Insight
Is Labour selling the UK a Turkey? by Sam Lowe 12 April 2018
A future UK-EU customs union should not be ruled out. While it would place some constraints on a future UK independent trade policy, the positives far outweigh the negatives. On February 26th 2018, Jeremy Corbyn, the leader of the Labour Party, said that “Labour would seek to negotiate a new comprehensive UK-EU customs union.” This stands in contrast to the UK government’s position, which categorically rules out a customs union. However, while Theresa May’s red lines have set the UK on a path that only leads in one direction – a free trade agreement (FTA) – it is not clear that there is a parliamentary majority in favour of forgoing an UK-EU customs union. Eight Tory MPs – enough votes to overturn the government’s working parliamentary majority, when combined with Labour and other opposition parties – have put their name to an amendment that would bind the government to “take all necessary steps” to stay in a customs union with the EU. Facing possible defeat, the government has delayed votes on urgent Brexit legislation. There is no economic rationale for ruling out a UK-EU customs union. The UK is an intermediary manufacturer – one that imports to export (see Chart 1) – and the EU is, and will remain, the UK’s most important trading partner. Recently published internal analysis by the British government finds that a customs union exit would (assuming everything else remains the same) leave the UK economy, in the long-run, 1.1 per cent smaller than otherwise. As well as Labour, business groups such as the Confederation of British Industry (CBI) and the Institute of Directors (IoD) are supportive of a UK-EU customs union (partial, in the IoD’s case).
CER INSIGHT: Is Labour selling the UK a Turkey? 12 April 2018
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