Head of the CBI speaks at Warwick in favour of a customs union with the EU

This Monday saw head of the UK’s Confederation of British Industry (CBI) speak at University of Warwick concerning why the UK should remain in a customs union with the EU to ensure “a good Brexit for Britain”.

Whilst Theresa May has already made clear that we will be leaving the single market and the customs union after EU exit day, the CBI are still heavily promoting the idea of a customs union.

The CBI’s proposals have been criticised by Richard Tice, Co-Chair of campaign group Leave Means Leave.

“Remaining in a customs union will handcuff all of British businesses to bureaucratic EU red tape even though approximately 90% do not trade with the EU. This is one of the major benefits of leaving.”

Carolyn Fairbairn, head of the UK business group, began her speech on Monday by emphasising the “lack of clarity” surrounding ongoing talks about the future of UK-EU trade, and what will replace the customs union.

Fairbairn suggested that “two years of uncertainty is taking its toll” on the world and UK economy, with the forecast for world’s economy to grow at 3.7% this year, whilst the UK growth is predicted to be just 1.5%.

According to Fairbairn, this means “we have slipped from the top of the G7 league table in 2015 to near the bottom in 2018.”

Despite the initial welcoming of Brexit, Fairbairn suggested that “January has brought a cold dose of reality”, with the UK still awaiting transitions and trade talks that make a state of agreement “seem a world away”

In answer to this lack of progression, the head of the CBI promoted a strategy of greater clarity and flexibility, above all avoiding a “no-deal” situation in which “great economic self-harm” and “uncertainty for 4 million citizens” are almost guaranteed.

Stuart Croft also shared this desire for rapid clarity in an interview with The Guardian in November of last year, suggesting that the notion of no deal being struck upon exiting the EU is “utterly bizarre”.

The Vice-Chancellor had in fact been expecting some level of clarity concerning residency rights in particular to be asserted in December last year.

Fairbairn continued by discouraging an agreement similar to the Canadian or Norwegian model.

Whilst Canada’s location and the fact that they only trade less than 10% of their goods with the EU mean that they can lower trade barriers, approximately half of the UK’s imports and exports are traded within the EU. “And when the EU is our largest trading partner” Fairbairn emphasised, “we can’t afford higher barriers to trade.”

In addition, “for the UK, the Norwegian model’s lower level of control [would be] a political problem” as the UK will more likely be obligated to permit the four freedoms, including freedom of movement.

Thus, the head of the CBI emphasised instead finding “a solution to the shared challenge of barrier-free single market access – in both directions – after Brexit.”

And, contrary to misconception, “UK firms are certainly not clamouring for deregulation.”

“Our aerospace, automotive and chemical sectors, for instance, have highly integrated European supply chains. Each business in that supply chain benefits from consistent regulation, and most will want to maintain it.”

After highlighting the necessity to remain clear and flexible throughout the deal, Fairbairn’s final proposal centred on the UK’s need for a customs union.

This idea involves “a single set of tariffs for goods imported from outside the EU enabling tariff free trade within it”, removing trade barriers and avoiding compliance with notions of freedom of movement

Whilst Fairbairn stressed the necessity of the customs union in solving the issue of Northern Ireland trade too, she underlined that “on its own it’s not enough”.

“The other vital part is a deep relationship with the single market. But it is an important step along the way – for peace, as well as prosperity”.

The head of the CBI’s final note was one of urgency: “By March next year, our country will be out of the EU.”

“Forty years of economic and regulatory integration will end. And thus, decisions must be taken fast.”