THE nub of the Brexit problem for the Cabinet has been to do with trade and customs.
After months of UK ministers mulling over two options – the new customs partnership, Theresa May’s preferred choice, and maximum facilitation, the Brexiteers’, No 10 this week came up with a "third way"; the facilitated customs arrangement[FCA], which was to be coupled with a “free trade area for goods”.
Under the FCA, goods coming to Britain post-Brexit would attract a UK tariff but customs officials would also collect a potentially higher EU tariff for goods, which were bound for the EU’s single market. This would then be passed on to Brussels; a proposal similar in fact to the original new customs partnership.
But the FCA would also employ new technology to ensure there was as frictionless trade as possible, enabling there to be no physical border between Northern Ireland and the Republic or anywhere else along the UK-EU border for that matter; a proposal similar to the “max-fac” option.
No 10 boasted how the hybrid plan was “the best of both worlds”.
One concern, however, is that the third option could be a smugglers’ charter as unscrupulous businesses could pay the lower or even zero UK tariff but then pass the goods onto a destination on the continent.
But the political problem for the Prime Minister has centred on selling her idea of a free trade area for goods, including agricultural produce, under which there would be a “common rulebook,” regulatory alignment with the EU to keep the border as free-flowing as possible.
The Brexiteers argue that having regulatory alignment would hamper the UK from making its own trade deals, it could mean the country coming under the jurisdiction of the European Court, and it would effectively mean Britain abiding by rules set by Brussels; all of which does not sound like taking back control.
While Liam Fox, the Trade Secretary, is said to have been reassured by Mrs May on the trade deal front, his fellow Brexiteers appear unconvinced. Indeed, a "livid" Michael Gove, was said to have ripped up a copy of a summary of the customs options after he had read it. Also, David Davis, the Brexit Secretary, insisted Brussels would never accept Britain’s cake-ist approach.
The negotiation of the details of a future trade deal is not due to begin in earnest until after Brexit happens in March 2019. The 21-month transition period, which could be extended, will keep the status quo until a final deal can be agreed. What will particularly focus UK ministers’ minds will be avoiding the so-called Irish border “back-stop”.
Until now the EU27 has poured cold water on key elements of the UK's suggested way forward on customs, making clear it believed using technology to create frictionless borders was "magical thinking" while it categorically ruled out a third country collecting its own tariffs.
Michel Barnier, the EU’s chief negotiator, has again made clear Brussels would be “ready to adapt our offer should the UK's red lines change.” Yet he has also stressed that the Commission was determined to protect the EU's core policy, stressing how there would be “no unravelling” of the European single market.
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