26 February 2018

Labour today announced its position to seek “a new comprehensive UK-EU customs union” post-Brexit, finally elaborating on its ambition to secure “the exact same benefits” of the EU customs union. Labour leader Jeremy Corbyn emphasised that a customs union with the EU was necessary “to ensure that there are no tariffs with Europe and to help avoid any need for a hard border in Northern Ireland.” He also stressed the importance of a formal customs union in order to protect complex manufacturing supply chains from disruption post-Brexit.

This position was not surprising – Labour’s shift in policy has been well signposted over recent weeks, with shadow foreign secretary Emily Thornberry last week suggesting that Labour would seek to agree an arrangement that was “pretty much like the current customs union.” Similarly, shadow Brexit secretary Keir Starmer this weekend said, “We’ve long championed being in a customs union with the EU.” Over the past week, The Times’ Sam Coates has published two articles signalling Labour’s intention to establish a customs union with the EU.

However, one aspect of Corbyn’s proposal is particularly striking:

We are also clear that the option of a new UK customs union with the EU would need to ensure the UK has a say in future trade deals. A new customs arrangement would depend on Britain being able to negotiate agreement of new trade deals in our national interest. Labour would not countenance a deal that left Britain as a passive recipient of rules decided elsewhere by others. That would mean ending up as mere rule takers.

Under this proposal, the UK would not agree new trade deals independently post-Brexit, but would allow the EU to negotiate on its behalf – on the condition it could influence its position. Labour’s proposal therefore seeks to respond to the challenge that “a” customs union with the EU necessarily means agreeing to an asymmetric relationship with the EU, where the EU can effectively sell market access to the UK as part of its FTAs, without Britain having a say or receiving reciprocal access in return.

Labour is seeking an unprecedented solution that would be extremely difficult to negotiate. Third countries in a customs union with the EU do not enjoy any formal representation or influence through the EU. For instance, Turkey – who has held a customs union with the EU since 1995 – has no decision-making power over what countries the EU chooses to strike free trade deals with, nor can its represent its interests in these negotiations through EU institutions. While the EU is currently considering upgrading its customs union with Turkey, it does not foresee increasing Turkey’s role in trade negotiations. What interest would the EU have in granting the UK such an unparalleled role post-Brexit? Corbyn appeared to suggest that the EU could be willing to pursue such a relationship in order to prevent the UK from engaging in a deregulatory race to the bottom in the future. But, given he also used today’s speech to rule out lowering social and environmental protections post-Brexit, this is unlikely to be a sufficient argument.

It is also not clear that the UK would avoid becoming a rule taker under this proposal. Firstly, as part of a new customs union, the UK would have to align itself with EU tariff structures, pursue a substantially similar trade policy to the EU, and agree to adopt key aspects of the EU’s regulatory regime in relevant sectors – Turkey abides by these conditions as part of its customs union agreement. There is an argument for the UK voluntarily choosing to mimic EU tariffs and rules post-Brexit in order to minimise disruption to trade. However, unlike membership of a formal customs union, this would leave the UK free to diverge in the future without jeopardising its whole agreement with the EU.

It is highly unlikely that the UK will play a truly decisive role in future EU trade negotiation. In theory, the EU could agree to consult the UK as part of internal talks to agree a common position ahead of negotiations. It could also offer to keep Britain updated on the progress of trade talks with non-EU countries. But it is doubtful this would translate into real influence in practice – Corbyn himself has set no real test what “a meaningful say” over EU trade negotiations would look like. Why would the EU rigorously pursue UK interests in trade deals with third countries after Brexit? Indeed, the furthest the EU has been willing to go in representing Turkey’s interests in trade deals is to call for a “Turkey clause” – this non-binding clause has recently been introduced to encourage third country partners to pursue a similar deal with Turkey in order to prevent unequal market access. This falls far short of the influential role Labour aims to achieve.

Most importantly, it is not clear what action Labour would take if it disagreed with the final trade deal the EU had negotiated – in an interview with the BBC’s Laura Kuenssberg today, Corbyn failed to present Labour’s “plan B” if the UK failed to achieve “a meaningful say”, suggesting he would continue to negotiate until he reached an agreement. It is important to put this point into context: If the EU managed to revive stalled negotiations for a Transatlantic Trade and Investment Partnership (TTIP) with the US – a deal Corbyn himself was vocally opposed to – what right of reaction would Labour want the UK to have?

It is highly improbable that the UK would be able to secure a formal veto over future EU FTAs. Why would the EU give Britain the power unilaterally to block its ability to conclude trade agreements after Brexit? This would mean handing a non-EU country unprecedented influence over determining the future direction of the EU – both Brussels and member states have consistently signaled their opposition to any erosion of the EU’s autonomy following Brexit. A UK government could feasibly choose not to apply the free trade agreement domestically, without preventing the EU from concluding the deal. However, this would simply lead to the same asymmetry that Turkey currently experiences – the non-EU country would still gain tariff-free access to the UK’s market without the UK benefiting from reciprocal access in return.

Corbyn is right that a customs union would “help” reduce the possibility of a hard border on the island of Ireland – it would negate the need for customs declarations or revenue collection along the border. However, it would not include sufficient provisions for addressing potential regulatory barriers to trade between the UK and the EU. In many ways, these are more difficult to overcome – there already exist methods of ensuring customs checks and duty collection can take place away from the border, for instance through electronic declaration systems and on-side auditing.

The EU is likely to place a high price on reducing regulatory barriers to trade. It has already laid out demands for the UK to agree to binding arrangements on state aid, taxation and labour and environmental standards as part of a free trade agreement. While Corbyn today rejected “any race to the bottom in workers’ rights, environmental safeguards, consumer protections or food safety standards,” his determination to secure exemptions from EU state aid rules would make it harder to secure a comprehensive deal that minimises technical barriers to trade.

While today’s proposals offer a tactical means of differentiating themselves from the government’s Brexit vision, they do not provide a realistic blueprint for a “softer” Brexit.