly.  But the clock is ticking and what matters now is giving companies the confidence to continue investing as quickly as possible.”

And focusing on the customs issues, Hardie said: “Business wants to see as frictionless a customs system as possible, with a strong emphasis on digital systems that make it easier to trade.

“But to secure frictionless trade, negotiations on regulation, tariff and non-tariff barriers will have to take place.  All efforts should be made to deliver a single-step transition, so that businesses don’t have to adapt twice.”

The Federation of Small Business (FSB) has also voiced its support for the idea of an interim customs deal.

In a statement sent to Post&Parcel today, Mike Cherry, National Chairman at the Federation of Small Businesses (FSB), said: “Today’s commitment from the government would give small businesses the time they need to prepare for new customs arrangements, which is very welcome. But it is essential that this interim deal is negotiated as soon as possible with the EU Commission, to give businesses the certainty to keep investing in the UK.

“We also welcome the aspiration that negotiation on Free Trade Agreements globally will be able to begin once we have left the EU. Whilst 63% of our small businesses would prioritise an FTA with the EU, 49% would prioritise an FTA with the US and 28% with China.

“Beyond the interim period it is essential that new customs arrangements achieve the most frictionless trade with small businesses as possible. Our research shows that non-tariff barriers are just as important as tariff barriers in determining where small businesses export to. Engagement with small businesses is essential to develop a new customs relationship with the EU that enhances trade and successfully capitalises upon the opportunities offered by digital technology.”

The Road Haulage Association (RHA), meanwhile, has given a “cautious welcome” to the government’s post-Brexit customs proposals.

Road Haulage Association director of policy and public affairs Rod McKenzie commented: “Today’s news is encouraging but we will carefully follow the detail to ensure we get the best possible customs arrangements for the UK haulage industry.

“If we don’t get this right, people will see empty supermarket shelves and huge traffic jams around the ports.

“The ideal scenario for us would be a transitional arrangement that looks and feels the same as the customs arrangements we have now and we are looking to ministers to deliver that in the forthcoming negotiations”.

UPDATE: UK government paper on the UK’s future partnership with the EU now available online

The UK Government’s new paper setting out proposals for a future customs relationship with the European Union (EU) is now available on the gov.uk website. Click here for access.