With the EU to set out its latest guidelines on the Brexit negotiations later today, much attention will be given to the negative reception to Theresa May’s pick and mix approach to accessing the single market. In particular, financial services and her dashed hopes for the City continuing to access the EU single market through mutual recognition will be headline news.

Tom Parker
Senior Advisor

Less prominent but no less important will be the likely reception that will be given to May’s proposals on customs. Of intrinsic importance to the free flow of trade, the integrity of the market either side of the channel and the Northern Ireland question, May’s position on customs in her speech last Friday built on a paper released last August setting out two models for a new customs deal with the EU.

The first of these models, a new “Customs Partnership”, is, in the words of the UK government itself, based on an unprecedented approach, where the UK would mirror the EU’s requirements for imports from the rest of the world where their final destination is the EU (not the UK). Novel in thinking, it has raised many questions amongst the business community and does not fill EU negotiators with excitement.

The second, a “highly streamlined customs arrangement” would look to take advantage of existing customs arrangements such as the Common Transit Convention (CTC); include measures to promote trade facilitation, for example a continued waiver from the requirement to submit entry and exit summary declarations for goods being moved between the UK and the EU; and implement technology-based solutions to facilitate compliance with customs procedures.

At the heart of the second model is the idea of reducing pressure and the risk of delays at ports and airports by mutual recognition of “authorised economic operators” and a technology-based pre-arrival notification system. The logic is to enable faster clearance of goods, the smooth flow of traffic, and critically avoid congestion at key pinch points like the Port of Dover and Eurotunnel.

The system will be heavily dependent on the technology, cooperation between the UK and EU authorities and the awareness/willingness of those trading in goods between the UK and the EU. In practice, at pinch points like Dover there will be limited physical checks of freight, as the prospect of gridlock in the south-east corner of England, where it has been said that an additional 2 minute control on freight will result in a 20km tailback on either side of the Channel, cannot easily be addressed by other measures.

To the EU such weakness in customs control and the threat that it risks to the integrity of the single market is unlikely to find favour. It will be considered tantamount to a smuggler’s charter. To UK citizens the irony of the customs proposals should not be lost either. Central to May’s Brexit position is the idea that by leaving the EU the EU the UK will “take bake control”. For a growing number of observers, her proposals on customs risk the exact opposite, resulting in a loss of control and making the UK a smuggler’s paradise for contraband, counterfeit, people and all other forms of illicit trade.