Labour pains
Corbyn’s sudden embrace of the customs union is a calamitous proposition
Ambrose Evans Pritchard
Labour’s sudden embrace of the EU customs union as a “possible end destination” is a calamitous proposition. It is a destination to permanent peonage with no way out. The strategic imperative for Britain is to avoid such a trap at all costs.
The only good reason to remain in the customs union beyond Brexit is to avert a “hard” economic border with Ireland. We certainly have a special duty of care to Ireland, left in the lurch through no fault of its own.
Yet there are ways to mitigate the damage to intra-island trade with digital tracking technology, mimicking Sweden’s economic border with Norway – or Mexico’s border with the US, before Donald Trump started smashing the furniture.
In the complex geometry of EU affairs one must separate the customs union from the single market, no easy task even for those, like me, who have toiled at the Brussels coal-face. While they look fungible, they have different characters and greatly different political implications.
As a grizzled Eurosceptic of many decades, I am relaxed about what some would call a “soft Brexit”. There is merit in a deal that secures proxy access to the single market for a decade along the lines of the Norwegian option (European Economic Area), allowing the UK to strike future trade deals gradually with North America, Japan, China, India, and others, and exit the EU in safe stages.
I would swallow it even though it meant the indirect sway of the European Court of Justice (ECJ) over limited areas. Those who assert that this implies full submission to the ECJ are either disingenuous or – usually – do not grasp the way in which the Maastricht, Amsterdam, Nice and Lisbon treaties have vastly increased the jurisdiction of EU judges over affairs that have nothing to do with markets.
Lisbon turned the ECJ into a supreme court with the last say over anything it wants through the Charter of Fundamental Rights. Tony Blair told the House of Commons that Britain had a legal opt-out under Protocol 30, but this was quickly swept aside by Luxembourg as a “comfort clause”. Blair seems not to care that he misled Parliament on the gravest constitutional matter since the Bill of Rights of 1689.
Norway does not have to put up with such an imperial ECJ, yet it nevertheless has access to the single market and passporting rights for financial services. It is fully sovereign in justice, security, foreign policy and constitutional affairs, as well as fisheries and farming. It also has an emergency brake over EU migration, although this is increasingly irrelevant as wages catch up in Eastern Europe and we enter an era of labour shortage for demographic reasons.
It is true that the customs union does not entail submission to the ECJ or acceptance of free movement. While that may be seductive for some, it comes with a poisonous proviso. So long as you are in this protectionist structure you are prohibited from negotiating free trade deals with the rest of the world. It would keep Britain locked in the cage.
As Daniel Hannan, the Tory MEP, has argued all along, it is the worst of all worlds. It does little to avert a cliff-edge in trading relations at the end of the ordeal, and the arrangement is a recipe for trouble. Britain would chafe as an EU satellite, without a say over terms.
This raises the risk of two destructive outcomes: one is to sap support for Brexit and open the way for total reversal when the moment is ripe, probably the motive of Chuka Umunna and Labour’s arch-remainers; the other is to inflame Eurosceptic
‘Jeremy Corbyn aims to stir up trouble for the Tories. The volte-face smacks of political opportunism’
feeling further, culminating in a vicious bust-up with the EU. The first would court civil conflict, the latter is reckless.
Outside the customs union, British firms would have to comply with “rules of origin” codes to prevent goods from China, say, coming into the EU through the back door. Large companies routinely operate such systems in order to trade globally. It is how the North American Free Trade Agreement (Nafta) functions. “You need software and tracking devices but the Nissans of the world already do this,” said Holger Hestermeyer from King’s College London. It raises costs. Rules of origin – or ROOS as they are known – are a spaghetti bowl. The interwoven supply chains across borders make it a headache to comply. As a rule of thumb, cars manufactured in the UK would qualify if 60pc of input was local British content, yet all this data has to be catalogued.
The Norwegian-swedish border is the template for a light-touch policing of these flows. There are spot checks but no need to stop every lorry or shipment. Firms submit their documents electronically. The Norwegians grumble but the process is mostly invisible.
Bob Jones, an expert on the customs union at KPMG, says it takes a tangle of lawyers, tax specialists and IT experts to navigate this swamp but it is ultimately doable if there is the political will on both sides.
New cloud and blockchain technologies promise to make it easier. “It can be close to frictionless but it is expensive and would take a long time. It is almost impossible for small companies and I am most concerned about sanitary inspections for food,” he said.
The pattern around the world is that small businesses and family firms choose to pay the tariff as a lesser cost than converting their whole system to a rules of origin regime. This would not be good enough for Ireland where it would erect barriers where none now exist.
Yet it is just as much a test of EU credibility as it is for UK credibility, whether they can come up with a creative formula for the unique circumstances of intra-irish commerce. It would be astonishing if they failed to do so.
Labour’s new affection for the customs union and the single market has almost nothing to do with Ireland in any case. Jeremy Corbyn ruled out remaining in either in his manifesto and sacked three front-bench spokesmen just weeks ago for refusing to toe the line. The volte-face smacks of political opportunism.
Corbyn aims to stir up trouble for the Tories, which is certainly easily done. But he may in the process have punctured the bubble that allowed him, miraculously, to gather votes from metropolitan remainers in the last election, whilst at the same time luring back Labour’s working class base in northern England from UKIP. The latter won’t be fooled twice. Corbyn may yet be hoisted by his own petard.