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BrexitCentral: The CBI is wrong yet again – this time on a Customs Union with the EU

Date: 21 01 2018

The CBI is wrong yet again – this time on a Customs Union with the EU

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The Confederation of British Industry (CBI) has just decided to muddy the waters again with a proposed EU-UK Customs Union just before sensitive Phase 2 negotiations begin.

The purpose of the CBI is – in their words – “to help create and sustain the conditions in which businesses in the UK can compete and prosper for the benefit of all”.

One would have thought then that the CBI would be hammering on the Government’s door on behalf of its claimed 170,000 members and 7 million employees, to demand it cut EU red tape through regulatory divergence and deliver UK free trade agreements right around the world – particularly to open up the largest world markets such as the USA, China and India, where the EU has conspicuously failed to deliver any trade deals.

India with its 1.2 billion population and 7% annual growth has 150% tariffs on luxury goods such as Jaguar cars (ironic given that Tata is Indian-owned) and Scottish whisky. Cutting such tariffs would be transformative for our economy, but the EU deal I monitor has stalled after nine years negotiating.

Liam Fox and the Department for International Trade are already fully engaged in preparing the ground for a world of trade deals, and there is much enthusiasm globally to do deals with the world’s sixth largest, non-protectionist and newly-liberated economy: Britain’s.

If talking economic ‘evidence’ and ‘hard choices’, the evidence is that trade with the EU accounts for just 12% of our economy and 44% of exports – and this is predicted to drop to 35% with the Rest of World going from 56% now to 65% in the future. Our trade surpluses are with the USA and most of the Commonwealth, not the EU.

But, incredibly, no: in rather a panic at what are outrageous EU negotiating positions (even President Macron admits a bespoke deal is possible), the CBI is unhelpfully demanding we have no trade deals of our own, but stay trapped in a form of an EU-UK Customs Union.

The CBI backed nationalisation under the post-war Labour Government, backed price and incomes policies and lost the battle on joining the Euro, staying in the EU and staying in the Single Market. Now the CBI’s final redoubt is to get it wrong on staying in the Customs Union.

This voice of British industry is sacrificing Britain’s global future for the diminishing markets of the past. Even the EU forecasts 90% of global growth will come from outside the EU in the next 15 years. Why is the CBI so intent on holding onto today’s deeply unsatisfactory EU relationship, one which results in a goods trade deficit with the EU of £75 billion a year – a disaster for British industry if great for Germany and the EU? No wonder major UK exporters like JCB and Dyson are so relaxed about leaving the EU.

The Customs Union may seem cosy and familiar, but in reality it is a malign protectionist fortress that hurts the poor inside and poor exporters outside the most: with 60% EU tariffs on Chinese and Vietnamese shoes, 45% on New Zealand lamb, 20% on bananas, 68% on chicken breasts, 100% on granulated sugar, 17% on sportskit, 12% on dresses, up to a whacking 375% tariff on sugar beet. They also drive up inflation.

To continue such protectionism due to services is folly. Yes, services dominate the UK and EU economies at 70% to 80%, but free trade agreements offer little on services for a reason: barriers are regulatory not customs tariffs – the need for a licence to sell insurance or for a presence in the EU for passporting for a bank. The EU’s own Single Market for Services hardly exists now – it is the least developed sector of the Single Market. So what are we seeking to keep? We will be better off negotiating enhanced access in an EU deal than within as an EU member.

What is far more sensible option is a SuperCanada or CETA+++ trade deal which builds on the 99% access to the EU Single Market Canada enjoys with no fees and no free movement and sovereignty over regulation, but which does far more on services. This has not been ruled out at all as the CBI fears: I spoke about it positively only last week to the former head of German industry, the BDI, their  equivalent of the CBI.

This is not a time for British business to lose its nerve, to cave in and desperately seek to hold onto the past. It is time to embrace the wonderful opportunities this free and re-emerging trading nation can enjoy out of the EU.

We didn’t need permission from the EU to create the Industrial Revolution or to establish the world’s largest trading block. We don’t need it now.

January 21st, 2018: BrexitCentral