Here’s why we need out of the protectionist racket that is the EU’s Customs Union
The ongoing debates about whether or not the UK should remain in the EU’s Customs Union have become a proxy for the old arguments about whether the UK should Leave or Remain in the EU. Some have even admitted that this is what they are trying to achieve – by using membership of the Customs Union as a backdoor into staying in the EU under the control of Brussels. However, staying in the Customs Union would not only be a betrayal of the referendum result, but to do so would hold our country back and undermine the economic and political freedoms we will secure on 29th March 2019.
The Prime Minister has made the case that leaving the Customs Union gives us all a chance to reflect on the problems the Customs Union has caused and the opportunities and benefits of leaving it.
While supporters of the Customs Union have sought to hold it up as providing our country with benefits, the fact is that the Customs Union – with its external tariff – represents a protectionist bloc. The Customs Union serves to inhibit and restrict free trade, it keeps prices high for the poorest consumers in the UK and it damages and oppresses markets in poorer and developing countries. Remaining in the Customs Union would be economically misguided and morally reprehensible.
How can it be right to advocate the UK continuing to subscribe to an institution that fails some of the poorest people in the world? Let’s look at how developing countries are treated when it comes to some of our favourite products – coffee and chocolate. Raw coffee beans and cocoa beans harvested from developing countries are welcomed into the EU with no tariff barriers, free from duties. But those same countries which harvest these raw materials from their natural resources cannot sell processed goods made from them – like roasted coffee beans or chocolate bars – without incurring huge tariffs.
This holds back economic development in those nations which are being blocked from selling products to our market on fair terms. In Britain we care passionately about there being fairness in trade arrangements but this has no meaning while we remain shackled to the Customs Union’s oppressive and discriminatory tariffs. Inequalities are exaggerated as companies based in the EU take advantage of this system, harming the poorest people in the developing world and causing higher prices for consumers in Europe. The same vested and powerful interests which benefit from the protections that the Customs Union gives them are those campaigning for the UK to remain in it.
As well as acting as a serious barrier to economic development because of the way tariffs are put in place, the Customs Union has an impact on our aid programme. During my time in Government, I re-orientated UK support towards economic development in order to enable developing countries to become more economically sustainable and able to support themselves, rather than just focusing on aid. But they can only do this by being able to trade on fair and mutually beneficial terms.
It is shocking to see that these countries’ ability to create new jobs, grow themselves out of poverty and move off of overseas development assistance programmes is being stopped by protectionist trade policies. In all my engagement with businesses, charities and politicians, they reiterated the importance of reforming the trade system and removing barriers to enter the EU and other developed countries’ markets as that is the best and most sustainable way to long-term development and trading their way out of poverty.
Leaving the Customs Union will give the UK the freedom to negotiate its own trade deals and be a beacon for free trade. This will put the UK in an enviable position to be able to slash tariffs, open up global markets and improve trade partnerships across the world. Those who want the UK to remain in the Customs Union often argue that to leave would affect trade with the EU as our biggest trading partner. However, this argument goes against the grain of reality and global economic trends.
While the EU accounts for around 40% of our trade, this is because of the arrangements imposed upon us by our membership of the EU concentrating trade within this protectionist bloc. Although the proportion of our trade with the rest of world is rising, the Customs Union holds us back and we could be doing so much better. It is our membership of the EU and the Custom Unions that disrupts global trade flows and by leaving we can secure better opportunities to boost jobs and growth at home and abroad.
In the 21st century, other economies will excel and Europe’s economic power will weaken. In 1990 the EU accounted for 28% of the global economy. By the end of this decade it will fall to 16% and by 2050 PWC have estimated that it will fall below 10%. Being chained to the EU through membership of the Customs Union risks dragging us under.
The freedom to negotiate our own trade deals means we can form closer partnerships with growing markets and the countries that have a strong affinity with Britain. The Gulf States, for example, have a great appetite for British goods and services. As we saw with last week’s Commonwealth Heads of Government Meeting, our shared history with our friends in the Commonwealth and the work we have done supporting developing countries has built ties, while supporting the establishment of the institutions and capacity in those countries to be free to trade more. Moreover, the USA, our biggest trading partner, has given a clear indication that they want to trade more with us when we leave the EU, with President Trump wanting to establish a “very big and exciting” trade deal. These opportunities can only be grasped by having freedom from the Customs Union.
With so much to gain from leaving the Customs Union, the opponents to this have now resorted to making claims about hard borders being established and questioning how Britain can trade freely with the EU from outside the Customs Union. The answers to these questions are straightforward. Countries from outside of the EU which have eventually negotiated trade deals with the EU, lowering and removing some tariffs, have access to European markets and trade without undue restriction. In terms of hard borders and monitoring the trade in goods between borders for customs purposes, it is only the pessimists who see problems. The advent of new electronic technologies and the ability to exchange documents prior to the crossing of borders means we can have effective customs controls in place without the need for border posts and intrusive bureaucracy.
By leaving the Customs Union we can take forward our national mission on Brexit. We will no longer be bound within a protectionist racket that disrupts our trade with the rest of the world and holds back the poorest overseas while increasing prices and costs for the poorest at home. For our country to succeed in the future, we need a trade policy made in Britain, not Brussels – which means getting out of the Customs Union.