Bilateral Customs Unions

27 Feb 2018

Taken from sangreal’s incredibly factual & insightful posts on the DigitalSpy forums


Just painfully listened to Liam Fox’s speech….

Lord help us if he’s going to be involved in any of our future trade negotiations.

The man is so clueless it’s unbelievable how someone like that can get to be in such a high position.

Just one lie after another, endless deception, disinformation, delusion…. absolutely unbelievable!

The EU has made it perfectly clear that we will not be able to rollover or grandfather ANY of our current trade deals.
They told us before the referendum on page 5 of this A50 Briefing (consequences section), and Cecilia Malmström (EU Trade Commissioner) confirmed it again in Dec 2017.

We are going to lose the FTAs with Canada, Japan, S Korea, Mexico, S Africa – and all the other ~90 or so countries we’ve already got trade deals with – plus all additional preferential agreements and hundreds of bilateral treaties.

How long will it take us to just get back to where we are now?

He was making out as if being in a bilateral customs union with the EU after Brexit would prevent us from trading globally, whereas it would be the exact opposite.

Not only would we lose all our current trade deals, plus the ones currently being negotiated between the EU and Aus, NZ, India, Mercosur (Brazil, Argentina, etc), ASEAN (Malaysia, Philippines, Indonesia, Singapore, etc), we’d also lose customs-free trade with our closest neighbouring countries and current largest trading partners.

He said we would be rule takers without having any say…. but then went on to say we want a deep and comprehensive FTA with the EU, where effectively we’d still need to abide by the exact same regulations, otherwise the EU won’t buy our goods.

He doesn’t even know the difference between Free Trade Agreements and Customs Unions, or even what Free Trade means.

The Free in FTA is just tariff-free, not customs-free, not non-tariff-barrier free, just tariff-free.
Our current trade deals already remove most of those tariffs!

Customs Union means customs-free, customs-duty-free, tariff-free, non-tariff-barrier free.
There cannot be frictionless trade in goods via a FTA, only via a customs union.
(services, esp. financial services & capital/passporting, etc. require a single market)

He also said being in a customs union restricts us.
I guess he isn’t aware that the EU is just one of many customs unions and single markets in the world.
Are all those other countries restricted too?
Mercosur, ASEAN, Caricom (15 x Caribbean), SAARC (India, Pakistan, Sri Lanka, Bangladesh & co), GCC (Arab Gulf states), Eurasian ES (Russia & co), and all the others (African, Central America, Andean, etc) in the list?

Turkey vs San Marino

Fox used the Turkey example to criticise and play down the crucial importance of (bilateral) customs unions.

He’s obviously already aware of Turkey’s situation but is deliberately being disingenuous in an attempt to further his agenda.

Turkey has only managed to close 1 out of 35 required chapters to join the EU since its BCU was first introduced back in 1995.

That is why its BCU only covers industrial goods, not raw materials, medicine, fish, agriculture, plants, livestock, food, or drink, because it doesn’t meet the criteria to have free movement of those types of goods.

San Marino however does meet all the required criteria, and therefore all those goods are covered
(except for coal & steel, for some odd reason).

We are starting from a point of full alignment/convergence, and therefore we should also be able to achieve a BCU which covers all goods.



EU Trade Deals

In place (fully in force) = 31

Partly in place (initially applied and being phased in) = 46

Pending (finalised, waiting to be implemented) = 4

Sub total: 81

Plus EU27 = 108

Being negotiated = 17
(18, but minus Trump’s USA)

Not included in those tabs:

Australia (talks resumed in 2017, hoping to be finalised before 2021)
NZ (partnership agreed, FTA talks begun in Mar 2017)
Eastern African Community (Burundi, Kenya, Rwanda, Tanzania, Uganda, S Sudan) – Economic Partnership Agreement (negotiations finalised as from 2014, but not yet in place. i.e. should be in the Pending tab)

Countries covered = 133

The trade deals are the EU’s trade deals.
Both the EU and each respective 3rd country would need to agree for us to be able to grandfather any of them.
Being in a bilateral customs union makes it possible. Not being in one makes it very unlikely, if not impossible.
The EU deals with the facts. Our current government peddles lies and deceit.

The EU clearly states the type of trade deals on offer.


