The Brexiteers’ report:

Sixty Brexiteers set out why they believe the PM’S proposal would be disasterous for Britain

A 30-PAGE memorandum sent to No 10 by Eurosceptic Conservative MPS sets out in forensic detail why they believe a customs partnership with the EU is “undeliverable”.

The 60-strong European Research Group, led by Jacob Rees-mogg, wants Theresa May to rule out a customs partnership today when she meets her Brexit “war Cabinet” to discuss what customs arrangement with the EU should be. The group insists the Government must stick with a “highly streamlined” customs arrangement which would use technological solutions and trusted trader status schemes to solve the issue of the Irish border.

The document says a customs partnership would make an independent trade policy a “practical impossibility”.

Customs partnership means no regulatory autonomy

A Customs Partnership (CP) would “eliminate” the UK’S independent trade policy because it would require Britain to be in regulatory alignment with the EU, the document says.

Instead of being able to set its own standards and regulations for imports to the UK, Britain would have to ensure all goods were Eu-compliant to avoid “leakage” of Uk-only imports to the EU.

It says the main purpose of a CP is customs-free circulation of UK and EU goods, which “could not be achieved without the EU demanding regulatory alignment with the EU”. The ERG argues a CP “would end up substantially the same as a full customs union” and therefore Britain would not “take back control” of its trade policy.

Threat to independent trade policy

The inevitable consequence of regulatory alignment is that Britain would be unable to negotiate its own trade deals with non-eu countries, the memo says.

Wilbur Ross, the US commerce secretary, has said that unless the UK can diverge from EU regulations, it will be unable to sign a free-trade agreement with the US. Other countries’ trade ministers “regard a customs partnership and customs union as analogous”, meaning it would “make the execution of an independent trade policy a practical impossibility”. It adds: “Meaningful trade agreements would become impossible”

Mutual tariff reductions with trade partners at risk

The fact that trading partners in thirdparty countries would have to pay EU tariff rates up front would deter them from agreeing mutual tariff reductions with the UK.

Under any free trade agreement, UK exporters would be able to send goods to customers in the receiving country tariff-free, but the partner country’s exporters would have to pay an EU tariff and claim it back as a rebate. “This substantially reduces the appeal of a free-trade agreement with the UK,” the memo says. The EU also has quotas for some imports, so that the import is tariff-free until the quota is filled, making the system even more complicated.

Red tape would negate benefits of lower tariffs

Brexit is intended to deliver cheaper goods by enabling Britain to negotiate tariff-free deals with third party countries, but the ERG argues that a customs partnership would mean firms would end up paying higher EU tariffs just to avoid red tape.

The system would rely on companies paying a common external tariff set by the EU, before claiming back a rebate by proving that the goods had gone to a UK end-user.

Often the destination would be unknown, for example in the case of meat that might be imported into Britain and then processed and exported to the EU, making tariffs difficult to calculate.

Only the biggest companies would have the capacity to cope with the administrative burden of the system, so small and medium-sized companies (SMES) would pay the higher tariff to save time, “removing at a stroke any competitive gains for our SMES”.

Britain would continue to be a net contributor to the EU

If companies continued to pay the higher tariffs to save time, the EU would be the beneficiary, meaning that Britain would continue to be a net contributor to the EU. Britain would end up being the EU’S “tax collector”, the ERG says, and would be in a “disproportionately disadvantaged position” because it trades a higher percentage of its GDP than any other major EU member.