So it’s half in, and half out, for the customs union then?

17 January 2017

David Wilson

Being a member of the single market means free trade of goods and services with other EU Member States. The customs union however is not the same as the single market; the customs union is merely a procedural agreement affording the movement of goods only.

Full membership of the customs union would mean that all signatories agree not to impose tariffs on each other’s goods, and would agree on the imposition of external tariffs from countries outside the customs union. 

Being a member of the customs union therefore means that all goods that have been imported into an EU member state can then be moved freely within the EU without further customs checks or additional tariffs, thereby reducing administrative and financial barriers.

The drawback for the UK of being a full member of the customs union is that it prevents the UK from striking its own trade deals with non-EU partners. It is probably with this ‘free trade’ aspect that the Prime Minister is raising the prospect of being an ‘associate member’.

Assuming that the other 27 member states agree to some form of associate membership, this would allow the UK to strike its own trade deals and tariffs with non-EU countries, but may imply that tariffs would be applicable to specific goods and trade sectors when dealing with the EU.

This is an important point to note; the UK is a net importer of goods from the EU (and overseas), whilst its principal export is services. Although it’s far too early at this stage to comment on how being an associate member of the customs union will impact our balance of trade, we cannot ignore the prospect of additional costs of imports; the prospect of additional tariffs to our exports by our trading partners; or the additional administrative burden placed on our businesses trading with customers and suppliers outside the UK.

In members’ clubs up and down the UK, associate members are well aware that, even though they have to pay for the privilege, their admission is subject to the agreement of full members, they do not get the same benefits as full members, and they have no voting rights. Indeed, associate members are often on the peripheral of the clubs’ undertaking. What will the UK therefore gain from being ‘an associate member of the customs union’?

For more information please get in touch with David Wilson, Ian Carpenter or your usual RSM contact.