Brexit: Liam Fox warning of customs union ‘sellout’

Liam Fox arriving for cabinet ahead of the triggering of Article 50Image copyrightGetty Images
Image caption The rest of the world offers more potential growth in services than the EU, Mr Fox will say

Any form of customs union with the EU after Brexit would be a “complete sellout” for the UK, International Trade Secretary Liam Fox is to argue.

The UK would find itself in a “worse position” than it is now, he will say, if it leaves the existing arrangement but negotiates a similar new one.

Having to accept EU rules and limits on doing other deals would make the UK “less attractive”, he will say.

Brexit: Liam Fox warning of customs union ‘sellout’
Brexit: Liam Fox warning of customs union ‘sellout’

But his former top official has criticised the government’s strategy.

Sir Martin Donnelly, who was permanent secretary in the Department for International Trade until last year, said any deals done after Brexit would not compensate for leaving the single market and the customs union.

In a speech, he will say giving up access to the EU market and its existing trade agreements was “rather like rejecting a three course meal now in favour of the promise of a packet of crisps later”.

Sir Martin, who has previously warned about leaving the single market and has worked for the European Commission in the past, said that negotiating full access to the single market without accepting EU rules would require a “fairy godmother specialised in trade law”.

Foreign Secretary Boris Johnson said he did “not agree for a moment” with Sir Martin’s verdict, because the “real growth opportunities” were outside the EU.

Mr Johnson told BBC Radio 4’s Today programme that a long-term customs union, as Labour has proposed, would lead to “colony status for the UK”, which would not get a say in trade policy.

The government has said it wants a customs agreement with the EU – which is the UK’s single largest trading partner accounting for 43% of exports – but one that does not stop it from doing free trade deals with other countries.

Mr Fox, one of the most prominent Brexiteers in the cabinet, is the latest minister to set out his stall as part of the government’s attempt to map out “the road to Brexit”, which is due to happen in March 2019.

His speech comes a day after Labour leader Jeremy Corbyn set out his approach to Brexit, saying he backed the UK being in a “new and comprehensive” customs union with the EU.

Mr Fox will warn changing economic and trade patterns mean the EU is a less significant partner than 15 years ago and the UK must have the freedom to exploit the “opportunities of the future”, particularly in services and digital industries.

Mr Corbyn said a new customs union would help protect existing jobs and supply chains while giving the UK a say in future deals negotiated by the EU.

But Mr Fox will reject this, saying the UK would have to cede “considerable control” of its trade policy to Brussels in any customs union.

Image copyrightNissan
Image caption The customs union allows its members to set internal and external tariffs

“As rule takers, without any say in how the rules were made, we would be in a worse position than we are today,” he will say. “It would be a complete sell out of Britain’s national interests.”

Citing Turkey’s experience of being outside the EU but joined in a customs union with it, he will say if the UK found itself unable to set its own rules in key sectors of the economy, this would “remove the bulk of incentives” for other countries to enter into comprehensive free trade agreements.

“The inevitable price of trying to negotiate with one arm tied behind our back is that we would become less attractive to potential trade partners and forfeit many of the opportunities that would otherwise be available.”

Flexibility, he will say, must be the basis of the UK’s trade policy if it is to support the fledgling industries that will provide much of the employment and income of the future.

Labour’s policy shift could lead to it siding with Tory rebels to defeat Theresa May on her Brexit strategy.

Mr Corbyn insisted in an interview with BBC political editor Laura Kuenssberg that his speech was a “firming up” of Labour’s existing policy, which was to back customs union membership during the planned two-year transition period after the UK leaves the EU in March 2019.

Mrs May will address the issue of the UK’s future relationship with the EU on Friday amid calls for greater clarity about how her twin objectives of frictionless trade with the continent and no hard border on the island of Ireland can be achieved outside the single market and customs union.

But former World Trade Organisation chief Pascal Lamy argued that whatever Brexit option is chosen “this will necessitate a border” between Northern Ireland and the Republic.

“There will have to be a border”, he told the Commons Brexit committee, because checks will have to be carried out on goods and people.

Instead he suggestsed a “Macau option” for Northern Ireland.

“You should think about giving to Northern Ireland the same autonomous trade capacity that China has given to Macau, which doesn’t mean that Macau doesn’t belong to China,” he said.

The European Commission will publish the first draft of its proposed withdrawal treaty on Wednesday, which it wants both sides to agree to by the autumn to allow for an orderly departure.

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