UK seeks interim customs union with EU to smooth Brexit path

epa06094409 Britain's Prime Minister Theresa May looks on during her meeting with Estonian Prime Minister Juri Ratas (unseen) at No. 10 Downing Street, in London, Britain, 18 July 2017.  EPA/WILL OLIVER / POOL

Bloomberg

The UK government said it wants to maintain tariff-free, bureaucracy-light trade with the European Union for a period of up to two years after Brexit, a proposal cheered by British businesses but which is likely to raise eyebrows on the continent.
Ahead of the publication Tuesday of the first of a series of new papers aimed at fleshing out its ambitions for future relations with the EU, Britain said it will seek to negotiate a “close association” with the bloc’s customs union after it leaves in March 2019.
Industry lobby groups expressed relief. They have repeatedly warned against the potential for a “cliff edge” of duties, border controls and regulatory uncertainty on commerce with the UK’s biggest market the day after Brexit.
The road map, though, will likely run into opposition from the EU, given the UK’s suggestion it be allowed to line up trade accords with other countries during the interim period, something remaining fully inside the customs union would prevent. The EU has repeatedly warned the UK against cherry
picking the advantages of membership and said that it won’t be able to enjoy frictionless trade outside its ranks.
A European Commission spokesman said the bloc welcomed the UK’s detailing of its position as a “positive step” and predicted it would allow the talks to progress. But he added that the EU would only turn to future relations once “we have made sufficient progress on the terms of the orderly withdrawal” and that any agreement “can only be finalised once the UK has become a third country.”
“We’ve got to have some sort of a transition arrangement for a year or two,” Brexit Secretary David Davis told BBC Television on Tuesday. The interim agreement “would be as close as we can to the current arrangements” while giving Britain the freedom to line up new trade deals, he said on BBC Radio 4.
While the bloc’s 27 other governments have said they are open to a post-Brexit implementation phase, they first want to resolve matters such as citizens’ rights and a financial settlements. That’s unlikely before October at the earliest. Divorce talks are set to resume in Brussels on Aug. 28 and the EU’s lead negotiator, Michel Barnier, has complained of a lack of progress in the first two rounds.
Davis would not be drawn on the cost to Britain of its proposed customs arrangements, and said the divorce bill’s amount was still under discussion. “We are putting up some proposals, we’re not saying here’s the price list to go with these proposals,” Davis told. “At this stage were not going to commit, there won’t be a number by October.”
Mujtaba Rahman, an analyst at the Eurasia Group, said much will depend on how much PM Theresa May’s government is willing to pay to leave the bloc. “A lot still hinges on money,” he said. “This will determine whether the UK can unlock discussions on the future, and these options, in October.”
The UK is showing more of its hand after a summer in which members of May’s cabinet forged a consensus around supporting a transitional period following Brexit, although differences remain over how long it should run. Tuesday’s blueprint will be seen as a victory for Chancellor of the Exchequer Philip Hammond, who has advocated as smooth a departure as possible from the EU.
The Brexit department said the interim period it imagines would enable both sides of the Channel to establish future customs arrangements to ease border crossings. The UK’s public-spending watchdog warned last month of a “horror show” if new systems were not in place by the time of Brexit.
Failure to maintain something akin to the status quo could prove costly for the British. The current arrangement saves UK exporters from paying tariffs on goods sold to the EU. Countries lacking a free-trade accord with it pay about 10 percent on shipments of cars alone.

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