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1/ You're going to hear wild and contradictory claims about Customs Unions.
Two reasons:
1. The Brexit conversation has more grifters, chancers and hacks than a Trump Cabinet meeting; &
2. A 'Customs Union' can be done in many different ways.
Can't fix #1, so a thread on #2.
Two reasons:
1. The Brexit conversation has more grifters, chancers and hacks than a Trump Cabinet meeting; &
2. A 'Customs Union' can be done in many different ways.
Can't fix #1, so a thread on #2.
2/ The very basics of a Customs Union are pretty simple.
Countries in geographical proximity agree to eliminate tariffs between them, and instead have a single set of mutually agreed tariffs on everyone else.
Something entering the bloc's territory only pays tariffs once.
Countries in geographical proximity agree to eliminate tariffs between them, and instead have a single set of mutually agreed tariffs on everyone else.
Something entering the bloc's territory only pays tariffs once.
3/ A Customs Union on its own doesn't eliminate the need for hard borders with physical infrastructure, or the paperwork to move goods consignments across such borders.
It does however eliminate the need for onerous Rules of Origin paperwork, relying on a simpler form.
It does however eliminate the need for onerous Rules of Origin paperwork, relying on a simpler form.
4/ The variability of CU's emerges when countries start negotiating the details required to make the basic concept of a Customs Union a reality.
Like IKEA furniture, a Customs Union looks simple once assembled but building one as a couple leads to screaming and broken Fjalkinge.
Like IKEA furniture, a Customs Union looks simple once assembled but building one as a couple leads to screaming and broken Fjalkinge.
5/ First question: Coverage
Not all Customs Unions cover every single type of product (tariff line). The most famous example of this is Turkey-EU, which excludes agriculture.
Not all Customs Unions cover every single type of product (tariff line). The most famous example of this is Turkey-EU, which excludes agriculture.
6/ Second question: Subsidies/State Aid
When a country binds itself to eliminating all or most of its tariffs against you, it generally wants some guarantees you're not going to exploit that openness by heavily subsidizing your producers to crush theirs.
When a country binds itself to eliminating all or most of its tariffs against you, it generally wants some guarantees you're not going to exploit that openness by heavily subsidizing your producers to crush theirs.
7/ This is where claims that being in a CU with the EU will require remaining in the CAP (Common Agricultural Policy, the EU's farm subsidies scheme) come from.
In practice, there are many different ways the EU and UK could agree state aid rules without the UK staying in CAP.
In practice, there are many different ways the EU and UK could agree state aid rules without the UK staying in CAP.
8/ Third Question: Trade Defense / Anti-Dumping
Under certain circumstances, the WTO rules allow Members to levy defensive tariffs in specific products from specific sources if they have evidence those products are being unfairly subsidized or dumped on their market.
Under certain circumstances, the WTO rules allow Members to levy defensive tariffs in specific products from specific sources if they have evidence those products are being unfairly subsidized or dumped on their market.
9/ To massively simplify one of the most complex areas of trade law - It allows Australia to conduct an investigation and slap a 100% tariff on Chinese steel if Chinese steel is being sold in the Australian market for half of what it could fetch in China (AKA, being dumped).
10/ With a single external tariff and no internal tariffs, Customs Unions need agreed rules for how they're going to handle situations where one member of the Union wants to launch a trade defense investigation, either against one of the other Members or a 3rd party.
11/ Fourth Question: Standards / Regulations
A Customs Union can, as the name suggests, be exclusively focused on tariffs/customs duties.
However, the more internal alignment and mutual recognition a bloc has internally, the easier trade can flow in it.
A Customs Union can, as the name suggests, be exclusively focused on tariffs/customs duties.
However, the more internal alignment and mutual recognition a bloc has internally, the easier trade can flow in it.
12/ Fifth Question: Future Agreements
A common external tariff really limits the ability of individual Customs Union bloc members to negotiate FTAs with goods market access (tariffs) components.
You can't have half a customs bloc with a 10% tariff on US cars and half with 0%.
A common external tariff really limits the ability of individual Customs Union bloc members to negotiate FTAs with goods market access (tariffs) components.
You can't have half a customs bloc with a 10% tariff on US cars and half with 0%.
13/ If the UK is in a Customs Union with the EU, the rules of that Customs Union will need to clearly spell out how trade agreements with 3rd parties will be negotiated, signed off on and applied.
14/ A common Turkish complaint regarding their Customs Union with the EU, is that when the EU signs an FTA with another country, say Japan, that country automatically gets improved access to the Turkish market but Turks don't get the access to Japan the EU negotiated for itself.
15/ This is one model of how a Customs Union could work, but not the only one.
The UK and EU could agree, for example, that the EU would require all future FTA partners to also extend their market access offers to the UK.
The UK and EU could agree, for example, that the EU would require all future FTA partners to also extend their market access offers to the UK.
16/ Labour and Jeremy Corbyn were widely mocked for suggesting the UK demand a seat at the table in deciding EU FTAs.
This is probably a bit too ambitious, but a really robust consultation mechanism with commitments by the EU to take UK interests into account is a possibility.
This is probably a bit too ambitious, but a really robust consultation mechanism with commitments by the EU to take UK interests into account is a possibility.
17/ These are just some of the many complex questions involved in crafting a Customs Union.
Because they are unanswered, almost any claim about what a potential EU-UK Customs Union WILL BE should be treated cautiously. The negotiations haven't happened yet.
Because they are unanswered, almost any claim about what a potential EU-UK Customs Union WILL BE should be treated cautiously. The negotiations haven't happened yet.
18/ If you want to read more, I would suggest this thread by @AnnaJerzewska () and these articles by @SamuelMarcLowe () and ().
