Theresa May’s post-Brexit customs proposal has been rejected by Michel Barnier in a joint press conference with Dominic Raab the Brexit Secretary last night. This is the latest, and possibly most significant blow to the Prime Minister’s Chequers plan and has further raised the likelihood of a no deal Brexit.
Under May’s Facilitated Customs Arrangement, the UK would collect tariffs on behalf of the EU. However, Barnier has declared that this is not an arrangement his side is willing to accept.
“The EU cannot and the EU will not delegate the application of its customs policy and rules, VAT and excise duty collection to a non-member, who would not be subject to the EU’s governance structures,” he said.
Barnier also said that the EU remains open to a customs union with the UK, which has been his favoured outcome all along. And it is not hard to see why. If Britain were to be in a customs union but not a member of the EU, our trade policy would be set by Brussels without us having any say. This would prevent the UK from taking advantage of the main opportunity from Brexit, namely signing trade deals with other countries. It would also enable the EU to use the UK market to increase its leverage in trade negotiations. In other words, a win-win for Brussels. But this would be an intolerable position for the UK, the world’s fifth largest economy. Many Brexiteers regard this outcome as worse than remaining a member of the European Union.
May therefore cannot opt for a customs union. It is an absolute red line for Brexiteers and leaving the customs union has been a key pillar of her Brexit strategy. She has consistently promised that Britain will be free to negotiate its own trade deals when it leaves the EU. To renege on this would almost certainly finish her premiership, with Brexiteers within her government and on the backbenchers moving to bring her down.
It is unclear where the negotiations will go from here. Raab will bring fresh UK proposals to Brussels in the near future and some are saying Barnier hasn’t killed the FCA entirely. May will be hoping that with tweaks the EU may accept it and come to her rescue.
However, if the Facilitated Customs Arrangement proves non-negotiable, May will have to return to the Max Fac option favoured by Brexiteers. The problem is, May is not convinced this meets the agreement she made with the EU in December regarding the Irish border.
Interestingly, the website Conservative Home has published the Alternative White Paper devised by DExEU whilst Davis was in charge, which contains a different solution to the Irish border. The plan proposes a comprehensive free trade deal and a mutual recognition regime, alongside existing technological arrangements and intelligence-led policing to prevent the need for customs checks at the border. In other words, Canada plus plus plus. But this has been rejected by May and there is little chance she will go back on that decision.
Meanwhile, the EU is not going to stop pressuring for a customs union and may be helped in this endeavour by MPs in Parliament. If May is unable to come up with an alternative that will fly in Brussels, the UK could well be heading towards no deal. So far, May’s ‘no deal is better than a bad deal mantra’ has been an empty threat, as the EU know she is determined to reach some sort of agreement.
However, it looks like she might have to start taking her own rhetoric seriously if she wants to remain in office.