There are three main types of agreements:

  • Customs Unions
    eliminate customs duties in bilateral trade
    establish a joint customs tariff for foreign importers.
  • Association Agreements, Stabilisation Agreements, (Deep and Comprehensive) Free Trade Agreements and Economic Partnership Agreements
    remove or reduce customs tariffs in bilateral trade.
  • Partnership and Cooperation Agreements
    provide a general framework for bilateral economic relations
    leave customs tariffs as they are

None of them allow for free movement of services, capital & a banking passport.
The EU clearly points out those can only be achieved via EEA-Single Market membership
and the only way for a non-EU country to gain EEA membership is to be in the EFTA and sign the EEA Agreement



Q: Is it possible to become a party to the EEA Agreement without being a member of the EU or EFTA?

A: Article 126 of the Agreement on the EEA makes it clear that the EEA Agreement only applies to the territories of the EU, in addition to Iceland, Liechtenstein and Norway. Under the present wording of the EEA Agreement, it is therefore impossible to be a party to the EEA Agreement without being a member of either the EU or EFTA.

Third-country equivalence in EU Banking legislation


To date, there is no precedent of passporting rights without full membership of the EU or acceptance
of all relevant EU rules and regulations (EEA model). The EU passport as such is not available to
financial institutions established in “third-countries” (i.e. a country not being part of the EU or the EEA).

Theresa May’s speech – 02 March 2018

Also taken from Sangreal’s posts on the digitalspy forums


The German(?) reporter who asked one of the questions at the end perfectly highlighted the glaring inconsistencies in May’s proposals….

wtteo: You are leaving the Single Market and Customs Union and want your own trade policy (i.e. with own tariff system and separate trade deals). Isn’t it time you were honest with the British people and told them there will be a hard customs border between EU and UK, and NI and ROI?

May also lied about bilateral customs unions.
San Marino, Andorra and Turkey can trade with whoever they like.

San Marino sells goods to plenty of non-EU countries: Brazil, USA, Russia, Belarus, Saudis, Turkey, Mexico, Algeria, S Africa, India and many more.

The issue she’s trying to capitalize on and thus being highly duplicitous over (just like Fox was in his speech) is Turkey‘s situation where it’s only closed 1 of 35 chapters required to be in the EU and therefore doesn’t qualify for free movement of any goods other than industrial goods (i.e. not raw materials, medicines, agriculture, fish, food, drink, etc) – which means there’s still customs checks/duties, and they can’t partake in the same trade deals as the EU, also making it difficult for external trade deals to be struck.

Whereas UK is starting from a point of convergence, and would just need to guarantee continuity (which is easier said than done with the Tory hardliners in control).

She also failed to point out that (as an EU/EUCU member) we already have trade deals with dozens of other countries around the world, either fully in force, being phased-in, or still being negotiated, which already remove bilateral tariffs – Canada, S Korea, Mexico, Japan, S Africa, Singapore, Colombia, Chile, Mercosur, Israel, Norway, Switzerland, Caricom, half of Africa, and many more – and we are going to lose them all.

May at least acknowledged that the entire deal on services will be different and more limited and we wouldn’t be able to keep our banking passport, so she is actually capable of telling the truth sometimes…. though she failed to mention that the only offer on the table (for all non-EEA countries) is per-sector equivalence rights.

LostFool wrote: »
Associate membership of the EMA and others? That’s new. And welcome.

Except no non-EEA countries have got that, and the EFTA-EEA countries pay for access.

Associate membership is the Ukraine model, aka: the Deep and Comprehensive FTA term she keeps parroting, which involves closer economic & political ties and ECJ jurisdiction, though Ukraine doesn’t have access to agencies, only EEA countries do…. i.e. she’s still cherry-picking the best bits from all the various models, and rejecting any of what she deems to be the bad bits (FoM, ECJ, fees, etc)…. i.e. just as delusional as she was at the very start.

Re: Continued participation in EU science, education and cultural programmes

That’s another thing the EFTA-EEA countries pay for:

At this rate, what with also needing to spend on new customs infrastructure, hmrc/border staff & trade negotiators (due to no longer being in any customs union), we’ll end up spending more than we currently do with the EU fee.

As for the fish…. yes, well done, you got some territory back… only problem being that you’re no longer in a customs union with your closest and largest trading partners any more, which means there will be customs checks, and EU importers/customers will need to pay customs duties, import tax, customs clearance fees & VAT (regardless of whether tariffs are removed or not via a FTA) if they still want to buy your fish.

