Customs Union

What about the remaining 80 percent – services? The ‘Customs Union’ and ‘Unilateral Free Trade’ share the same flaw

05 July 2018 L. Alan Winters CB is Professor of Economics and Director of the Observatory. Two years in and the Cabinet is still squabbling over the UK’s trade relationship with Europe. Among the options most discussed, if not most likely to occur, are The Jersey option – arrangements to provide conditions equivalent to the customs union and the Single Market in goods; Mrs May’s ‘third way’ customs partnership – where the UK collects EU-level tariffs at the border and rebates them only if UK tariffs are lower and firms can prove that the goods did not leave the UK. Until the UK can convince the EU that the technology to do the latter will actually prevent the leakage of lower-taxed goods into the EU, this is effectively the ‘customs union’; and Unilateral free trade – ‘no deal’ followed by the immediate abolition of all UK tariffs. This blog does not assess the relative merits of these arrangements, but notes that they share a common flaw: they ignore 80 percent of the British economy! The more successful 80 percent, in fact – the services sectors, in which the UK has a manifest comparative advantage (see below). The advocates of these [...]

By Nick Phipps|2018-07-06T09:56:40+01:006 July 2018|UK- EU|8 Comments

The EU should agree an all-UK backstop

22 May 2018 Alasdair Smith is an Emeritus Professor of Economics at the University of Sussex and is a member of the UK Trade Policy Observatory. Not before time, the UK government is giving attention to the ‘backstop’ provision which will be written into the Withdrawal Agreement for Brexit to avoid a hard border in Ireland. But rather than focussing on how to sell this politically in the UK, the government needs to address the more pressing question of whether the European Union (EU) will agree to the UK’s preferred version of the backstop. […]

By Nick Phipps|2018-05-22T09:40:34+01:0022 May 2018|UK- EU|13 Comments

The return of the Norway option?

18 May 2018 Julia Magntorn is Research Officer in Economics at the UKTPO. While Theresa May and her cabinet are trying to agree on whether to back the maximum facilitation proposal or the customs partnership, another option, nicknamed the ‘Norway option’ which would see the UK remaining a member of the European Economic Area (EEA), has made a comeback in the Brexit debate. […]

By Nick Phipps|2018-05-18T12:00:22+01:0018 May 2018|UK- EU|3 Comments

Why the Customs Partnership is problematic

17 May 2018 Dr Michael Gasiorek is Senior Lecturer in Economics and Dr Peter Holmes is Reader in Economics at the University of Sussex. They are both Fellows of the UKTPO and Managing Director and Director of InterAnalysis respectively. The government’s two preferred options for post-Brexit trade with the EU are “Maximum Facilitation” whereby technological solutions are used to simplify trade procedures, and a so-called “New Customs Partnership”. This blog discusses the implications of the New Customs Partnership (NCP) scheme. It must be borne in mind that the EU has so far rejected both and that in fact the degree of detail currently provided by the Government on either is so slight that we cannot be sure what is proposed. It is also arguable that they are not alternatives since under any scenario the government is keen to ensure the maximum simplification of procedures in order for trade to be ‘as frictionless as possible’. Even if they were viable, both the NCP and the Max Fac proposals involve significant trade-offs – namely that they involve firms in expensive set-up costs in order to be able to reduce transactions costs. […]

By Nick Phipps|2018-05-17T13:41:05+01:0017 May 2018|UK- EU|2 Comments

Backstop v2: A solution to trade with the EU post-Brexit

2 May 2018 Dr Michael Gasiorek is Senior Lecturer in Economics at the University of Sussex and Managing Director of InterAnalysis. He is a Fellow of the UKTPO. The red lines laid down by the UK government, and those laid down by the EU, together with the agreement that there will be no ‘hard’ border between Northern Ireland and the Republic of Ireland are mutually incompatible. This was discussed in some detail in our March 2018 Briefing Paper UK-EU trade relations post-Brexit: binding constraints and impossible solutions. In that Briefing Paper, we concluded that: “The current set of the UK government’s overlapping conditions or constraints cannot be reconciled. The solution space appears to be null. The only way of resolving this is to drop and/or relax at least one or more of the conditions.” […]

