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| Brexit: What is the EU customs union and why should people care if the UK leaves it? | Brexit: What is the EU customs union and why should people care if the UK leaves it? |
| (35 minutes later) | |
| After months of vague and ambiguous statements about what Brexit actually means (apart, of course, from Brexit), Prime Minister Theresa May will lay out plans for negotiations in a speech on Tuesday. | After months of vague and ambiguous statements about what Brexit actually means (apart, of course, from Brexit), Prime Minister Theresa May will lay out plans for negotiations in a speech on Tuesday. |
| According to several reports, the Prime Minister is expected to outline a so-called “hard Brexit” strategy, meaning access to the single market would be sacrificed for controls on immigration. | |
| Such a scenario would include leaving the EU customs union, meaning UK exports to the Continent may face steep tariffs and the country would not benefit from the EU's 56 trade deals with other nations. | |
| The pound fell further against the dollar on Monday, to levels only reached once briefly in the last 30 years -- during October’s flash crash -- as traders worried about the potential negative economic impact of this scenario. | The pound fell further against the dollar on Monday, to levels only reached once briefly in the last 30 years -- during October’s flash crash -- as traders worried about the potential negative economic impact of this scenario. |
| But what is the customs union and what would leaving it mean for people in the UK? | But what is the customs union and what would leaving it mean for people in the UK? |
| The customs union facilitates free trade between EU states by ensuring that they all charge the same import duties to countries outside the union. | The customs union facilitates free trade between EU states by ensuring that they all charge the same import duties to countries outside the union. |
| The agreement reduces administrative and financial trade barriers such as customs checks and charges. | The agreement reduces administrative and financial trade barriers such as customs checks and charges. |
| This is different from a free trade area, in which means no tariffs, taxes or quotas are charged on goods and services moving within the area. | This is different from a free trade area, in which means no tariffs, taxes or quotas are charged on goods and services moving within the area. |
| It is also not the same as the single market, which is broader still, encompassing the free movement of goods, services, capital and people. | It is also not the same as the single market, which is broader still, encompassing the free movement of goods, services, capital and people. |
| The EU customs union is the largest in the world by economic output, which gives it considerable negotiating power. The EU is also a free trade area and single market. | |
| In practice, it is possible to be outside the customs union but still have access to the single market, as Norway does. This means it can negotiate its own trade deals but has to accept free movement of people - an option that would anger many UK Brexit voters. | In practice, it is possible to be outside the customs union but still have access to the single market, as Norway does. This means it can negotiate its own trade deals but has to accept free movement of people - an option that would anger many UK Brexit voters. |
| Conversely, Turkey, Andorra and San Marino have customs union agreements with the EU but are not part of the single market. | Conversely, Turkey, Andorra and San Marino have customs union agreements with the EU but are not part of the single market. |
| The clearest effect of leaving the customs union is likely to be increased tariffs leading to rising prices. EU officials have said that they will not give the UK an easy ride, and the country cannot pick and choose which elements of the union it wants to keep and which it does not. | The clearest effect of leaving the customs union is likely to be increased tariffs leading to rising prices. EU officials have said that they will not give the UK an easy ride, and the country cannot pick and choose which elements of the union it wants to keep and which it does not. |
| In practice, this means that if the UK restricts the free movement of people with immigration controls it cannot have tariff-free access to the union. The cost of doing business will therefore rise, with those costs ultimately being passed on to consumers. | In practice, this means that if the UK restricts the free movement of people with immigration controls it cannot have tariff-free access to the union. The cost of doing business will therefore rise, with those costs ultimately being passed on to consumers. |
| A huge 44 per cent of Britain’s exports go to the EU - £220bn out of £510bn - according to the Office of National Statistics. They would be subject to import tariffs as well as extra administrative costs. | A huge 44 per cent of Britain’s exports go to the EU - £220bn out of £510bn - according to the Office of National Statistics. They would be subject to import tariffs as well as extra administrative costs. |
| If the UK did not negotiate a more favourable trade deal with the EU, it would have to trade on standard tariffs under World Trade Organisation rules. | If the UK did not negotiate a more favourable trade deal with the EU, it would have to trade on standard tariffs under World Trade Organisation rules. |
| An analysis by The Independent found that the cost to Britain’s exporters -- in extra tariffs alone -- would be at least £4.5bn per year. This conservative estimate does not include the difficult-to-measure costs of non-tariff barriers, such as the enforcement of different market standards and regulations. | An analysis by The Independent found that the cost to Britain’s exporters -- in extra tariffs alone -- would be at least £4.5bn per year. This conservative estimate does not include the difficult-to-measure costs of non-tariff barriers, such as the enforcement of different market standards and regulations. |
| As an example of how damaging a WTO scenario could be, the Nissan plant in Sunderland, which has a workforce of 6,700, exported around 250,000 cars to the EU in 2015, around half of its output. Those exports would face a tariff of up to 10 per cent outside the customs union. | As an example of how damaging a WTO scenario could be, the Nissan plant in Sunderland, which has a workforce of 6,700, exported around 250,000 cars to the EU in 2015, around half of its output. Those exports would face a tariff of up to 10 per cent outside the customs union. |
| The extra costs on companies could force them to relocate UK operations within the EU after Brexit, potentially leading to job cuts. | The extra costs on companies could force them to relocate UK operations within the EU after Brexit, potentially leading to job cuts. |
| The main positive put forward by hard-liners, such as Secretary of State for International Trade Liam Fox, is that Britain would be free to negotiate its own trade deals with non-EU countries. This could allow the lowering of barriers elsewhere that may help to make up for the loss of trade with the EU. | The main positive put forward by hard-liners, such as Secretary of State for International Trade Liam Fox, is that Britain would be free to negotiate its own trade deals with non-EU countries. This could allow the lowering of barriers elsewhere that may help to make up for the loss of trade with the EU. |
| However, trade deals take a notoriously long time to negotiate - far longer than the two years the Government has between triggering Article 50 and leaving the bloc. The UK would also be in a far less advantageous negotiating position. | However, trade deals take a notoriously long time to negotiate - far longer than the two years the Government has between triggering Article 50 and leaving the bloc. The UK would also be in a far less advantageous negotiating position. |
| Being the world’s largest economic trading bloc with 500 million relatively wealthy consumers gives the EU hefty clout when negotiating trade deals with other nations; clout that the UK alone will not have. | Being the world’s largest economic trading bloc with 500 million relatively wealthy consumers gives the EU hefty clout when negotiating trade deals with other nations; clout that the UK alone will not have. |
| The second positive put forward is that the country would not have to pay the £13bn it paid to the EU for membership in 2015, though there would be other, potentially huge costs to businesses. | The second positive put forward is that the country would not have to pay the £13bn it paid to the EU for membership in 2015, though there would be other, potentially huge costs to businesses. |
| European officials have also mooted charging an annual fee if the UK wants access to EU markets but remains outside the customs union. | European officials have also mooted charging an annual fee if the UK wants access to EU markets but remains outside the customs union. |
| Norway, which is not in the customs union, is set to pay £140 per head for its access to the single market between 2015 and 2020. The UK currently pays £220, according to analysis by factchecking organisation, Full Fact. | Norway, which is not in the customs union, is set to pay £140 per head for its access to the single market between 2015 and 2020. The UK currently pays £220, according to analysis by factchecking organisation, Full Fact. |