May’s cherrypicking gambit on customs union reveals weak Brexit hand

31 January 2017 9:56am

17 January 2017. By Simon Taylor. 

UK Prime Minister Theresa May left no doubt today that the UK would cease to be a member of the EU’s single market when it leaves the bloc in 2019. Remaining part of the single market, she said, would mean complying with the union’s rules and regulations without having a vote on them. It would also mean accepting a role for the European Court of Justice.But May went further. She said the UK could not stay a full member of the broader EU customs union, as this would prevent the country from negotiating trade deals with third countries. Instead, the UK would seek to negotiate its own “comprehensive, bold and ambitious free-trade agreement” with the EU.

So far, so clear.

Yet May couldn’t resist the temptation to engage in what EU leaders have referred to, with contempt, as “cherrypicking.”

The prime minister ruled out full membership of the customs union if it meant adopting the EU’s common commercial policy and the bloc’s common external tariffs — which, clearly, it would. She then went on to say that the UK could negotiate its own “customs union” with the EU —  a “completely new customs agreement” that could see the UK becoming an “associate member of the customs union.”

May should know that the status of “associate member” of a customs union doesn’t exist. You’re either in it, or you’re not. What the EU does offer are association agreements with third countries that cover trade and economic ties, as well as political relations.

The only country that is in a customs union with the EU is Turkey, and that relationship is a poor substitute for full membership of the EU. Under the terms of the agreement, Turkey must adopt the same external tariffs as the EU, and it can only negotiate trade deals with countries that already have accords with Europe.

Turkey’s former ambassador to the EU, Selim Yenel, told MLex in December that Turkey’s agreement has many “unsatisfactory points which have to be overcome.”

The advantages of being in a customs union are that exporters enjoy duty-free access to the wider market and their products don’t have to go through customs clearance. This speeds up trade flows and is crucial for just-in-time supply chains — something that May appeared aware of in her speech.

The prime minister said she wanted British trade to be tariff-free and for cross-border commerce to be “as frictionless as possible” — in other words, May wants the benefits of being in a customs union while still being able to negotiate bilateral trade deals. She even name-checked Australia, New Zealand, India and the US as countries that have expressed an interest in doing a trade deal with a post-Brexit UK.

The problem for May is that her demands for a new form of customs union will be seen as cherrypicking by the other 27 EU leaders. Why should they agree to lower costs for UK-based manufacturers and exporters when May is resolutely insisting on an end to free movement of workers and an end to the jurisdiction of the European Court of Justice? What’s in it for the EU?

May is banking on getting some leverage in the negotiations by arguing that the economic interests of the UK’s trading partners in the EU would be damaged it they insist on erecting new trade barriers. It is an appeal to EU leaders’ self-interest, which suggests May will offer no concessions to the bloc in the lead-up to the Brexit negotiations. She wants Europe to be generous, because it stands to lose if it isn’t.

As negotiating positions go, it’s a weak place to be starting from.

Brexit Special Report