IoD: Business leaders push for hybrid Brexit model to include a customs union
Business leaders believe they have a compromise proposal for post-Brexit trade that would reduce barriers while allowing the UK to pursue free trade deals.
The plan – a partial customs union covering industrial goods and processed agricultural products – has been put together by the Institute of Directors, who argue it would help maintain the competitiveness in certain industries, while allowing the government to adopt an independent trade policy, including in areas such as tariffs on agricultural products like beef, oranges and sugar from developing nations.
The IoD argues that ministers should not be bound by existing precedents and must forge a bespoke deal with European counterparts. It recommends a trade framework using a customs union akin to Turkey's agreement with the EU.
"The UK could reasonably expect the same treatment, and is in fact in a stronger position, with many of those third countries already wanting to pursue deals with it after Brexit," the business group said.
A customs union covering all industrial goods and processed agricultural products would facilitate the flow of goods across UK-EU borders; remove the need for costly ‘rules of origin’; would not interfere with the pursuit of external free trade agreements; but would help shift existing EU trade agreements to the UK after transition.
It would also allow the UK to maintain full control over agricultural tariffs and allow the UK to maintain a broadly distinct trade remedies policy from the EU.
Stephen Martin, IoD director general, said: “As a fundamental principle of European Union membership, the UK’s decision to leave means that leaving the customs union is less a matter of choice but rather one of necessity.
“For the welfare of Britain’s businesses, prolonging its operational effects during the transitional period is no doubt crucial. In the long-term, the UK should consider remaining in a narrowed customs union to mitigate the disruptive effects for business and ensure manufacturing remains competitive and attractive for inward investment. In the interest of our members and the wider business community, while respecting the decision taken by the people in June 2016, we feel this is the best way forward.
“It’s as simple as this – there was no Canada deal before there was a Canada deal, and no Turkey deal before there was a Turkey deal. We must be ambitious in undertaking the most important negotiations this country has embarked on for decades and push for a bespoke solution.”
Allie Renison, author of the paper and the IoD's head of Europe and trade policy, added: "There are some important choices to be made about our future economic relationship with the EU, but sadly this debate has not fully come to fruition. Even now, 20 months on from the referendum, there is still much talk and much less action.
“It is crucial that this debate be focused on outcomes – something that both the government and the EU would do well to remember. Inevitably every negotiation rests on a series of compromises, and our proposal could provide the foundation for one that would minimise disruption while ensuring the UK’s ability to pursue new opportunities.”
However, the debate that has so far waged in Westminster suggests many pro-Leave figures would reject attempts to remain within a customs union of any kind.
One source has told City A.M. that such efforts on behalf of the government, through its Cross Border Trade Bill, were "an abuse of language".
MPs including Jacob Rees-Mogg and Bernard Jenkin lined up to attack chancellor Philip Hammond after he suggested "very modest" changes after Brexit, insisting the ability to do deals with other countries – and by extension leaving the Single Market and customs union – was the only way to carry out the referendum result.
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