Britain risks enormous trade disruption without Customs Union pragmatism post-Brexit

Guy Platten
Operation Stack Continues To Cause Traffic Problems Throughout Kent
Nothing will disincentivise trade quite like “Operation Stack” becoming a daily occurrence (Source: Getty)

In 1988, Margaret Thatcher delivered a speech at Lancaster House.

Her mission was to outline the meaning of a true Single Market, arguing that both Britain and the European Union were not yet truly “open for business” and that only by tearing down frontiers could this be changed. She called for “action to remove the customs barriers and formalities so that goods can circulate freely and without time-consuming delays”.

By 1992, her wish had come true. All customs barriers within the European Union Customs Union disappeared and, seemingly overnight, it became as easy to trade with Munich as it was with Manchester. A lorry could leave the factory, head out onto the motorway, into a port, onto a ferry and out the other side without anyone stopping it to ask who they are, where they are going or what they are carrying.

And the boost in trade that followed was massive. The Port of Dover saw trade volumes increase by 150 per cent, Liverpool 273 per cent, and Holyhead 627 per cent. But 25 years after the Lancaster House speech, Theresa May looks set to take the UK out of the Customs Union, and with it, risk the return of the very barriers her predecessor had so decried.

Read more: Defaulting to WTO terms post-Brexit would be a disaster for British trade

The UK is a world-leading maritime nation. Ninety-five per cent of the country’s international trade is moved by sea, and by its very nature shipping is a global industry. The opportunity to sign free trade deals with emerging markets and friends around the world – the sole benefit of leaving the Customs Union – is an exciting one. But insofar as it relates to prosperity, it is exciting only if it complements rather than replaces trade with our closest neighbours.

An enormous £120bn of goods moves through Dover alone each year, the vast majority of which is bound for or originates from European markets: that’s 17 per cent of the UK’s total international trade. But if barriers – namely customs declarations and inspections – return at our ports, each of those lorries will have to wait while the paperwork is sorted, perhaps for several hours.

Here is the issue: neither British nor EU ports have the space, never mind the facilities, to park large numbers of lorries. If no positive deal is secured around the negotiation table, then within hours of Brexit finally taking place huge traffic jams will spill onto motorways on both sides of the Channel.

Nothing will disincentivise trade quite like “Operation Stack” becoming a daily occurrence. The “just in time” economy will be replaced by a “we’ll see you when we see you” economy, and it could well see exporters and customers alike wondering whether the hassle of trading is worth it. That’s a recipe for job losses and economic decline.

Read more: The optimal Brexit strategy is simple – if Britain leaves the Customs Union

But this is the worst-case scenario, and there is every reason to believe it will not come to pass.

Spain exports £23bn of goods to the UK. In Germany that figure is closer to £80bn, in Ireland it is £13bn, and in France £28bn. The UK‘s colossal trade deficit with the European Union exists precisely because we are good customers. Some have said that, as only 8 per cent of the EU’s trade is with the UK, it weakens the government’s negotiating hand. This only works if you believe the EU operates not just as a Single Market, but as a single economy within a unified nation.

While negotiators in the European Commission may be able to divorce themselves from the precariousness of the EU’s own economic reality in pursuit of protecting “the European Dream”, the politicians who make up the EU Council will not. Their priority will be more local than these lofty ideals. The ministers of individual European nations, accountable to their own electorates, will want to protect their own economies and people.

Within that framework is the opportunity for a hitherto unseen dose of pragmatism.

The UK government has already placed “frictionless” trade at the top of its negotiating agenda. Customs checks at ports are ultimately a human construct. Negotiators can choose to bring them back, and suffer the costs on both sides of the Channel. Or, simply, they could choose not to – protecting jobs and prosperity, not to mention the sanity of businesses and customers, in the process.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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