Richard North, 02/11/2020  

One of the bizarre twists in the Brexit debate preceding the fall of Mrs May was the number of parties who saw their salvation in negotiating a new customs union with the EU, or even remaining in the EU's customs union as it then stood.

The latter was an option pursued by Carolyn Fairbairn, Director-General of the CBI on 22 January 2018 when she gave a speech at the University of Warwick entitled, "A business plan for a good Brexit".

Looking for a solution that was "neither Norwegian nor Canadian", she decided to make the "business case" for a customs union with the EU, offering "a single set of tariffs for goods imported from outside the EU, enabling tariff free trade within it".

This option, she said, "brings no obligations over freedom of movement, or payment and removes some of the heaviest trade barriers", adding that it would also "go a long way towards solving the border problem in Ireland".

“Remaining a member of a customs union for as long as it serves us to do so", she concluded, "is consistent with the result of the referendum, and would be good for EU firms too".

The fatuity of this stance barely needs spelling out. Apart from the slight problem that a customs union would not facilitate the "frictionless trade" which industry so wanted (for which the Single Market was developed), there was another minor problem.

This is evident in the simple fact that the Customs Union lies at the core of the EU's treaty base. Not in a million years would the EU have allowed a non-EU member membership of this core function. Therefore, the UK would have to negotiate a new customs union, along the lines of the relationship with Turkey.

Given the lengthy queues at the borders between Turkey and EU Member States, however, it is hard to see what advantage a customs union would bring to most of industry. Even to suggest it, therefore, does rather suggest a basic lack of understanding of how trade works between the UK and the rest of the EU.

But this didn't deter Carolyn Fairbairn. Despite heading the UK's premier industry representative body, she went ahead anyway with not even a blush, to parade her own ignorance.

This rather stupid woman was at it again in June of this year, declaring that the CBI would not support further delays to Brexit.

Having previously voiced support for a longer transition period, she said that the UK now had to "leave the EU economically" having left politically. Business wanted to get on with leaving the EU even if it risked exiting without a trade deal at the end of this year. 'Business does not have any interest in delaying that because that is uncertainty magnified", she added.

And now, she's back again, telling the Observer that business needs more from a "thin" Brexit deal, and that her "really big disappointment" was the lack of help for British services in the potential deal.

Stepping back a minute, this is the woman who, in 2018 was pushing for the impossible – continued membership of the EU's Customs Union. And, of course, this didn't (and doesn't) cover services. So, having advocated a deal which didn't take in services, her "really big disappointment" is that the current deal doesn't cover services. Some people are so hard to please.

Now she is about to hand over to her successor, she is looking back on "a tumultuous five years in the job", ruminating that it had "been a mistake, and a lost opportunity for our country" that businesses had not had greater involvement in the shape of the deal to come.

Making up for lost time, though, it seems the CBI is to mount a new "business-led" campaign to widen a "thin" Brexit deal – assuming that we do get a deal – which is planned to start immediately in the new year.

Fairbairn says that securing a basic deal with the EU should be seen as a "starting point" for a deeper relationship, warning of a serious effect on Britain's large services sector, including financial and legal services, as well as engineering.

Such a deal, she says, would be a "significant improvement" on a no-deal outcome, while the removal of tariffs would be "existential" for the car industry. However, given the lack of help for British services in the potential deal, she adds that the CBI would immediately fight to broaden the agreement.

"Any deal we get now is likely to be focused on goods, and it should be treated as a starting point for a more comprehensive deal in the future", she states "At the CBI, we would be doing two things. First of all, we would be looking to help businesses make the most of where we are, to look for the opportunities and to manage that transition".

The second thing she says the CBI will be doing is to work with the government supporting the negotiations around building further chapters. The CBI would like a services chapter and, says Fairbairn, "We'll need more on aviation. We'll need more on haulage [and] data will be crucial. We hope that there will be a data agreement, but there will be more to do on the back of that".

This, for the CBI is "the challenge of the next one to two years" and although it will be on that case "pretty well immediately", it needs "that base case of a foundation deal first".

Although the EU, as late as last year was ruling out any prospect of negotiating "mini-deals" in the event of failure to reach an overarching trade agreement, more recently Barnier and Frost seem to have agreed that they will discuss "mini-deals" on key areas - including road transport and aviation - if no-deal Brexit starts looking likely.

At this stage, however, this only seems to be a provisional plan. Most likely, to pursue this course, Barnier would need a new mandate from the European Council, and that can't necessarily be taken for granted. The EU could just as easily make provision for unilateral contingency plans, giving them freedom to act without having to deal directly with the UK.

Nevertheless, business groups are said to have been raising "serious concerns" about the extent of new barriers to trade that will be erected even in the event of a deal. Therein, once again is the perpetration of that basic error of assuming that the barriers are "new", rather than pre-existing – coming into effect after the UK leaves the Single Market.

Generally, it is being assumed that there will be a no-tariff deal but, while tariffs will be removed, bureaucracy will increase and both government and industry will have to confront issues at the border. A business taskforce to manage the transition has been created between government and industry in an attempt to smooth the Brexit process in the new year.

However, Fairbairn worries that cash reserves and stockpiling have been run down as a result of the Covid-19 epidemic, while many businesses have been assuming the Brexit transition period would simply be extended.

"There is some wishful thinking", says Fairbairn – not overtly including herself in that observation. But she thinks the "single thing" that would be getting businesses preparing best is a deal. "Disruption of some sort is likely", she concedes.

Perhaps the second-best thing for industry is the fact that Fairbairn is shortly to hand over to a successor. Industry certainly needs someone at the helm of the CBI with a better grasp of the issues – and even in this day and age, miracles have been known to happen.

Also published on Turbulent Times.

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