Why is Labour under pressure to seek an EU-UK customs union?

Thirteen Labour MPs have rebelled against the prime minister and backed calls for a EU-UK customs union. Sean O’Grady looks at what it means for the government’s stance on Europe and Brexit

Three cheers for customs unions ... Ed Davey at his party’s autumn conference (PA)

In a rare case of the Liberal Democrats making the political weather, Ed Davey’s party has managed to put the question of Britain’s ties with Europe back on the political agenda, despite attempts by Downing Street to avoid the festering wound of Brexit.

A 10-minute rule bill calling on the government to open talks on a new EU-UK customs union was put before the Commons by Lib Dem spokesperson on Europe, Al Pinkerton. Although it was never likely to become law, it was backed by more than a dozen Labour MPs, which puts fresh pressure on Keir Starmer to revisit the issue.

Davey said the symbolic vote “was a historic victory” against “the economic nightmare of the Conservatives’ broken Brexit deal”.

What is this proposed new UK-EU customs union?

In truth, it is not a customs union at all. That’s an arrangement in which nations agree to abolish tariffs and similar barriers to free trade within their borders and to impose an agreed common tariff on other countries outside their union. The EU Customs Union dates back as far as 1944 when it began between Belgium, the Netherlands and Luxembourg. It is not as extensive and intrusive a regime as a full single market, which requires common standards.

The Lib Dem proposal is rather more modest: that the EU and UK agree a “bespoke” agreement on customs “covering most goods but not agriculture, and in which the UK would be consulted during negotiations on new EU trade deals with third countries”.

Is it a good idea?

Loose as it is, there is little on which to object, and it could do some good – but it is transparently a step on the road to rejoining the EU. It would not transform Britain’s growth rate on its own.

The UK-EU reset proposed by the prime minister – already partly enacted – will go further but never so far as to mean Britain would have to revoke its new independent trade agreements with India, America, Australia, New Zealand, Japan and the Trans-Pacific Partnership. Although those new deals aren’t transformative, the US now imposes higher tariffs on the EU than Britain and has a more hostile attitude to the EU Commission.

Fully rejoining the EU customs union would boost Britain’s growth more appreciably, and membership of the EU single market would do still more. Critics insist Britain could achieve faster growth elsewhere.

Will the Lib Dem proposal become law?

No. The vote was about positioning the Liberal Democrats as a pro-EU force in their existing and target seats, where voters are more sympathetic to rejoining the EU. Sir Ed might also enjoy making some mischief in the parliamentary Labour Party, which largely – but secretly – agrees with him.

Is Brexit in peril?

No. The Labour manifesto was perfectly clear: “We will reset the relationship and seek to deepen ties with our European friends, neighbours and allies. That does not mean reopening the divisions of the past. There will be no return to the single market, the customs union, or freedom of movement.” Labour promised only to “tear down unnecessary barriers to trade” and to seek a veterinary agreement, a security pact, and “to help our touring artists”.

What about at the next election?

Interesting. Labour might fasten upon the increasingly unpopular effects of Brexit, and the wider perception that it was a mistake, to attract some disaffected voters. Recent analysis suggests that, if the 2016 referendum were re-run today, a substantial majority would vote to Remain.

Constitutionally, there is no requirement for another referendum on rejoining the EU, but it would raise difficult questions about the terms of re-entry – adoption of the euro, powers devolved to Brussels, cost of membership, fishing, free movement of workers etc. Voters may find the prospect of fresh arguments on such topics very unappealing.

Most likely, Labour would end up with something like the Lib Dem proposal – which is to try and cherry-pick a deal with the EU without actually rejoining (not unlike Theresa May’s Chequers plan of 2018). Whether the EU would countenance such “cakeism” is doubtful.