Morning Call: pick of the papers

The ten must-read comment pieces from this morning's papers.

1. Now the Tories see the reality of public-spending cuts - and they don't like it (Independent)

Public spending can have more benevolent consequences than some ministers dared to realise in 2010, writes Steve Richards. They realise it now.

2. Hugo Chávez: an unfinished revolution (Guardian)

The truth is that there was indeed something of greatness about Chávez, says a Guardian editorial.

3. Hugo Chávez - an era of grand political illusion comes to an end (Independent)

Chávez leaves a Venezuela crippled by poverty, violence and crime, says an Independent editorial.

4. Sir David Nicholson doesn't deserve to be hounded out (Daily Telegraph)

The NHS boss could not have known what was happening on the ground during the Mid Staffs hospital crisis, says Sue Cameron.

5. Let's build more homes - who wouldn't vote for that? (Guardian)

Politicians are trying to dodge it, but the way to heal our warped housing market is to invest for the public benefit again, says Zoe Williams.

6. Welcome signs of life from Chilcot (Independent)

This week provided a rare and fleeting glimpse this week of what the Chilcot report on Iraq might produce, says an Independent editorial.

7. It’s plain what George Osborne needs to do – so just get on and do it (Daily Telegraph)

The politics are tricky, but the Budget must confront some hard economic choices, writes Jeremy Warner.

8. No formula can better a mother’s milk (Financial Times)

Children across Asia are being denied the incalculable benefits of breastfeeding, writes David Pilling. 

9. The US was midwife to Comandante Chávez (Times) (£)

Venezuela’s message is that all people desire liberty, dignity and democracy, writes David Aaronovitch. Treat them as you would be treated.

10. Billionaire’s club has become less exclusive (Financial Times)

Those yearning for recognition of their wealth should consider giving their riches away, writes John Gapper.

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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.