Brexit Day 34: 'Rendez-vous for beginning of demanding task'
Customs union: What does the Fox say?
The Flying Fox flew to the US. I am not surprised he’s made it an early priority; apart from the US being a global powerhouse, he loves America and he loves the idea of the Anglosphere. Washington D.C. is one cool city these days and who wouldn’t enjoy spending time there? On Monday, Fox met Commerce Secretary Penny Pritzker, U.S. Trade Representative Mike Froman and business leaders at the U.S. Chamber of Commerce, to talk about a future trade relationship. The US is making somewhat helpful noises about trade with the UK (especially since TTIP is going to the dogs) – but the Americans make a fair point: you can’t seriously talk turkey, or even chlorinated chicken, until the UK settles on its future trading relationship with the EU. Which sets up a sweet segue about what that relationship might look like...
On another leg of his tour, in Chicago, Liam Fox said that the UK should leave the EU customs union (EUCU) as part of Brexit.
Sorry, what the hell is the EUCU? Is that like another thing that we didn’t know about?
Afraid so. The Single Market – a term we all chuck about willy-nilly - is a construct. An edifice built from lots of different elements. One of the ‘things’ that underpins the single market is the EUCU. This allows tariff free trade within the club (which adds Andorra, Monaco, San Marino and Turkey to the EU member states), but sets common tariffs on anything coming in from outside. The EU negotiates on behalf of all members of the EUCU at the WTO.
One point that Leavers make - which I sympathise with - is that the EU is set up as a walled garden, not an outward looking trading bloc. Trade inside the club is fairly impressively open, but trade with the outside world not so much. Arguably that’s precisely the point of it. However, part of the Brexit dividend promised by Leavers is that leaving the shackles of the EU will allow the UK to go ahead and negotiate lots of trade deals with the rest of the world which is where global economic growth is being generated. The UK will not have the freedom to do this if it is still tied to external tariffs set by the EUCU. Ergo, Fox argues, we must leave it.
Note, for services which is the engine room of the UK economy, the issue is not tariffs, but non-tariff barriers, such as mutual recognition of standards and regulation. But that's for another blog
For whom does Fox speak when he says such things?
When Liam Fox suggests that we should leave the EUCU is he speaking for Her Majesty’s Government, or is he flying a kite? The FT described it thus:
Erm, so that’s, just like your opinion Liam.
Parker and Allen write that the Treasury is considering its options on the matter, and that the Chancellor has an open mind. The final decision maker, as ever will be the PM.
Important point here: when we listen to Davis, Fox and Johnson speak in the weeks ahead in relation to Brexit, you cannot assume necessarily that what they say is settled policy. They may be speaking as bearers of the Leave flame or to keep everyone guessing about the UK's position. I guess if anyone oversteps the mark they will be in for a bollocking from Number 10. There is such a thing as collective responsibility.
May’s magical mystery tour
The PM has visited Scotland, Wales, Germany, France, Ireland and Italy so far. This will be followed on Thursday by a trip to Slovakia (EU presidency holders) and Poland, where she will hold discussions with prime ministers Robert Fico and Beata Szydlo.
A quick note on Ireland. This is shaping up to be a royal pain for the Government and is another way in which exit from one union creates problems for our own union. Enda Kenny has chucked the idea of a referendum on united Ireland out there a couple of times recently. That’s not a suggestion you make lightly given all the baggage that comes with it. There’s also a problem about what to do about that land border. There appears to be agreement that there will be no hard border and no customs posts. But how could that work in the context of what Liam Fox has been saying on the customs union? Could we really have an entirely porous border with an EU member state?
Michel Barnier has been appointed the European Commission’s lead on the Brexit negotiations. He’s a player. And he’s French. And he did the DG MARKT Commissioner gig during the financial crisis. So he knows his oignons.