A stand-alone Customs Union would be a disaster for the British economy
6 min read
Labour MP Stephen Kinnock says it is "crystal clear that Common Market 2.0 is still the only way in which we can respect the result of the referendum without destroying the economy or compromising the Good Friday Agreement".
In many ways the two high-quality Indicative Votes debates on the UK-EU future relationship showed our Parliament at its very best. We knew what was at stake. The priority, most of us agreed, was to avert the catastrophe of No Deal Brexit, so it was incumbent upon all of us to help get a majority for at least one Brexit option. The unwritten rule was that each MP should not only vote for their preferred option, but for all the options they could live with. In this spirit Conservative MPs outside the cabinet were given a free vote, Labour MPs were whipped to support three options, and for a fleeting moment it looked like British politics was about to re-discover the lost art of compromise.
But then came the moment for us to cast our votes and, tragically, many colleagues reverted to type. It’s no secret that I have deep reservations about the idea of holding a second referendum, but I held my nose and voted for it. I also voted for a customs union, and for Common Market 2.0, for which I've been campaigning for two and a half years. Each lost by a small margin.
The vast majority of Conservative MPs behaved appallingly, opting to either vote against or abstain on everything; the less said about that, the better.
But here is a key statistic: 67 of the MPs who voted for a second referendum either abstained on or voted against Common Market 2.0, and of that 67, 48 voted to keep the UK in the European Economic Area during the votes on the Trade Bill in June. The EEA is the defining feature of Common Market 2.0, so what happened between then and now to make them change their minds?
The answer can only be that those 48 have decided that it is in their interests to bet the house on securing and winning a second referendum, even if that means playing Russian Roulette with the British economy. Yes, they topped the poll, but it was a Pyrrhic victory, for two reasons; firstly, because any referendum would of course need to be a contest between Remain and a viable Leave option, but by voting consistently against a customs union and Common Market 2.0 they are slowly but surely erasing all those Leave options. And secondly, by preventing MPs from expressing a majority view they were also preventing us from taking No Deal off the table.
So, where does this leave us? The customs union proposal came closest to a majority, and therefore the talks between Theresa May and Jeremy Corbyn (ongoing at the time of writing) may well end up converging around that centre of gravity.
But while this option might at first glance appear attractive, when it comes to the Customs Union all that glitters is certainly not gold. The fact of the matter is that a stand-alone customs union without Single Market membership would destroy the British economy.
First, only 20 - 30% of the issues that create border friction in trade with the EU are customs-related, because the majority of the EU’s non-tariff barriers are generated by Single Market legislation. Consumer standards, environmental protections and workers’ rights all sit within the Single Market section of the acquis communautaire. Just look at the Turkish-Bulgarian border. Turkey’s trading relationship with the EU is based exclusively on a customs union and lorry tailbacks are 20km long. Hard infrastructure on the Irish border will be inevitable if we secure a Customs Union-only deal.
Second, the difference between goods and services has elided to such a degree that it’s almost impossible to separate the two. Michel Barnier in September described the Single Market for goods and services as "an ecosystem that has grown over decades. You cannot play with it by picking pieces. There is another reason why I strongly oppose the [Chequers] proposal. There are services in every product. In your mobile phone, for example, it is 20 to 40% per cent services.”
Third, a stand-alone customs union does absolutely nothing for the services sector, which is the lifeblood of the British economy as it accounts for about 80%. Think of the consumer ordering goods from Amazon in Luxembourg. They arrive just two days later because the delivery logistics are all part of the Single Market’s harmonised framework for services. Or think of shopping around for home or car insurance - the increased competition from European providers drives prices down and quality up for UK consumers.
Fourth, a stand-alone customs union does nothing for the dynamic alignment of workers’ rights, environmental standards and consumer protections that are at the heart of the Single Market. The General Secretary of the TUC Frances O’Grady has said repeatedly stated that a Customs Union alone is not enough.
It is therefore crystal clear that Common Market 2.0 is still the only way in which we can respect the result of the referendum without destroying the economy or compromising the Good Friday Agreement. Labour’s front bench position calls for alignment with the Single Market, along with shared institutions. That’s a reasonable starting point, but it’s far too vague and certainly not ‘Boris-proof’. How closely aligned? In which sectors? Which institutions? And what would ‘shared’ actually mean in practice?
Common Market 2.0 puts flesh on the bones of Labour’s position, and our plan is clear: the Political Declaration must be based on a specific and explicit commitment to membership of the Single Market through membership of the European Economic Area. The time for trying to dream up bespoke arrangements by hunting for unicorns in the Brexit fantasy forest has long passed. It is time to embrace the clarity, security and stability of the tried and tested EEA Treaty. It would secure workers’ rights, introduce new safeguards over freedom of movement and is the only hope of reuniting our deeply divided country.
Common Market 2.0 delivers Brexit whilst protecting jobs and livelihoods. Set against that benchmark a stand-alone customs union simply does not cut it.
Stephen Kinnock is the Labour MP for Aberavon
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