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Demystifying the Customs Union debate

Brexit

Demystifying the Customs Union debate

By Zencargo Team on July 14, 2017
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The debate over the EU Customs Union (EUCU) reminds me of the Brexit debate.

On the one hand, there’s the economic argument to remain. On the other, ‘it’s a big world out there’ and only by leaving can we negotiate those Free Trade Agreements (FTA’s) that will allow the UK to prosper in the 21st Century. The one big difference, of course, is control.

Assuming we leave the Single Market, here are the arguments for & against leaving the EUCU

REMAIN: Will somebody please think about the economy!

  1. Leaving = more bureaucracy & more red tape, which in turn = more costs & delays. Open Europe estimates that the impact on the UK economy will be 1%-1.5%, with others fearing it could be higher. As Dr Grainger noted int the FT, “It is easy to imagine an additional cost to UK-EU trade in the order of several billion pounds per year.”
  2. Complex supply chains will struggle with Rules of Origin, which could cripple UK industry. Even if tariffs are low (or zero), the bureaucratic costs of Rules of Origin can have a significant impact (cost estimates range from 4-8%).
  3. The costs to the state could easily be £250m+ per year (from hiring more people to deal with customs, etc)
  4. We’d be relying on France to to increase the size of their customs team, too
  5. Northern Ireland!
  6. Leaving would lead to a reduction of inward investment (e.g. the UK as a distribution hub for Europe)
  7. Technology can help – but it takes a long time for government systems to be updated (link)
  8. You can’t discount that it’s psychologically easier to trade inside a customs union, even if we can offset some of the red tape.
  9. Delays at Customs can be arbitrary and mess up supply chains

LEAVE: It’s a big world out there! (more detailed article here)

  1. Control part 1: We will have no say on how policy evolves – even if it hurts the UK (and we’d still be under the thumb of the ECJ)
  2. Control part 2: We will have to accept all FTA’s that the EU negotiates, without reciprocal access
  3. It will be near impossible to negotiate FTA’s with any other country (look at the Turkey example)
  4. We’d have to oblige by additional non-tariff matters, making FTA’s even harder
  5. If it works for Norway and NAFTA, why can’t it work for us?
  6. We can have our cake & eat it too (link to article)
  7. Technology can help
  8. The UK runs a very efficient customs process
  9. It could lower inflation
  10. We could benefit more from customs and duties monies

(if you wan’t detailed facts / description of any of these points, drop me an email at alex@zencargo.com).

Zencargo Team
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Zencargo Team

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