Free trade outside the EU customs union

16 November 2016
What was claimed

The Foreign Secretary’s claim that the UK can leave the EU customs union but still trade freely was described as “impossible” by his Dutch counterpart.

Our verdict

Broadly correct, although Jeroen Dijsselbloem assumed that Boris Johnson was referring to staying in the EU single market when he talked about maintaining “free trade”. That may not have been the case.

“[Boris Johnson said] that the UK is likely to leave the EU customs union post-Brexit but still wants to trade freely afterwards. In response, his colleague from the Netherlands has said that that option ‘doesn’t exist’ and is impossible. Both of these things cannot be correct.

Angus Robertson MP, 16 November 2016

“The right honourable gentleman doesn’t actually seem to understand that the customs union is not just a binary decision”

Theresa May, 16 November 2016

“Pravděpodobně budeme muset opustit celní unii”, Boris Johnson told Czech newspaper Hospodářské Noviny the other dayor so it was translated. Rendered back to English, it reads:

“We'll probably have to leave the customs union, but it is a question that will be discussed. I believe it can be done while maintaining free trade”.

It’s correct that Dutch Finance Minister Jeroen Dijsselbloem responded negatively to those remarks. He told Newsnight that:

“To say [the UK] could be inside the internal market, keep full access to the internal market but be outside the customs union [is] intellectually impossible [and] politically unavailable”.

Mr Johnson didn’t quite say that he wants to be in the single market but out of the customs union.

He spoke of “maintaining free trade” and “access to” the single market outside the customs union. It’s possible to imagine a fairly free trade arrangement with the EU that doesn’t require single market or customs union membership.

Being a member of the EU customs union means charging the same taxes on imports from outside the EU as all other members—the “common external tariff”.

It’s different to being part of the EU single market. Turkey is an example of a country that’s in a customs union with the EU for non-agricultural goods, but isn’t an EU member and isn’t part of the single market. Customs union membership limits its freedom in negotiating trade agreements with other countries. So on that basis, it does look like there’s quite a “binary decision”: “in” or “out”.

Daniel Thornton, a Programme Director at the Institute for Government who has written about the customs union, agrees. He points out, as does EU law professor Steve Peers, that under World Trade Organisation rules customs unions are supposed to cover “substantially all the trade” between participating countries.

So the UK would have limited room to pick and choose which products were subject to customs union, and which weren’t.

The Department for Exiting the European Union referred us to comments made by Mrs May’s spokesperson to journalists recently. These were to the effect that there are various aspects to the customs union, including tariffs, customs paperwork and rules of origin. It’s fair to say that with a trade agreement, some of these barriers to trade could be reduced without being in a full-on customs union.

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