Jeremy Corbyn ups the Brexit ante with customs stance

Jeremy Corbyn has upped the ante significantly in the political battle of Britain about what kind of Brexit the UK wants. From the point of view of Ireland and businesses here, there are some welcome directions in his speech, which sees a softer kind of Brexit than that envisaged by the Conservatives. Specifically, he is in favour of a new customs union between the UK and the EU, and an ongoing relationship between the UK and the EU's single market.

Both May and Corbyn are looking to have some kind of a bespoke future arrangement with the EU.The EU may show some flexibility as the negotiations go on, but they have made it abundantly clear that they will not allow the UK to pick and choose as it wishes – and to have the benefits of membership of the EU trading bloc without the responsibilities. As this progresses it is worth remembering that whatever the outcome of the UK debate on what it should look for, the EU remains firm about what is on offer.

A new union

The headline from the Corbyn speech is that he wants the UK to negotiate a new customs union with the EU after Brexit. The Conservatives, in contrast, insist there will be no such deal. The customs union is the arrangement which allows goods to move without any tariffs – or import taxes – across the EU. It also imposes a common tariff on goods coming from outside.

The crunch political point here is that the Conservatives want the UK to be able to negotiate new trade deals with countries like the US on its own termsafter Brexit. It can’t do this if it is in a customs union. Corbyn says he would insist that the UK had a say in trade deals with other countries negotiated by the EU. It is not clear how far Brussels would concede on this, but there might be some scope for negotiation. As well as having a say in future EU deals, Corbyn also says he wants the UK to be able to do its own trade deals, but this is very complicated if it is in a customs union.

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Border issues

For Irish business, a customs union between the UK and EU would be welcome, removing the threat of tariffs – or import taxes – on goods, which are a particular danger to sectors such as agriculture. However, it would not on its own remove the threat of new customs checks on exports and imports .

For this to happen the UK would also need to stay in the EU single market – which ensures the same rules and regulations – or agree to align its rules and regulations with EU ones, effectively shadowing single market rules. Membership of the customs union would also seem to rule out the option of the kind of trade deals involving cut-price food imports into the UK from countries such as Brazil, which could have posed a big threat to some Irish exporters.

Corbyn’s formula of staying in the customs union does not solve the conundrum of the Irish Border, as he conceded himself, though it is one step towards doing so. To avoid the return of a trade Border also requires the UK to agree to abide by the same rules and regulations – as set down by the Single Market.

This will become a big issue as the week goes on and Brussels publishes its draft withdrawal agreement, which will refer to the UK’s commitment in December to maintain alignment in regulations between the North and the Republic after Brexit as a “backstop” solution to avoid a trade Border. With London also having promised the DUP that there would be no trade border between Britain and the North, this reopens the cracks papered over by the December deal.

Unanswered questions

Corbyn in his speech said he wants a “ new,strong relationship” with the EU single market, but – like May , wants the UK to leave it and is insistent on no restraint on future Labour policy in area like state aid to industry and regulation.The single market is a vital issue for UK services exporters in areas like financial services and in areas like aviation– and this is a real crux issue for the UK’s overall exports. But the EU has repeatedly made clear that the UK cannot pick and choose which parts of the single market it wants to retain membership. It is, in Brussels view, either in or out, eithre the UK signs up to all the rules or its leaves. And the Labour leader’s demand to be able to introduce new state aid to UK industry and thus give it an advantage in competing with its EU counterparts is the example of the kind of issues faced here.

While still leaving many questions unanswered, Corbyn’s speech does point in a different direction to Theresa May’s. Labour wants the UK to remain in the customs union, which might open up a future trade relationship similar to that between the EU and Turkey. The Conservatives have spoken of a relationship similar to that between the EU and Norway – which remain in the Single Market – though are not currently prepared to make the concessions likely to allow this to happen.

The logic – unless Corbyn’s customs union argument wins the day – continues to point to a new free trade deal such as that between the EU and Canada – and in this context much work is needed to avoid the return of an Irish trade Border.

For the Government here and Irish businesses trying to plan for Brexit, the likely outcome here is still as clear as mud and the risk of a hard Brexit remains.