EU renegotiation: chasing windmills in Birmingham

There is no hope that a renegotiation would be anything but a step towards exit from the EU.

Do you see over yonder, friend Sancho, thirty or forty hulking giants? I intend to do battle with them and slay them.

Perhaps Cameron will not employ the very words used by Miguel de Cervantes (some on the nationalist right of his party will probably take issue with the quotation of foreign writers) but, if recent statements are anything to go by, that will be the sentiment expressed when talking about Europe. The PM is picking a whole host of fights with the EU, in most cases against everyone’s advice, just to satisfy his Europhobic backbenchers.

From the EU budget to justice and home affairs, from fiscal union to banking union the debate is framed in terms of threats rather than opportunities. In fact, the only time the word opportunity is utilised is when talking about using the process of reform in the EU as an opportunity to remove Britain from more and more chapters of European cooperation.

That’s where the illusion starts. This nebulous concept of renegotiating Britain’s membership of the EU is the biggest red herring in the North Sea. It is used to appease those at the right and extreme right who want full withdrawal from the EU. But it is doomed to fail on all counts.

On the one hand no “renegotiation” will ever be enough for those that want to see Britain abandon the EU. The more meat the PM throws at them the more he wets their blood-thirsty appetite. In fact, in this futile effort to appease them, the PM has been compromising the national interest. The December 2011 “veto” locked the UK out of the room where important decisions about the EU’s future are taken. And the mooted opt out for justice and home affairs measures has been criticised by the police and all those involved in the nation’s security as a massive mistake that will make the fight against terrorism, illegal immigration and organised crime even harder.

On the other hand, such “renegotiation” will not be accepted by Britain’s European partners. The Polish Foreign Minister, a Conservative himself, from a country which has traditionally been considered the UK’s ally, came all the way to Oxford to say as much (£). He expressed an exasperation echoed by most EU member states with the UK’s attitude when in Brussels. The perception among our EU partners is that there seems to be more interest in grandstanding for domestic political consumption than constructively engaging to address the challenges the EU as a whole is facing. Germany, which has always been keen to keep Britain at the core of the EU, is now changing tune, with MPs from both the ruling centre right CDU and the centre-left SPD currently in opposition, saying that there is very little will to accommodate Britain’s demands for a “renegotiation”, exactly because of the spoiled child attitude displayed by the PM at European Council meetings since he came in power.

But good will aside, Britain’s hand if such a renegotiation is ever to take place will be weakened by its relative size and trading relationship with the rest of the EU. Whereas about 50 per cent of our trade is done with our EU partners, only 10 per cent of their trade is done with Britain. You do the maths.

Furthermore, why would other EU member states allow Britain to excuse itself from Single Market rules but continue ripping the benefits of Single Market membership? What is to stop others from making similar requests for exemption from areas the UK considers important? Even if the political will was there, even if Britain had the diplomatic and commercial capital to invest in such renegotiation, any concessions would imply the start of the Single Market’s unravelling, which would cost British business and households dearly.

Not to mention that it sends the wrong message; the more the UK isolates itself, the more it tries to remove itself from areas of European co-operation, the less likely it is to be able to gain support to advance areas that are of interest to us.

So instead of picking pointless battles with imaginary enemies, instead of creating impossible to fulfil expectations, the PM and his Ministers should use the EU’s decision-making structures to build alliances with Britain’s EU partners. Rather than threatening opt-outs and vetoes, the best way for Britain to address the areas of Single Market law it wants renewed is to engage constructively with others in the Council of Minister in reviewing EU laws, improving them when necessary and removing them if they have achieved their objective or have reached their sell-by date.

Don Quixote was told by his humble servant Sancho, "Now look, your grace, what you see over there aren't giants, but windmills, and what seems to be arms are just their sails, that go around in the wind and turn the millstone." The hope is that someone will awake the PM and his Europhobic backbenchers to exactly the same fact.

Some red herring. Photograph: misocrazy from New York, NY (CC-BY)

Petros Fassoulas is the chairman of European Movement UK

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.