Monday 26 September 2016 6:45 pm

Leave the EU's Customs Union for a serious trade and aid policy

Brian Monteith is a former member of the Scottish and European parliaments

It will not be enough to leave the EU’s Single Market. We need to leave its highly corrosive Customs Union too.

Indeed, as a new report from Global Britain into the links between international trade and development aid shows, leaving the Customs Union is a prerequisite for making globalisation of benefit to the whole world – and especially the poorest of the poor.

The UK must leave the Single Market because the latter’s focus on manufacturing and agricultural goods puts Britain, with our great strength in financial services, at a disadvantage, fuelling a growing trade deficit with the EU; the cost of its regulations are borne by the whole country rather than just by those firms that export to it; and we are required to pay a membership fee for this dubious privilege while submitting our domestic laws to its unaccountable politicians and justices.

By comparison, we manage to enjoy a healthy trade surplus with the rest of the world, where exporters pay relatively low tariffs instead of us all paying a membership fee; any regulations fall on only the products concerned; and our domestic laws are not decided upon by US judges or Chinese politicians.

The Single Market, however, is only one side of the coin. The UK must also leave the EU’s Customs Union – the invisible ring fence of tariffs, quotas and regulations designed to protect it – and especially the obscene Common Agricultural Policy.

First, if we don’t leave the Customs Union and take back our own seat at the World Trade Organisation, trade secretary Liam Fox might as well shut up his new department now. For the UK would not be allowed to strike the trade deals with emerging nations that can deliver a more prosperous, faster growing economy.

But the EU’s protectionist Customs Union is harmful in other ways. It places high tariffs on agricultural produce and a 100 per cent premium on processed foods, pushing up prices for UK consumers and ensuring poor nations export only raw commodities rather than invest in the manufacturing that creates jobs and spreads prosperity.

Read more: UK trade pessimists should reconsider – Britain is in a prime position

Being locked out of economic prosperity creates a cycle of dependency through growing demands for international aid to alleviate the distress.

Examples abound. The Ghanaian tomato industry has largely been destroyed by the dumping of subsidised Italian tinned tomatoes, forcing Ghanaian farmers to migrate illegally to work on Italian tomato farms where they are known as “the invisible ones of the harvest”. Without growing a single coffee bean, Germany profits more from processing coffee than the whole of Africa does from growing it. Similar tariffs, subsidies and quotas have hit the Caribbean sugar cane industry to the benefit of European sugar beet farmers.

Ghana's tomato industry has been bankrupted by dumping of subsidised Italian tinned goods (Source: Getty)

Worse still, the EU seeks to mitigate the effects of its protectionism with notoriously wasteful aid schemes that often support regimes known to be undemocratic, corrupt and reliant on torture.

The head of the European Parliament’s own committee on budget controls claimed the EU’s aid projects were “throwing its money down the toilet”, with 900 projects worth over £11.5bn either delayed or failing to meet their targets. In Nigeria, an anticorruption programme had to be suspended because government officials were stealing the funds used to support it.

British politicians of both parties have known for years that our contributions to EU aid were being wasted. Former Labour minister Chris Mullin has said the EU’s “aid programme is a disaster area. Most of it goes either to the undeserving or the not very deserving and takes for ever to get there”, while former international development secretary Clare Short argued the European Commission ran “the worst development agency in the world” and branded its operations “an outrage and a disgrace”.

Read more: Forget trade deals: Unilateral free trade can be our Berlin Wall moment

By comparison, the UK’s aid programme has been recognised as the most transparent in the world and has administration costs of 1.47 per cent compared to the EU’s 5.4 per cent.

Leaving the EU’s aid programme will allow us to develop our own more efficient projects to encourage greater trade success, directing funds towards countries that are a strategic priority for the UK, and where economic and governance improvements would impact positively on the security of our country.

After dropping the EU’s protectionist tariffs on processed goods, we should help those countries develop stronger export-oriented manufacturing and processing centres, freeing them from being limited to exporting only raw materials.

Exiting the Customs Union and the EU’s aid programme is then a win-win policy, both for Britain and for the world’s poor. The sooner we succeed in doing both, the better for all.

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.