01 May 2018

​The Brexit war Cabinet is meeting to agree on the UK’s future customs arrangement. But Joe Owen says the two proposals the Government has floated are unworkable.

The Brexit 'war Cabinet' is meeting to agree the UK’s preferred customs approach. In the meeting, ministers will be asked to choose between two options the UK put forward last September: a highly streamlined customs arrangement, now dubbed “maximum facilitation” and the customs partnership. Neither is the solution the Government needs.

The ‘maximum facilitation’ option doesn’t solve the Irish customs problem

The 'maximum facilitation’ (aka 'max-fac'), takes the best of the best from international precedent. It combines data sharing, continued UK access to certain EU-wide customs systems and trusted trader schemes with a number of unilateral measures to streamline domestic processes.

The UK proposal goes further than most customs agreements. New technology using number plate recognition would ease flow at ports like Dover and Calais, while negotiating waivers for certain bits of paperwork would ease the burden on traders.

Add all of the different elements up and you have something which is pretty much world leading in terms of customs agreements. It should not present issues of principle to Brussels (though they may be wary about precedents they are setting for other borders). But even if everyone is signed up as a trusted trader – or exempted – it still results in a hard border. There is a need for infrastructure, like cameras, to make it work (something has to recognise those number plates). Acceptable in Dover or Holyhead – but not along the 200+ Irish border crossings. 

The ‘customs partnership’ option is practically and politically infeasible

What was the second option in September now appears to be the Government’s lead option. It is designed to give the UK the benefits of customs union membership, but without the need to sign up to a common external tariff. This option takes a different approach: rather than tried and trusted, it is innovative and untested.

The proposal last September was a statement of ambition with the Government’s paper proposing both sides “jointly consider innovative approaches”. "One potential model", as the Government puts it, would see the UK charging EU tariffs at its border, for goods destined to the EU. “A tracking mechanism” would allow an importer to claim a refund if the goods ended up in the – presumably lower-tariff - UK.

So far the UK Government has published just five paragraphs on the partnership, almost half of which is caveat and context. The EU has said the suggestions put forward are unrealistic. Jacob Rees-Mogg is rather less complimentary. It seems that the customs partnership is either too “creative and imaginative” or seen as ECUNO – exiting the customs union in name only. Would a customs union be required to cover the unspecified time necessary to develop and implement the tracking mechanism?

The Cabinet needs to agree to a workable solution

Six months have passed since the UK Government put forward these two options. Work has continued, consultants have been brought in and presumably thinking has moved forward. The key Cabinet meeting this week needs to come to a judgement on the preferred approach. That approach needs to be feasible, negotiable with the EU and sellable to Parliament. There is no point in getting the Cabinet to agree to something that fails those tests.

A customs agreement on its own cannot eliminate the need for checks. But nor would a customs union.

If the Government wants to avoid a border in Ireland and keep lorries moving freely through Kent, it needs to deal with regulatory checks as well. A nice new customs arrangement is necessary, but it’s not sufficient.

Comments

Dear Mr. Owen, I am currently reading your oral evidence in the House of Lords on 17 April.
Concerning your paper, I agree on the ‘maximum facilitation’ option. Concerning the ‘customs partnership’, when I read it on 15 August last year, I understood that, in practice, it was a message addressed to the British people and surely not a document for discussion with the EU as it was extremely poor and purely unilateral. Almost no word on what the EU27 should do, no explanation on the more common case of products that arrive first in a EU27 main hub harbour (like Rotterdam, Antwerp or even Zeebrugge) at will go then to UK (either to Northern Ireland or to another part of UK).
No indication also on the cases where the EU customs tariff will be lower than the UK tariff 5I know Mrs May is convinced UK will be able to renegotiate each FTA of the EU prior the end of the transitional period, but I do not think that its is feasible and to apply, in that case the EU rate on an unilateral basis (tariff suspension) would make the conclusion of the agreements concerned very difficult).
Shall the goods circulate under a internal transit procedure? What about the goods that are first put in free circulation and then exported to the EU in order to circumvent the EU legislation? It means that it requires a hard border or that UK remains at least in the Single Market (at least de facto). I don’t think that the current Government will be able to answer these questions and challenges.

Why not state it clearly? To avoid a hard border requires participation in both the customs union (tariff and rules-of-origin alignment) and the single market (regulatory alignment). Given the already settled backstop of a common regulatory area in Northern Ireland, the only way to avoid a hard border in the Irish Sea is to avoid a hard border between UK and EU. This is where paragraphs 49 and 50 of the December political position on the withdrawal agreement inevitably and inexorably lead if the 'customs partnership' and 'max-fac' are infeasible. What matters now is how soon that is recognised by the Cabinet so that the UK can start engaging with these issues in a reality-based way.

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