The Strategist

The UK is ready for an interim customs union with the EU

08/15/2017 - 14:38

Today, the British Department for Exiting the European Union announced a new project of creating a temporary customs union with the EU during the transitional period after Brexit. The document also contains two options for long-term trade agreements, which will enter into force after the transition period is over.

On the eve of the next round of negotiations on the withdrawal of the UK from the European Union, the British “Brexit” department prepared a draft of a "new ambitious customs agreement" with the EU, which should provide "highly free and problem-free trade relations" with the rest of Europe after Brexit. According to the document, London may ask Brussels to establish a temporary customs union with the previous rules of trade for a transitional period after March 2019, when the country leaves the European Union. The document’s authors say that this should prevent possible chaos on the borders after Brexit and facilitate business difficulties in moving subsequently to new trade rules.

Long-term trade agreements must enter into force after the end of the transition period. The British Ministry offers two options. The first implies a "largely optimized" customs procedure, including simplifying inspection of goods moved between the UK and EU states. The second option involves creation of a new customs partnership, which "will bring to naught the need for a customs border between the UK and the EU."

The British side sounded proposals for a temporary customs union for the first time. Until now, representatives of the British leadership, in particular the Minister of Finance Philip Hammond and the Minister of Trade Liam Fox, have stated that during the transition period the UK will not remain in the single market or in the Customs Union. According to them, this will allow the country to independently conclude agreements on duty-free trade with other states.

All proposals of the British Ministry should still be discussed with the EU. The union itself refuses to discuss all issues of future trade relations with Britain until the country achieves any results on a number of issues, including settlement of border issues with Ireland and determining the amount of compensation that the United Kingdom must pay to the EU.

Earlier, Oxera consulting company presented its forecast of consequences of introduction of border customs control after Britain leaves the EU. The cost of inspecting the goods will be £ 1 billion per year, and consumers in both the EU and Britain are expected to seriously delay their deliveries. Researchers emphasize that £ 1bn is the most conservative of forecasts. It does not takes into account, for example, such factors as traffic and traffic jams, rent or purchase of land for placement of additional customs terminals and costs associated with growing uncertainty. "The total cost is likely to be significantly higher," the report says. Another consequence of Britain's withdrawal from the EU and the strengthening of the customs regime will be an increase in the delivery of goods.

In total, the report considers four different scenarios, including the one that representatives of the Dover port once called "Armageddon" - a situation in which all rules for trade with foreign countries (high level of regulation) come into force, and the checks will become the most thorough (high level of execution of the rules).


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