This paper considers the proposals that have been put forth by the UK in order to satisfy the simultaneous objectives to leave the EU Customs Union, but have a cooperative ‘customs arrangement’ following Brexit; and to leave the Single Market, but maintain trade that is ‘as frictionless as possible’ following Brexit. These proposals have to navigate the EU’s red lines, primarily the ones that preclude sectoral agreements (or ‘cherry-picking’), and that guarantee an invisible land border between Northern Ireland and Ireland.
It first sets out the functioning of customs and regulations while the UK is a Member State, in order to establish what the proposals for post-Brexit customs and regulatory arrangements would have to accomplish in order to be equivalent.
On customs, it explains the effects of membership of the EU Customs Union in Section 1.1, and then considers the two main alternative ‘customs arrangements’ the UK government has put forward: so-called ‘maximum facilitation’, or ‘Max Fac’ (in Section 1.2), and a Customs Partnership (in Section 1.3). It also considers an alternative customs arrangement not currently being considered by the government, but raised by various commentators as offering a potential solution to the Irish border situation in particular: a Customs Union with the EU, rather than membership of the EU Customs Union (in section 1.4). The progress to date on agreeing on customs arrangements that satisfy the aforementioned ‘red lines’ is summarised in Section 1.5.
On regulation, the paper first explains the functioning and the effect of the EU’s Single Market in Section 2.1, before considering what the UK has proposed as the primary alternative to Single Market membership in Section 2.2: mutual recognition with a focus on ‘outcome alignment’. The positions of both parties on the effects of leaving the Single Market and the viability of ‘outcome alignment’ as known to date are again summarised in Section 2.3.
At the time of writing, the EU has explicitly rejected ‘Max Fac’ and the current draft of the ‘Customs Partnership’ idea; its response to ‘outcome alignment’ has been less direct, but the proposal clashes with a number of ‘red lines’ that the EU has maintained throughout the negotiations, such as integrity of the Single Market and protecting the role of the Court of Justice of the EU (CJEU). The UK government is in the process of redeveloping its customs arrangements proposals, in the hopes of finding a compromise position on customs with the EU soon. Such a compromise position is needed for the conclusion of a Withdrawal Agreement: without agreed customs and regulatory arrangements, it will not be possible to meet the commitments made in the December Joint Report concluding phase 1 of the negotiations – particularly vis-à-vis avoiding a hard border between Northern Ireland and Ireland.
A link to the full report can be found here http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8309#fullreport