Dear Rosie, What Is The Point Of An EU/UK Customs Union?

Dear Rosie

Knowing of your concern to protect UK jobs, I’m writing this open letter, shared with the public, to ask if you might explain your reasoning for your support of the indicative vote, below, on 1st April.

You voted “(aye) to instruct the Government to (1) ensure that any Withdrawal Agreement and Political Declaration negotiated with the EU must include, as a minimum, a commitment to negotiate a permanent and comprehensive UK-wide customs union with the EU; (2) enshrine this objective in primary legislation. (C, Customs Union) (division #397; result was 273 aye, 276 no)”.

This option commits the government to negotiating “a permanent and comprehensive UK-wide customs union with the EU” as part of any Brexit deal.

This arrangement would give the UK a closer trading relationship with the EU and reduce the need for some (but not all) checks at the Irish border. But it would prevent the UK striking independent trade deals with other countries, and has previously been ruled out by Mrs May.

I ask about this because expert analysis shows how the Customs Union accounts for easily the worst-performing element of UK trade. Multiple 20-year comparisons in US–EU trade, intra-EU trade, UK productivity and EU growth, all reveal that the UK’s track record inside the Customs Union has been uniquely poor, by every reasonable measure or comparison.

The UK’s poor EU goods-export performance, a growth rate of just 0.22% per year since 1998, is often attributed to the EU’s own flaccid economic growth. The growth rate of UK goods exports traded tariff-free into the EU’s Single Market from 1993–2015 was lower than for 35 other countries, many trading under Word Trade Organisation (WTO) terms.

What should deeply worry Customs Union supporters is that the UK’s performance inside the Customs Union is uniquely poor even by European standards. The UK’s goods export/import ratio (expressed as a percentage) within the EU has plummeted from 80% in 2003 to just 63% in 2017, far below Germany (now at 124%), France (86%), Italy (112%), Netherlands (113%), and Spain (91%). Incidentally, Ireland’s export–import ratio with the EU stands at an impressive 155%.

Perhaps more important, should you MPs worry that at some point, the UK’s £95bn deficit with the EU will become an incendiary political issue all of its own?

Whatever its theoretical benefits, it has proven to be the wrong customs union for the UK since 1998. It delivers no commercial benefit to the UK’s fastest-growing manufacturing sectors (pharmaceuticals and aerospace); and leaves all the UK’s other major goods-export sectors in a state of either stagnant growth, huge deficits, or both. By any reasonable comparative measure the UK’s performance inside the Customs Union since 1998 is the picture of a failed trading relationship. And yet clinging to that failed relationship may now prevent the UK from liberalising trade with export markets that have grown quickly during the past 20 years, markets that are receptive to UK goods; markets that actually create jobs.

Might you now consider that a managed WTO exit is the only way to honour the votes of 17,410,742 UK voters including 35,323 West Lancastrian leavers, and create the jobs you are concerned about?

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