Confusion grows over the purpose of the coalition

Coalition 2.0, an attempt to thrash out a joint agenda for the second half of parliament, has been w

They called it Coalition 2.0 -- a working group of ministers and policy wonk Tories and Lib Dems, with the task of thrashing out a joint agenda for the government for the second half of the parliament. Last summer's coalition agreement doesn't contain enough plans to fill up a whole legislative term. Or at least it wasn't meant to, but with sufficient "pauses" along the lines of the recent NHS reform pit stop, they might eke it out for a good few years. That wouldn't look good though and the more enthusiastic supporters of Coalition 2.0 thought it might deliver a second formal agreement. It won't. The whole thing has been downgraded, with one participant telling me recently it is most likely to deliver some vague statement of shared principles after the Olympics next summer. It is a sign of growing confusion at the heart of government about what the coalition is actually for -- the subject of my column in this week's magazine.

On the Conservative side, I've looked at the competition between what I call Romantic and Pragmatic tendencies in David Cameron's inner circle -- those that see the whole project in terms of a grand re-alignment of politics, and those that see coalition more as a means to a Tory end: securing a second term with an outright majority.

That has focused Lib Dem minds on the need to carve out a distinct and positive agenda within the coalition. Party strategists know they won't make any progress with voters by simply watering down Tory proposals, as they did with the NHS reform.

Clegg can hardly build an electoral recovery by casting himself as an iceberg, lurking mostly beneath the surface waiting to sink Tory boats. If the Lib Dems block too much legislation the Tories will denounce them as unfit for office. "There's no advantage to us from stalemate government," says one senior Clegg aide.

How to avoid stalemate was the main subject of discussions at a recent Lib Dem "away day" (technically two days) in Bingley, Yorkshire -- in a conference centre and hotel in a converted Gothic mansion. One detail from that meeting of no great consequence and therefore not included the column: there was a pub quiz to break up the heavy political chatter. The result was close, but I gather deputy leader Simon Hughes's table won. Clegg's Special Branch security protection team also put in an impressive performance, apparently.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

Getty
Show Hide image

What is the EU customs union and will Brexit make us leave?

International trade secretary Liam Fox's job makes more sense if we leave the customs union. 

Brexiteers and Remoaners alike have spent the winter months talking of leaving the "customs union", and how this should be weighed up against the benefits of controlling immigration. But what does it actually mean, and how is it different from the EU single market?

Imagine a medieval town, with a busy marketplace where traders are buying and selling wares. Now imagine that the town is also protected by a city wall, with guards ready to slap charges on any outside traders who want to come in. That's how the customs union works.  

In essence, a customs union is an agreement between countries not to impose tariffs on imports from within the club, and at the same time impose common tariffs on goods coming in from outsiders. In other words, the countries decide to trade collectively with each other, and bargain collectively with everyone else. 

The EU isn't the only customs union, or even the first in Europe. In the 19th century, German-speaking states organised the Zollverein, or German Customs Union, which in turn paved the way for the unification of Germany. Other customs unions today include the Eurasian Economic Union of central Asian states and Russia. The EU also has a customs union with Turkey.

What is special about the EU customs union is the level of co-operation, with member states sharing commercial policies, and the size. So how would leaving it affect the UK post-Brexit?

The EU customs union in practice

The EU, acting on behalf of the UK and other member states, has negotiated trade deals with countries around the world which take years to complete. The EU is still mired in talks to try to pull off the controversial Transatlantic Trade and Investment Partnership (TTIP) with the US, and a similar EU-Japan trade deal. These two deals alone would cover a third of all EU trade.

The point of these deals is to make it easier for the EU's exporters to sell abroad, keep imports relatively cheap and at the same time protect the member states' own businesses and consumers as much as possible. 

The rules of the customs union require member states to let the EU negotiate on their behalf, rather than trying to cut their own deals. In theory, if the UK walks away from the customs union, we walk away from all these trade deals, but we also get a chance to strike our own. 

What are the UK's options?

The UK could perhaps come to an agreement with the EU where it continues to remain inside the customs union. But some analysts believe that door has already shut. 

One of Theresa May’s first acts as Prime Minister was to appoint Liam Fox, the Brexiteer, as the secretary of state for international trade. Why would she appoint him, so the logic goes, if there were no international trade deals to talk about? And Fox can only do this if the UK is outside the customs union. 

(Conversely, former Lib Dem leader Nick Clegg argues May will realise the customs union is too valuable and Fox will be gone within two years).

Fox has himself said the UK should leave the customs union but later seemed to backtrack, saying it is "important to have continuity in trade".

If the UK does leave the customs union, it will have the freedom to negotiate, but will it fare better or worse than the EU bloc?

On the one hand, the UK, as a single voice, can make speedy decisions, whereas the EU has a lengthy consultative process (the Belgian region of Wallonia recently blocked the entire EU-Canada trade deal). Incoming US President Donald Trump has already said he will try to come to a deal quickly

On the other, the UK economy is far smaller, and trade negotiators may discover they have far less leverage acting alone. 

Unintended consequences

There is also the question of the UK’s membership of the World Trade Organisation, which is currently governed by its membership of the customs union. According to the Institute for Government: “Many countries will want to be clear about the UK’s membership of the WTO before they open negotiations.”

And then there is the question of policing trade outside of the customs union. For example, if it was significantly cheaper to import goods from China into Ireland, a customs union member, than Northern Ireland, a smuggling network might emerge.

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.