7 reasons why a UK-only trade policy wouldn’t be as good as a customs union

Published date
28 Feb 2018
UK Border Force at Southampton docks. Photo by Matt Cardy/Getty Images
UK Border Force at Southampton docks. Photo Matt Cardy/Getty Images

On Monday, Jeremy Corbyn set out Labour’s call for the UK to stay in a customs union with the rest of the EU after Brexit. Conservatives criticised the move because it would stop the UK negotiating our own trade deals with the rest of the world. But would such deals necessarily be a good thing for British workers?

Here are seven reasons why staying in a customs union would be better for Britain.Most of our current trade is with the EU. We stand to lose more than we could gain

UK trade with the rest of the EU is far more important to the economy than our trade with the rest of the world. Leaving the customs union (and single market) wouldn’t mean losing all our EU trade, but the government’s own estimates show that we won’t fully replace lost trade with the EU by trading with other countries around the world.

A group of Dutch economists have predicted that “the impact of a combination of hard Brexit with a true Global Britain scenario [negotiating trade deals with everywhere else in the world] is negative to the extent that its value-added exports fall by more than 6%.”

If we left the customs union, it would be more difficult and more expensive to manufacture the goods that provide millions of workers skilled jobs on decent wages. Corbyn used the example of Minis, which are assembled in Oxford using components sourced and worked on all over Europe (including other parts of the UK).

The same is true of the iconic Irish drinks Baileys and Guinness. Guinness is brewed in Dublin but canned in Belfast. And some ingredients of Baileys cross the Northern Irish border three times before their journey to Britain. Inside the customs union, that movement is frictionless and tariff-free. Outside, the cost and the paperwork could make it uneconomic.

  1. We have trade deals with 65 countries outside the EU because of the customs union. It would take years to start over

The EU has negotiated far more trade deals than any comparable economic bloc, like China or the USA. As part of the customs union, the UK is part of those trade deals already, and the UK government took part in negotiating all of them.

The government says we could simply roll those EU trade deals over when we leave, but other countries may want to renegotiate them because we’ll have far fewer consumers than the EU single market.

And the Conservatives’ arguments that the customs union is bad for developing countries (a strange argument from the people who want to cut aid and joked about ‘Empire 2.0’) is wide of the mark. Although the trade union movement in Europe wants to develop EU trade policy to do more for poor countries, the existing ‘Everything but arms’ policy means that the poorest countries have tariff-free access to European markets already.

  1. We would lose negotiating clout by walking away from the world’s most powerful trading bloc

The EU has a consumer market of over 400 million people, and many of those consumers are better off than we are (Britain is 10th in the EU for spending power.) Potential trading partners will look at our much smaller domestic market and we look a lot less attractive than as part of the EU customs union.

That means that we give up the negotiating clout that means a lot in terms of international trade deals. It’s far more useful to have that clout than to have the freedom to negotiate deals that don’t need to consider EU trade policies.

  1. We would be less able to defend our manufacturing industries outside the customs union

The Government says that if we ‘took back control’ of our trade policy, we would be able to defend UK manufacturing from unfair competition. But it was Conservative Ministers themselves who stopped the EU from adopting stronger ‘trade defence instruments’ to protect domestic china, steel and tyre manufacturing.

Manufacturers and unions have highlighted that the government’s proposals for a UK-only trade defence system in the customs bill would fail to protect UK industry from unfair trade competition. By contrast, if the UK stayed in a customs union we’d be covered by recently strengthened EU rules to deal with dumping by countries like China.

  1. Workers’ rights and the NHS are under threat from new trade deals

The trade bill currently before Parliament would let ministers sign new trade deals off without our MPs having a say. What’s to stop a Conservative government giving up all sorts of things, like workers’ rights, environmental standards, consumer protections and even the NHS?

We know that the US wants a trade deal that would force the UK to accept food manufactured to far lower US standards (like GM crops, hormone-enhanced beef, and chlorinated chicken). Their health providers want to take over running the NHS, and there would be no protection for our current workplace rights which would be undermined by the lower minimum wage and anti-union laws of the USA.

Other countries have their own priorities: India wants more visas for its people, but as they would have no rights attached to them, a trade deal including that provision would increase the exploitation of migrants and undercutting of existing workers.

And outside the customs union we would be less able to resist the demands of foreign investors for Investor-State Dispute Settlement and similar systems - special tribunals that could impose multi-billion pound penalties on us for threatening their profits.

  1. We would be replacing trade with liberal democracies in Europe with deals with some of the world’s worst oppressors of human rights

A lot of the countries that Trade Secretary Liam Fox wants to do deals with have appalling human rights records. He’s gone on record as saying that we have ‘shared values’ with the Philippines where trade union rights are routinely abused and said he wanted to extend the ‘bond of friendship’ through trade with the Gulf States where millions of workers are in slavery.

That means that we could be flooded with cheap goods made by child labour and people in modern slavery. And we’d be cosying up to some of the worst dictatorships in the world, just to replace the trade we currently do with democracies like the Netherlands and Sweden.

  1. Leaving the customs union could endanger peace and prosperity in Ireland

One of the main reasons why the TUC opposes the government’s decision to make leaving the customs union one of its red lines is the effect it would have on cross-border trade between Northern Ireland and the Republic of Ireland. And a customs border could also re-open the wounds of the Troubles, undermining the Good Friday Agreement and its 20 years of progress.

A customs union would make a better trade policy possible

But we don’t just want the sort of customs union or EU trade agreements that we have now: we want a better deal for working people.

Working with the rest of Europe in a customs union would mean we could negotiate from a position of strength as part of the world’s richest trading power. Working with trade unionists across Europe, we could demand higher standards for workers’ rights and the environment.

On our own, the UK would be weaker in negotiations, and would be struggling to catch up on the trade we lose by leaving the EU. It’s better to work with our nearest neighbours, and defend manufacturing jobs in the UK at the same time.