It's Tom Watson's attack on Labour's EU referendum policy that should really worry Miliband

The former election co-ordinator's call for an early EU referendum highlights the danger of Labour replicating Tory divisions over Europe.

Ed Miliband rarely goes a day at the moment without some damaging intervention from a Labour figure. With the party holding off on all policy announcements until next month's conference, the vacuum has been filled by malcontents from past and present. The latest example is Tom Watson's interview in today's Guardian. The party's former campaign co-ordinator reminds us that the row over Falkirk remains unresolved, declaring that "a huge injustice has been done" to Karie Murphy, his former office manager and Unite's candidate of choice in the constituency. He adds: "When they finally complete this inquiry they will find out that she hasn't done anything wrong."

But more harmful than Watson's comments on Falkirk (which are merely a reiteration of his long-standing position) are those on Labour's EU referendum policy. No longer bound by collective responsibility, he calls for the party to support an early referendum next May (becoming the most senior figure in the party to do so) and criticises it for allowing the Tories to set the terms of debate. He warns: "Cameron has set the agenda on Europe; he wants a referendum, and if we don't engage with that debate then it won't be on our terms. So I would argue for a referendum next May – get it out the way before the election. That should be Labour's position. Yes to a referendum, and yes to remaining part of Europe."

His stance echoes that of shadow work and pensions minister Ian Austin, who broke ranks last month to call for an in/out EU referendum on the same day as next year's European elections: "[T]he truth is that the UK needs to decide and I would prefer it to do so more quickly. I know this isn't Labour Party policy but my view is that we should have a referendum next year on the same day as the European elections."

Coming out in support of an early referendum is one option that is under regular discussion within the shadow cabinet. It would have the advantage of getting Labour off the hook while also splitting the Tories down the middle. But if and when Miliband makes his move, it will have to be at a time of his choosing. It was the panic with which Cameron agreed to bring forward the draft referendum bill that allowed Labour to frame him as a weak leader who had lost control of his party. If Miliband is to avoid the same fate, he must seek to prevent more interventions like Watson's. A process by which Labour MPs drag Miliband towards a referendum and he eventually capitulates would be a political gift for the Tories.

Labour MP Tom Watson, who resigned as the party's campaign co-ordinator six weeks ago. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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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.