BRUSSELS (; The British parliament will on Monday hold a second round of indicative votes on various Brexit alternatives, and the customs union could emerge as a preferred solution for lawmakers who have rejected Prime Minister Theresa May’s deal.
A customs union would allow an easier flow of goods, but would not itself guarantee frictionless trade and would limit, but not prevent, Britain’s capacity to strike its own free trade deals.
The European Union is itself a customs union and is also part of three other customs unions with Andorra, San Marino and Turkey.
In the case of Turkey, the arrangement does not include agricultural or coal and steel products. Other goods can circulate without paying customs duties and the whole zone applies the same import duties for products from third countries – such as the 10 percent rate for imported cars.
Unlike a free trade deal, a customs union removes the need for complex rules to determine whether a good is really from a given partner – such as a machine with multiple imported components. Such “rules of origin” can prove costly and time-consuming for exporters.
Being a member of a customs union limits, but does not prevent the separate participants from striking their own free trade agreements with other countries.
Turkey, the junior partner in the customs union with the EU, does face a challenge. The EU’s recent free trade deal with Japan opens Turkey up to inbound Japanese cars without providing reciprocal access for Turkish products to Japan’s market.
The junior customs union partner, which Britain would likely be, can find itself playing catch-up with a reduced bargaining position, given their own market is already open.
Turkey did for example begin a free trade deal covering goods with South Korea in 2013, two years after an EU-South Korea accord came into effect. It remains in exploratory talks with Canada, whose deal with the EU began in 2017.
However, Turkey is free is in those areas not covered by the customs union. So, following their agreement on goods, Turkey and South Korea also struck in 2015 a bilateral deal covering services and investment.
Depending on the nature of an EU-Britain customs union, Britain would still be able to negotiate with others trade access covering its large financial services market, investment, public procurement, data flows and possibly agricultural quotas.
