Brexit means Brexit, as we all know. The UK (currently) intends to leave both the single market and the customs union after the end of a transitional period which will run from April 2019 until December 2020, At that point, it hopes to have secured frictionless trade with the EU (which of course it enjoys now), a customs arrangement which provides (near) frictionless trade between the UK and the EU (which, of course, it enjoys now) and be signing free trade deals with anybody that wants one around the world.
The UK’s biggest single trading partner is the EU and this will continue to be the case after Brexit, however, the trade will become harder to conduct and could risk just in time supply chains and huge tailbacks at ports and airports. The position that May’s government has consistently taken is that no deal is better than a bad deal, but this has never withstood any serious examination. Without an agreement, there is no transitional deal and the UK hurtles over the cliff edge at the end of March next year – few would pretend that the UK is ready for such an eventuality. A no deal scenario would see the UK trading with the EU and the rest of the world on WTO rules, yet it has no WTO tariff schedule of its own and it is not certain that it can simply copy and past the EU’s schedule under which the UK trades with non-EU countries that do not have specific trade agreements with the EU. WTO rules would require that the UK enforces a border with the EU and collects duties and inspects goods at the border. This, of course, breaches the Good Friday Agreement which has been responsible for peace in Northern Ireland for 20 years.
Nobody serious wishes to see a hard border in Northern Ireland, but the easy fix that the province remains in the customs union has been rejected by the DUP and the UK government although, perversely, it remains the de facto backstop for EU-UK trade in the absence of a specific solution. The Irish Government has made it clear that it will veto a transitional deal if a hard border is imposed between it and Northern Ireland. Both sides have also ruled out additional hardware at the border which would make the so-called Max-Fac solution even more difficult to implement.
The cabinet is in near open war over their preferred solution to the Brexit impasse, with the PM and remain-minded ministers supporting a new customs partnership whereby the UK would collect and refund duties on behalf of the EU. Brexiters in cabinet are vehemently opposed to this with the Foreign Secretary calling the plan “crazy”. The Brexit preferred solution, Max-Fax, is regarded as being impractical within the available time and existing technology. Both plans have been discounted by the EU. Stories are circulating and being rapidly denied, that the UK wants to extend the transitional period and that it would want to continue to be bound by the customs union arrangements during any such extension. These are known as mixed messages! The EU position seems to be that whilst permanent alignment with EU regulations and the external tariff would be welcome, a short term fudge would not. Tick-tock.
One of the 15 amendments that the Lords attached to the EU withdrawal bill calls for the government to explain what it is doing to remain in the (or a) customs union with the EU. It is thought likely that another amendment to the trade and customs bills which requires the UK to stay in the (or a) customs union may get enough support in the commons to force the government to do so. This, should it happen, would infuriate hard core Brexit supporting MPs in government and on the back benches with some claiming that it would undermine the entire raison d’etre for Brexit (who knew there was one?). With May at the head of a minority government, she is prone to a commons defeat if the DUP do not support her position or if a relatively small number of her own party’s MPs rebel. Brexit will live or die on the customs decisions, but the UK does not fully control the process, of course.