The UK can do better than the EU’s Customs Union

Abstract

Like most decisions about Brexit, the choice of future customs arrangements is about getting the trade-offs right. Remaining in a customs union with the EU would not just prevent disruptive border checks. It would also allow tariff-free trade to continue after the UK left the Single Market, and could make it easier to replicate the EU’s existing trade deals with third countries. These benefits should not be dismissed lightly. Nonetheless, securing these benefits via a full customs union would come at a significant cost. This option would prevent the UK from making the most of the opportunities to reduce barriers to trade with the rest of the world, whether by signing new deals or simply lowering these barriers unilaterally. What’s more, a full customs union is not the only option. The UK could keep any additional trade frictions with the EU to a minimum with a new and comprehensive free trade agreement, including alternative customs arrangements. There may still be a case for a time-limited extension of the current customs union, perhaps for goods only, during a transition period. However, it is far too soon to conclude that this is the best solution for the longer term, especially as talks about the future relationship haven’t even begun.