Be A Voice: Theresa May’s best Brexit option is to negotiate a UK-EU customs union

By Former Media Director Richard Wood

The EU are not budging, and a no-deal Brexit would harm the economic and political stability of the British Isles. The creation of a UK-EU customs area carves a sensible middle path for the prime minister.

Events in recent weeks have shifted the political narrative so that a new referendum – on the terms of the final Brexit deal - seems more likely. The Independent’s “Final Say” campaign, Justine Greening’s call for a preferential final vote and the recent YouGov poll suggesting that most voters now support a new referendum, have all put focus on returning to the polls.

However, while a new vote must feel inevitable to some, especially following Liam Fox’s recent comments on a no deal Brexit, the chances of one taking place are slimming by the day. The Brexit clock is ticking, and the parliamentary mentality and arithmetic for a second referendum do not stack up.

For People’s Vote advocates, while a majority of Labour backers consistently support the EU, the swathes of Labour seats that backed Brexit make the option of Jeremy Corbyn’s leadership supporting a new referendum incredibly small.

The key to unlocking a “People’s Vote” is Labour support and a new election by the winter at the very latest, but the former looks incredibly unlikely as Labour have made it clear that they are accepting the outcome of the 2016 referendum. The party’s recent positive spin on Brexit – their campaign to “Build it in Britain again” – further sets this in stone. To change strategy now would not be forgiven by the Brexit-backing electorate.

As for the Conservatives, the party will almost certainly deliver Brexit, but what will it look like? It is maddening that with the UK leaving the EU in fewer than eight months,  there is not a clear answer here. Theresa May is stuck between a rock and a hard Brexit, but there is a pragmatic solution to her problems, one which I suspect she will end up taking:

There are four Brexit options from here on out, but one clearly solves the most problems (whilst, admittedly, throwing up some more); negotiating a custom union with the EU. 

1. No deal

The most devastating of these options is a “hard Brexit”, one in which the UK falls back on WTO rules, the economy gets hit and the Northern Ireland problem gets significantly worse. This option is unlikely for three reasons. The first is that it would cause severe economic damage – and that’s not how Theresa May will want to be remembered. The second is that the opposition would not support such an option. If a no deal vote looked likely, I suspect the pro-EU Tories would marginally grow in numbers and block any attempts to leave without a deal by joining forces with the opposition. The third is the DUP. Arlene Foster’s party have done incredibly well out of this parliament, all without having to restore Northern Ireland’s Assembly and face the consequences of a coalition government with the Tories.

With no majority, Theresa May needs DUP support. Arlene Foster’s priority is keeping Northern Ireland aligned with the rest of the UK and has prioritised that over leaving the customs union, according to the Belfast Telegraph. While this means that the DUP are open to a no-deal Brexit, one that keeps the UK together, Arlene Foster will know that 35% of Northern Irish exports to foreign countries went to the Republic in 2016 and that Northern Irish-Irish trade and free movement is extremely important for peace on the island.

2. A bespoke Brexit

This is the Brexit scenario in which the UK leaves the EU with some sort of deal that resembles the Chequers agreement – or better. However, Michel Barnier has ruled out Theresa May’s customs proposal, as reported by the BBC. Furthermore, the EU’s position has been consistent, repeatedly saying that the UK must play by the rules, that any deal must be good for the Republic of Ireland and that there can be no cherry-picking.

A bespoke deal that breaks any of these basic principles therefore looks unlikely.

3. Single-market membership

Remaining in the single-market and leaving the customs union is another option, but one that has two major flaws from Theresa May’s point of view. Firstly, there would need to be customs checks between Ireland and Northern Ireland. For example, Sweden is in the EU and Norway is in the single-market and there are resultantly customs checks, as the latter is not in the customs union. Secondly, free movement would not end under such an arrangement. UKIP’s support is already starting to rise once again, so any back pedalling on free movement would give them further political capital and weaken the Tories.

Furthermore, the related possibility of remaining in both the single-market and a customs union would be ridiculed as Brexit in all but name. And without real influence. 

4. A customs union

There is however, one option that meets most of Theresa May’s aims and would likely be palatable to the EU and Westminster: a customs union with the EU. Or rather membership of the customs union in all but name with a few other “good for spin” bespoke features.

A customs union links states via common external tariffs and abolishes customs duties on goods traded between participants. The main upside of this option is that with the UK and Ireland in a customs union, there would be no customs checks at the border, thus largely solving most of the Northern Ireland problem.

However, the major downside for Theresa May is that the UK government would not be able to strike its own trade agreements. This is far from ideal for the Conservatives, especially advocates of a “global Britain”, but it could be spun as a temporary arrangement until the 2022 election where voters could choose something new – if it exists by then. Furthermore, there is an incredibly strong argument in favour of clubbing together smaller countries to negotiate on the same levels as economic giants like the USA and China. A new customs arrangement could even be given a different name, for example, area or agreement, to put distance between it and the politically-charged “union”.

Furthermore, remaining in a customs area and leaving the single-market meets another three of the government’s aims. Firstly, trade between the UK and the EU would be significantly easier, due to the continued elimination of tariffs, and secondly, freedom of movement would come to an end as only the single-market requires the free movement of people. Both main parties have consistently said that free movement will end with Brexit and this option would meet this demand.

Thirdly, leaving the single-market and staying in a customs union would allow the UK to leave the Common Fisheries Policy and the Common Agriculture Policy, which would be a big win for anti-EU campaigners.

As highlighted in the FT, there are significant differences between the UK and Turkey – the only other country in a customs arrangement with the EU but not a member of the single-market – but it is difficult to see the EU rejecting an offer of this nature as it will limit economic damage and not result in a hard border in Ireland.

Political consequences

There would no doubt be major political ramifications if Theresa May went down this route. Cabinet resignations would follow, likely led by Liam Fox (whose department would become irrelevant as the UK could not make trade deals) while Jacob Rees-Mogg and failed Foreign Secretary Boris Johnson would rally against the prime minister. UKIP support would probably rise in the polls and Jeremy Corbyn would be able to claim he pushed the government towards that option.

Would there be a leadership contest? Perhaps, but even if Theresa May lost the contest, there could still be a parliamentary majority for a customs union deal, which would prevent the UK crashing out without a deal. A general election could follow in the winter, but let’s not get ahead of ourselves.

The next few weeks are crucial, but a new customs union route is Theresa May’s best bet at pleasing the EU, Ireland and Westminster. If not her Brexit-obsessed backbenchers.

However, as always politics is about competing forces with different ideas and visions. On this matter, a Conservative Home survey indicates that 8 in 10 Tory members would oppose customs union membership, while the Telegraph reported in July that the Conservatives face an “open revolt” over Brexit compromises. Furthermore, the fact that Labour have backed this position for months would give them a significant amount of political capital if Theresa May changed her mind on this issue.

Nonetheless, the customs union route would solve the Northern Ireland conundrum, lessen economic damage and end free movement, thus meeting core government objectives. It is not perfect, but with the Chequers proposal unlikely to get support, this route offers a very acceptable solution that does not involve crashing out of the EU with no deal.

Sources and Further Reading