An effective UK trade policy and a customs union are compatible by Sam Lowe
If the UK enters into a customs union with the European Union it will be able to operate an effective trade policy, but the political focus would need to shift away from headline-grabbing, comprehensive free trade agreements. The chances are rising that the UK will be in a customs union with the EU after the transition period ends, either temporarily or permanently. The withdrawal agreement does not, as many of its critics argue, lock Britain into a permanent customs union. The EU and the UK have agreed that before the backstop can come into force, and even afterwards, they will seek other solutions to prevent a hard border on the island of Ireland and a customs border down the Irish Sea. But even if it is possible to tackle the border issue with new technological fixes, it is unlikely that they will be ready by December 2020. In that case, the UK will probably seek to extend the transition period, but even that will be unlikely to buy enough time to avoid triggering the backstop. And any new Tory leader would face a Parliament without a majority for customs union withdrawal, especially if it entailed a customs border between Great Britain and Northern Ireland. A customs union would certainly constrain an independent UK trade policy. However, what the constraints are, and what they are not, is little understood in the Brexit debate. Unless supplemented by other provisions, a
customs union is simply an agreement in which participating countries commit to lower or remove tariffs on goods traded between them, and levy tariffs at the same level on goods entering their territory from elsewhere. If the UK were to enter into a customs union with the EU it would be bound to apply the EU’s external tariff to all goods imported from the rest of the world. This places obvious constraints on the UK’s ability to strike new trade agreements: the UK would not be able to offer tariff reductions on imports as part of an agreement. It is important to note that even if it is in a customs union with the EU, the UK will not be subject to the EU’s common commercial policy – its joint trade policy. This means that the European Commission will no longer negotiate trade agreements on the UK’s behalf, and the UK will no longer be covered by the EU’s existing free trade agreements, which will need to be replaced. Additionally, were the EU to enter into a new trade agreement with, for example, China, the UK would need to negotiate its own agreement in parallel. Otherwise, there would be an asymmetric relationship, in which Chinese exports to the UK benefited from a lower tariff