The case for a Labour EU referendum pledge is becoming ever weaker

Promising an in/out vote would shift the debate back onto Tory territory and allow Cameron to claim that Miliband is dancing to his tune.

After some fine filibustering by Labour MPs, debate on Conservative MP James Wharton's EU referendum bill (which would enshrine in law his party's pledge to hold a vote by the end of 2017) has been adjourned until 22 November. The most notable intervention today came from Ed Miliband, who told broadcasters: "I think what we see today is the Conservative Party talking to itself about Europe when actually what they should be doing is talking to the country about the most important issue that people are facing, which is the cost of living crisis. That’s what Labour’s talking about; that’s the right priority for the country."

What is striking is the confidence with which he dismissed the Tories' referendum antics. Having defined the debate through his proposed energy price freeze and his focus on living standards, he speaks from a position of strength. The case for Labour to pledge to hold an in/out EU referendum (discussed by Rafael in his column this week), most likely before 2017, is becoming weaker every day. Once viewed as a clever ruse to split the Conservatives (something that Adam Afriyie's amendment notably failed to do), it would now shift the debate back onto Tory territory and allow David Cameron to claim that a "weak" Miliband is dancing to his tune.

Despite this, some Labour figures privately suggest the party could reverse its stance following next year's European elections as evidence that it has "listened and learned". Cameron's charge that Labour is unwilling to "trust the people" is one they fear will haunt them during the general election campaign. Yet there is no evidence that the Tories' pledge will succeed in winning back significant numbers of voters from UKIP, most of whom have far wider grievances, or that it will define the election in the way that many Conservatives hope. As polling by Ipsos MORI regularly shows, the EU does not even make it into the top ten of voters' concerns. If there is an electoral cost to Labour from refusing to match Cameron's promise, it will likely be too small to make a difference.

All of this is before we consider the disruptive effect that a post-2015 referendum would have on Miliband's governing agenda and the danger of an 'out' vote (something that a Labour government would find harder to avoid than a Conservative one). Miliband and Douglas Alexander have long made a coherent case against a referendum. As the Tories continue to flout wise warnings not to "bang on" about Europe, they should hold their nerve.

Ed Miliband with shadow foreign secretary Douglas Alexander at the Labour conference in Brighton earlier this year. 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.