EXPLAINED: What is the customs union row between Theresa May and Jeremy Corbyn all about?
6 min read
Talks between Labour and the Government on Brexit are dragging on over differences around the customs union. But what is the row all about?
First things first: What is the Customs Union?
The customs union is a trading area comprising each EU member state plus Monaco. It means goods travelling across national borders inside it pay no tariffs (a type of tax). It also means goods coming in from the rest of the world are subject to just one tariff when they enter - then can be moved around the customs union freely with no further tariffs.
In the case of the EU, a car coming from the US would face a tariff of 10% when it enters the customs union, regardless of which country it arrives at. It can then be moved across internal EU borders at no extra charge.
It means the EU as a whole negotiates trade deals with countries as a bloc. Individual nations cannot make their own deals as that could result in countries having different tariff regimes for goods.
However, Turkey has a customs deal with the EU just for industrial products. It means Turkey can strike trade deals around the world on some items, but not on industrial products.
The customs union is not to be confused with the single market, which governs all other trade rules, such as packaging and safety regulations.
OK, so what does the Government want?
Theresa May has insisted the UK will leave the customs union and be free to strike its own trade deals after Brexit.
Anyone reading this will already know that the border with Northern Ireland is the crucial sticking point to breaking free of the customs union. If the UK and the Republic of Ireland have different trading tariffs with countries around the world it could pose a problem when they cross from Northern Ireland into the EU. But the Good Friday Agreement, which ended the conflict in the province, dictates that there must be no checks at the border itself.
That is why the Government has devised the backstop, which would effectively keep the UK in the customs union until another solution to manage that border issue can be found.
The deal with the EU says the UK and EU hope to agree a “deep… customs co-operation” that would include “no tariffs”. It says both parties will make use of “all available facilitative arrangements and technologies” in regulating the new customs arrangements, including trusted trader schemes and other measures to combat fraud across the Irish border.
At the moment all of that is yet to be negotiated, and some might say it is rather ambitious.
Right, and what does Labour want?
Labour wants to stay in a permanent customs union after Brexit, meaning the UK would keep the same tariffs with the EU and be unable to sign trade deals with other countries. The tough point for Jeremy Corbyn is that non-EU members are not allowed any involvement in the trade negotiations between the bloc and countries around the world.
But Labour wants “a say” for the UK in those negotiations, which would entail the most comprehensive customs union agreement with a non-member state in history. Whether or not the EU could agree to that is unclear - but what “a say” really means would be crucial.
A Labour source explains that it could be anything from agreeing a set of negotiating rules that the EU would have to keep to in talks about new trade deals, or having a veto over a deal once it was all hammered out. The latter would be an extremely strong power the EU would be unlikely to grant.
Alex Stojanovic from the Institute for Government told PoliticsHome that a veto would probably not be on the cards. But he said the UK might get "consultation rights," be able to join EU committees that discuss trade as an observer, or even an agreement that any country which signs a trade deal with the EU would have to agree a parallel agreement with the UK.
So why have the Labour and Tory talks broken down?
It has been pointed out that there is a lot of overlap between the backstop plan to protect the Northern Irish border and the Labour plan to keep the UK in a customs union with the EU.
“All customs unions do the same thing,” Alex Stojanovic said. “Labour’s customs union and the backstop aren’t different. They are exactly the same. The only difference is one is intended to be temporary, whereas the other would be a permanent feature of the future relationship.”
Labour is desperate to get the word “permanent” written into the future trade part of the Brexit deal. Henry Newman from the Open Europe think tank said: “The Labour party wants to force a concession from the Government for understandable reasons so the Government admits that there is a customs union to be added to their deal. They want to see that change in the political declaration.”
When it comes to political negotiations nobody wants to look like they have backed down. The use of the word permanent would tie the hands of a future Government, so Theresa May is naturally reluctant to agree to it. It would be a big win for Labour.
But anything else would look like it had won not very much at all, while Labour is worried that a future Prime Minister - like Boris Johnson - might scrap any commitments made by Theresa May.
Anything else at play?
The Government is also under political pressure from pro-Brexit Tory MPs who argue keeping the UK in a customs union does not comply with the vote to leave the EU. To be fair to them, agreeing to even discuss it with Labour is a major U-turn for the Prime Minister, who has argued for years now that the UK must leave the customs union after Brexit.
But those Brexiteers have refused to back the Brexit deal as it is, so Theresa May has been left with little choice but to seek votes from elsewhere in the Commons.
There are also those who argue striking any kind of deal with Labour is a betrayal of Tory values and of the country. The accusations that the PM is getting down to business with a man she previously warned was a threat to national security certainly ring true for some.
But the talks are not easy for Jeremy Corbyn either. Sitting down with Conservatives is not really on-brand for the Labour leader, and if he dips his hands in the blood of a Tory Brexit his party membership - and the country if it all goes pear-shaped - might not forgive him.
He is also under pressure to ask the Government for some concession on a second EU referendum. At least that is one area where both he and Theresa May agree - they don't want one.
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