Brexit: Outbreak of optimism over customs union talks

After almost a month out of the headlines, Brexit will return to the top of the agenda next Tuesday with the conclusion of negotiations between the government and Labour.

Both sides sounded optimistic this week about reaching a common position on the UK's customs arrangements with the European Union. Theresa May has long ruled out membership of a customs union after Brexit, which has been a central demand of the Labour leadership.

But the prime minister suggested on Wednesday that she could now accept a customs union – as long as it was called something else.

“Various terms are used in relation to customs. Sometimes people use different terms to mean the same thing,” she told the House of Commons liaison committee. “We are sitting down and talking about what it is that we both want to achieve in relation [to customs]. I think actually there is a greater commonality in terms of some of the benefits of a customs union that we have already identified between ourselves and the official opposition.”

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Downing Street is confident that anything that emerges from the talks with Labour will be acceptable to the EU and will be compatible with ratifying the Brexit deal

A couple of hours earlier, Jeremy Corbyn’s spokesman agreed “the name isn’t the most important thing”, adding that the government’s approach had moved during the talks.

“I think we have seen clear evidence that the government is prepared to explore shifts in its position and that is what we need to nail down: how far and where those shifts are going to go,” he said. “We haven’t yet locked down the essential movement that would be needed, however it is approached, but it is being discussed.”

The two sides appear to be moving towards a "customs arrangement" that would see the UK adopting the EU's common external tariff and customs code for goods. This arrangement would mimic customs union membership in almost every respect, with the European Commission negotiating trade deals for goods on behalf of the UK.

The prime minister would still be able to claim that the UK could pursue an independent trade policy because it could negotiate bilateral deals with other countries on services, intellectual property, public procurement and some regulatory barriers to trade.

Brussels anxiety

The UK government has not been liaising with EU negotiators during the talks with Labour, and there is some anxiety in Brussels about the details of any deal that might emerge. The deal would involve changes to the non-binding political declaration rather than the legal text of the withdrawal agreement but that may not be entirely straightforward.

“The joint political declaration is fungible, but you can’t just put things into it that don’t accord with regulatory and legal orders. Anything we agree must be legally robust and it can’t be a Trojan horse for single-market access,” one senior EU source said.

Downing Street is confident that anything that emerges from the talks with Labour will be acceptable to the EU and will be compatible with ratifying the Brexit deal.

A customs arrangement that mimics the customs union would eliminate the need for customs checks and infrastructure on the Irish Border. A veterinary agreement between the EU and Brexit could make animal health checks unnecessary. The EU has already suggested that the third major category of checks – regulatory checks on goods – could be conducted “in the market” rather than at the Border.

This could mean that, although the Northern Irish backstop would remain part of the withdrawal agreement, few of its provisions would have to be implemented.

Binding votes

Despite this week’s outbreak of optimism at Westminster, few are betting on the government and Labour agreeing a common position next week. If they fail to do so, the prime minister said she hoped Labour would agree to a series of binding indicative votes on various options for Brexit.

The government also hopes Labour will agree not to oppose the second reading of the Withdrawal Agreement Bill, the legislation needed to implement Brexit. Amendments to the Bill would offer another chance for rival options, including a second referendum, to be tested in the Commons and for cross-party alliances to form.

The government has all but abandoned hope of passing the legislation in time to avoid contesting the European Parliament elections on May 23rd. But Whitehall optimists believe that if Nigel Farage's Brexit Party eats into Labour's vote as well as that of the Conservatives, the arithmetic at Westminster could change in favour of passing a deal.