What are the UK's biggest exports
Donald Trump's punitive tariffs and Brexit: Commentators and politicians on mainland Europe often mention both in the same breath - as examples of the dangerous protectionism that is currently in vogue worldwide. The US president wants to protect domestic industries with tariffs and reduce imports; the British are leaving the EU economic bloc, presumably making it more difficult to do business across the English Channel. But most Brexit enthusiasts in the UK would reject accusations of being protectionist and trying to set up barriers to imports. On the contrary, they argue that after separating from Brussels, their kingdom will be a champion for free trade worldwide.
The exit camp promised that everything would be very easy. Now comes the rude awakening
According to these EU opponents, it is the Union that is protectionist: They complain about the high tariffs on food imports and the fact that Brussels has allegedly signed far too few free trade agreements with emerging economic powers like China. Such agreements abolish tariffs and simplify exports. According to this reading, the exit is a liberation from protectionism and the whole supposedly unnecessary regulation of the EU. Brexit Britain will quickly conclude many trade agreements with important countries such as the USA or China, and the Kingdom will thus become a global export power, promise these departing believers. It sounds like a kind of Empire 2.0.
Prime Minister Theresa May prefers to use the term "Global Britain". The Conservatives include this in every speech on the subject of Brexit, often several times. Their vision: The kingdom should not turn away from Europe, but it should look more out into the world and seek its economic salvation on other continents as well. "A great, global trading nation that is respected all over the world and is strong, confident and united at home" - the politician stated this goal for the future of Great Britain in one of her speeches.
For all the world-embracing rhetoric, however, it is the other EU countries to which the majority of British exports go. It was exactly 44.3 percent of exports of goods and services last year. Brexit champions have long argued that the exit would hardly harm these deals. At the end of the day, Brussels would agree to an agreement that would allow further trade without hurdles, it said. Few disadvantages when doing business with Europe, great advantages when doing business with other continents: this was the tempting promise of the Brexit camp.
But it is now clear that the world of international trade works differently than what exit fans imagined in their fantasies. The freedom to sign your own treaties with China or the United States comes at a high price. And the British government is deeply divided over whether they want to pay that price or prefer to bury the dream of the trade agreement - and thus of the new export empire.
Specifically, the dispute revolves around the question of whether the kingdom should conclude a long-term customs union with the EU for the time after the exit and the agreed transition phase. Such a union goes beyond a free trade agreement. A free trade agreement would prevent tariffs from being imposed between Britain and the mainland. In the case of a customs union, the participants also undertake to levy uniform tariffs on third countries such as China.
The EU is a customs union. Therefore, there are no French and German tariffs for imports of Brazilian beef, only the one EU tariff. This is extremely practical: imports from Brazil are only cleared once and can then be transported unhindered across the borders of member states.
However, the countries are not allowed to sign their own trade agreements with economic powers like China, because Brussels is responsible for trade policy and the uniform tariff rates. That is why Brexit enthusiasts in May's cabinet, like the wandering Foreign Minister Boris Johnson, reject a customs union.
May also takes this position. Instead, she would like to enter into an innovative customs partnership with the EU. This model, which has not yet been tested anywhere, is intended to offer the advantages of a customs union without its disadvantages. Of course, Brussels considers the concept to be completely unrealistic, and the EU opponents in the London cabinet are also fighting it. Johnson, for example, describes the idea as "crazy". Brexit fans suspect that May's cloudy customs partnership will end up being an arrangement that is not called a customs union, but is very similar to the hated model.
However, renouncing a customs union would have serious disadvantages: Great Britain can then conclude free trade agreements with the USA or China and lower tariffs. But trucks would have to be checked again in Calais and Dover and on the inner-Irish border, at least randomly. Because a free trade agreement with Brussels would only ensure that British goods remain duty-free. The border guards would be necessary to check whether goods from the USA or China are hidden on the loading areas. The reason: If the USA has concluded a free trade agreement with Great Britain, but not with the EU, American companies could bring goods into the Kingdom duty-free, for which duties are still due on the mainland. Without controls in Calais, the corporations could leverage the EU tariffs via Great Britain.
The British government and the EU both assure that Brexit should not result in the invisible border between Northern Ireland and the Republic of Ireland becoming visible again. Without a customs union, however, it would be difficult or even impossible to do without border controls. Such controls are also a nightmare for factory managers. The car factories in the UK only keep parts in stock for a few production hours. They depend on constant supplies, and many supplies come from the mainland. Every day more than 1100 trucks bring parts from other EU countries to British vehicle factories. Delays at the border endanger this model; companies would have to rent larger warehouses.
Without a customs union, exporters would also have to fill out customs papers for sales to the EU. Trade agreements like the one discussed in London and Brussels contain so-called rules of origin. Only products that are truly British should benefit from duty-free. Companies must therefore prove that their goods consist predominantly of British parts. A Brexit without a customs union would result in costly bureaucracy for the managers. Exit fans have always claimed that the separation represents the redemption from bad EU bureaucracy.
Business associations in the UK are calling for a customs union with the EU
And rules of origin are not a chicane, they are necessary so that EU customs are not undermined. Otherwise, companies from China, for example, could export almost finished products to Great Britain - duty-free, thanks to a new Sino-British trade agreement. The companies would finish the goods there quickly and then sell them as supposedly British products duty-free in the EU.
Unsurprisingly, business associations in the UK are in favor of a customs union. For them, trade with the largest export market, the EU, is more important than the vague prospect of lucrative free trade agreements with China and the USA. The dream of Empire 2.0 could cost the British dearly.
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