The trade delusion: why Brexit won’t be Britain's salvation

The notion that the UK will thrive outside the EU's customs union is an ideological fantasy. 


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Few of those who voted for Brexit, it is safe to say, did so for the purpose of extricating the UK from the customs union. The free movement of people, the EU's opaque structure, and weariness with austerity and falling living standards were all significant factors in the result – but the desire for Britain to strike its own trade deals was not. 

It is, however, an obsession of the Brexit vanguard (Michael Gove, Liam Fox, Boris Johnson). For them, exit from the customs union, would herald the birth of a freewheeling, buccaneering “global Britain”. Rather than being shackled to Brussels, the UK would be liberated to strike valuable trade deals with China, India and “the Anglosphere” (the US, Canada, Australia and New Zealand). 

The ideological and sentimental appeal of this project to Conservatives is obvious. But the economic appeal is not. As Robert Chote, the head of the Office for Budget Responsibility, emphasised when I interviewed him last month, “most of the work that trade economists have done” suggests that "the reduction in openness likely with the EU [the destination of 43 per cent of British exports] is likely to outweigh any increase elsewhere." Indeed, the government's own analysis suggests that the UK would lose between 2 per cent and 8 per cent of GDP over 15 years from a “hard Brexit” (withdrawal from the single market and the customs union), while new trade deals with the US and others would add no more than 0.6 per cent. 

Britain, as politicians of all parties have long lamented, does not export enough. But there is little evidence that customs union membership is the main obstacle. As former trade minister Jim O'Neill observed when I interviewed him, Germany's largest trade partner is now China (Germany exports five times more to China than the UK). Britain's problems are domestic in origin (low productivity, a lack of public and private investment) and domestic in solution. 

In view of this, most businesses, unsurprisingly, want the UK to retain customs union membership. A survey of 80 small and medium firms by the Harvard Kennedy School (co-authored by Ed Balls) is the latest evidence to this effect. Without the negotiating heft of 27 other member states, the UK will struggle to achieve beneficial trade deals. The US would demand greater access to agriculture (hence the spectre of chlorine-washed chicken, hormone-injected beef and acid-washed pork) and to the NHS. India and China would demand more visas (a problem for immigration-averse Conservatives). 

The greatest conundrum of all is the Irish Question (which Boris Johnson remarkably ignored in his speech yesterday). Should Britain adopt a new customs and trade regime, a hard border between North and South or between Northern Ireland and the rest of the UK becomes unavoidable.

After nearly two decades of peaceful coexistence between unionists and nationalists, we risk returning to the sectarian conflicts of the past. The success of the 1998 Good Friday Agreement lay in ending the forced choice between British and Irish identities. People and goods move freely across an island border with 275 crossings (compared to 20 during the Troubles). Ireland is grappling with a problem created by the UK or, more specifically, the Conservative Party.

Partly for this reason, Labour has wisely not ruled out support for a continued customs union and Tory support for the proposal is higher than for single market membership (which could force continued free movement). At the end of this month, two pro-customs union amendments tabled by Conservative MP Anna Soubry and Labour MP Chris Leslie to the Trade Bill and Customs Bill will be debated and voted upon. Whether or not they pass, they will force inconvenient truths to be confronted. 

Customs Union withdrawal is a solution in search of a problem. Indeed, worse, it will merely multiply the epic challenges that Britain already faces. 

George Eaton is assistant editor of the New Statesman.