© FT Montage/AFP

Jeremy Corbyn’s backing for a post-Brexit customs union between the EU and the UK has shaken up British politics and thrown down a challenge to prime minister Theresa May.

Because of the arithmetic of Britain’s hung parliament — which some say has a majority in favour of soft Brexit — the UK opposition leader’s stance could yet influence the country’s final negotiating position.

Mr Corbyn said he was offering a clear vision of a Brexit that puts “people’s jobs and living standards first.” He contrasted it with the “disarray” of the British government, whose different factions are struggling to hone a clear strategy.

But his speech on Monday contained competing strands that any future Labour negotiating team might struggle to reconcile. Here are five of them.

1) “Labour would seek a final deal that gives full access to European markets and maintains the benefits of the single market and the customs union as the Brexit secretary, David Davis promised in the House of Commons, with no new impediments to trade and no reduction in rights, standards and protections.”

Mr Corbyn is aiming high: he wants a Brexit that would produce a similar trading relationship between Britain and the EU to what exists today.

That is why he refers to the benefits of the single market, which has a common regulatory and legal framework so that an EU-wide market can exist, and the customs union, which imposes a common external tariff on goods from outside and makes it possible for the EU to negotiate trade deals as a bloc.

Chart showing potential split in parliament vote for a customs union with the EU

There are some models that allow such benefits without being in the EU — look at Norway, which participates in the EU’s single market even though it is outside the customs union. But the Labour leader then goes on to attach conditions likely to be unacceptable to Brussels and the other 27 members of the bloc

Mr Corbyn maintains that Labour “would not countenance a deal that left Britain as a passive recipient of rules decided elsewhere by others”. But such passive acceptance is exactly what the bloc says Britain would need to sign up to if it was to keep the kind of access it currently enjoys.

2) Labour would seek to negotiate a new comprehensive UK-EU customs union to ensure that there are no tariffs with Europe and to help avoid any need for a hard border in Northern Ireland.”

Mr Corbyn plants his mast on softer Brexit terrain than have the Conservatives, who reject a customs union with the EU.

A “comprehensive” deal would go further than the EU’s customs union with Turkey — one frequently cited template that does not include agricultural goods. The more comprehensive a deal, the less the need for the kind of border checks that, for instance, slow down EU-Turkish trade. Such an issue is particularly important for the island of Ireland, where all sides say they want to avoid a hard border.

However, a comprehensive customs union would not by itself remove all such need for checks, unless all the goods transiting were guaranteed to meet EU standards.

The final answer as to whether Britain may yet seek a customs union — and how extensive it could be — may come from the British parliament, which is set to vote on the issue in April. Defectors from the ranks of Mrs May’s Conservatives could play a crucial role.

3) “The option of a new UK customs union with the EU would need to ensure the UK has a say in future trade deals.”

This is a big issue for any post-Brexit British government. London does not want to follow the path charted by Turkey, whose customs union with the EU allows access to goods from third countries that have their own trade deals with Brussels — without guaranteeing reciprocal Turkish access.

Mr Corbyn’s caveat will raise eyebrows in Brussels. The EU is unlikely to be highly enthusiastic about giving a third country (which is what the UK will become) a say in its trade policy.

But Charles Grant, director of the Centre for European Reform and a veteran Brussels watcher, suggests there may be some wriggle room.

The “UK could achieve something like what Norway has when Schengen issues are discussed — a seat, a voice in relevant committees and ministerial councils, but no vote,” he tweeted on Monday.

4) “A new customs arrangement would depend on Britain being able to negotiate agreement of new trade deals in our national interest.

Being in a customs union with the EU does not prevent the UK striking its own trade deals — including the area of services, something of a new frontier for international trade agreements. But it becomes much more complicated. Most importantly, the UK could not agree anything that contradicts the EU’s own negotiations with third countries, as this would threaten the customs union’s principle of a common external tariff.

5) “Labour would negotiate a new and strong relationship with the single market that includes full tariff-free access and a floor under existing rights, standards and protections.

That new relationship would need to ensure we can deliver our ambitious economic programme . . . and build an economy for the 21st century that works for the many, not the few.”

Mr Corbyn is seeking to stay as close as possible to the single market, but also wants Britain to be able to “negotiate protections, clarifications or exemptions where necessary” in order to pursue a new industrial policy.

His list of areas for possible carveouts includes EU limits on state aid, and also EU rules allowing companies to bring in foreign workers on temporary contracts.

It is not immediately clear, to put it mildly, why the EU would permit the UK to sell freely in its market if it also subsidised British companies in a way that EU governments are not allowed to do themselves.

Michel Barnier, the EU’s chief Brexit negotiator, has often warned that any deal on a future EU-UK relationship must guarantee a “level playing field”.

What has been uppermost in his mind is the fear of the UK selling on the EU market while dumping its social or environmental regulations — not the path Mr Corbyn is pursuing. But the Labour leader’s stance on state aid presents a different version of the same sort of problem.

Get alerts on Brexit when a new story is published

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article