By Nick Phipps|2018-05-02T16:15:27+01:002 May 2018|UK - Non EU|7 Comments

A Customs Union with the EU: A giant step politically but a small step for the economy

1 May 2018 Ilona Serwicka is Research Fellow in the economics of Brexit and Charlotte Humma is the Business Manager at the UKTPO. As the European Union (EU) Withdrawal Bill and the Trade Bill progress through parliament, forming a customs union with the EU has become a key issue. On 18 April 2018, the House of Lords voted to keep open the option of staying in a Customs Union after Brexit, promptly followed by the UK Government reaffirming its intention neither to remain in the EU Customs Union nor to seek to form a new one. So where does this leave us? […]

By Nick Phipps|2018-05-01T08:43:32+01:001 May 2018|UK- EU|8 Comments

A Customs Union with the EU?

19 April 2018 Jim Rollo is Deputy Director of UKTPO, Emeritus Professor of European Economics at the University of Sussex and Associate Fellow, Chatham House. Dr Peter Holmes Reader in Economics at the University of Sussex and Fellow of the UKTPO. On Wednesday this week, the House of Lords voted that after Brexit a customs union with the EU should not be ruled out. If it remains in the legislation, it would require the government to submit a report to Parliament on the Customs Union option. This blog discusses some of the key issues that would need to be considered in such a report. […]

By Nick Phipps|2018-04-19T16:58:21+01:0019 April 2018|UK- EU|6 Comments

What can the UK learn from existing customs unions?

29 March 2018 Dr Ingo Borchert is Senior Lecturer in Economics and a fellow of the UK Trade Policy Observatory and Julia Magntorn is Research Assistant in Economics at the Observatory. With one year to go until the UK will leave the European Union (EU), sorting out Britain’s trade relation with the EU is the most important task. Yet the design of the future UK-EU agreement has implications for trade policy towards non-EU countries. On account of this, the British Prime Minister in her Mansion House speech ruled out forming a new customs union with the EU because this “would not be compatible with a meaningful independent trade policy.” Indeed, having sovereignty over its external trade policy post-Brexit has been at the forefront of the UK’s negotiation agenda, and consequently, the provision in the current draft Withdrawal Agreement that the UK may commence Free Trade Agreement (FTA) negotiations with other countries during the transition period was perceived as an important concession won. […]

By Nick Phipps|2018-03-29T10:20:25+01:0029 March 2018|UK - Non EU, UK- EU|3 Comments

What should Theresa May have said this week?

2 March 2018 Alasdair Smith is an Emeritus Professor of Economics at the University of Sussex, and is a member of the UK Trade Policy Observatory. The European Commission has this week published its controversial draft of the withdrawal treaty for the UK’s exit from the EU. The draft includes the EU’s proposal for dealing with the issue of the border in Ireland – Northern Ireland to remain in a customs union with the EU and to retain all the elements of the Single Market that support free movement of goods. […]

By Nick Phipps|2018-03-02T16:10:12+00:002 March 2018|UK- EU|2 Comments

The irreconcilability of the UK Government’s objectives for Brexit

2 March 2018 Dr Michael Gasiorek is Senior Lecturer in Economics at the University of Sussex and Director and Managing Director of InterAnalysis respectively. He is a Fellow of the UKTPO. There is much talk about the UK not being able to “cherry-pick” and “have its cake and eat it” with regards to post-Brexit trade policy with the EU. There are a couple of issues here. First, all EU agreements are different and hence by definition bespoke. Cherries are picked by both sides. This will also be true of a future UK-EU agreement. The question, therefore, really is to do with the extent to which the EU will grant the UK a bespoke deal in serious and substantive ways. The second issue is that it is far from clear that the UK government currently knows what all the ingredients are and what the recipe is for the cake it is hoping to share with the EU. […]

By Nick Phipps|2018-03-02T11:38:29+00:002 March 2018|UK- EU|0 Comments