There would be a joint EU-UK council/court via a bilateral customs union (or a joint EU-EFTA one via EFTA-EEA), but afaik, the EU currently just uses WTO for FTAs and all other trade dispute resolution.

Re: regulatory standards…
As others have pointed out, no serious organisation in the world would just trust people to keep their word (particularly ones who’re already known to be highly economical with the truth) without actually signing up to specific official rules and regulations, the same as everyone else.

There’s no “associate members” of EMA, or any other EU agencies, other than EFTA/EEA countries being actual members of a select few of the EU agencies.

ESMA: Members = EU countries; Observers = EFTA-EEA countries

EASA (Aviation): Members = EU + EFTA countries

EMA has partnerships and international agreements, but not associate members.

Likewise, the EFSA (Food Safety) has co-operation agreements with other such international agencies, but no associate members.

It’s pretty much the same for all of them – members = EU, with some also having EFTA/EEA countries, and partnerships/co-operation with other international agencies where relevant.

Like EU countries, the EFTA/EEA countries also pay fees, and are subject to FoM & ECJ.

Europol is kind of an exception.
Europol members = EU countries only, it doesn’t have associate members, but it does have Operational and Strategic Partner Agreements with many other countries, none of which have the same full access as EU countries.

It’s yet more utter delusion from May.

Fantasy elements of May’s fantasy speech:

1. No recognition of NI-ROI border becoming an external customs union border

2. No recognition that not being in a customs union means there will need to be customs checks, customs duties and all the rest between EU and UK.

3. Saying UK will be making its own trade deals, with its own independent trade policy, and then expecting there still to be frictionless trade between UK and a separate Customs Union

4. Saying there will be divergence in some sectors/areas, then expecting there still to be frictionless trade (the “as possible” part is one of the biggest understatements ever)

5. Expecting benefits of the Single Market without accepting the accompanying relevant rules

6. Expecting associate membership of EU agencies when no such type of membership even exists

7. Saying we will take back control of our borders by not having one with the only physical border we share with the EU

8. Saying we will take back control of our money, whilst expecting to be part of agencies, programmes and other SM elements for which EU & EFTA/EEA countries pay substantial fees.

9. Saying we will take back control of our laws, but wanting to have SM benefits which require ECJ jurisdiction

10. Saying technology exists which doesn’t, and claiming it would solve the Irish border problem, which it can’t

11. Lying about Turkey’s relationship with the EU and the reasons why its bilateral customs union is so poor, erroneously claiming/using it as a reason for why a bilateral customs union after Brexit between EU<=>UK would not solve the Irish border problem

12. Lying about trade deals – i.e. we’ve already got trade deals via the EU with over 100 countries, either in force (Switz, Norway, Mexico, S Korea, Chile, Israel, etc), initially applied (Canada, S Africa, 15 Caribbean Commonwealth countries, half of Africa, most of Central/Latin America, etc), finalised but not yet implemented (Japan, Singapore), or still being negotiated (incl. Aus, NZ, India, Malaysia and other Commonwealth countries, Brazil, etc), all of which already/will remove bilateral tariffs.

13. Lying about us being able to keep/copy them, when the truth is that we’re going to lose them all, along with almost 1000 bilateral treaties with the rest of the world which help to simplify customs/trade.

She was at least honest about us not being able to keep our banking passport…. but at the same time, she didn’t mention anything about sectors/companies needing to apply for equivalence rights, asap.

Frictionless Borders

Anyone claiming there can be frictionless borders outside a customs union is mistaken.

Customs Unions (particularly when it’s an internal CU within a Single Market, as in the EU’s case) guarantee countries remain regulatorily converged for trade in goods.

As soon as UK makes any different trade deals with different countries and different terms, we will no longer be aligned – so even if we say we will keep our own goods aligned (i.e. goods made/grown in UK), which can’t be guaranteed anyway, there will need to be customs checks to prevent non-regulatory goods getting into the European Single Market.

The NI-ROI border becomes an external customs union border and therefore customs checks will be required.

One of the main purposes of CUs is customs checks are only required at one external border, then goods can move freely internally between all member countries. The others are that members use the exact same customs regime, external tariff system, documentation, and trade deals.

First and foremostly, scanning technology will be required, like it already is at the Channel Tunnel – cameras for checking number plates etc, scanning for illegal people or goods (arms, drugs, etc), and a way to scan a customs declaration (something which doesn’t yet exist at the channel tunnel, but does at all relevant rail stations, ports, airports, etc) – all of which means infrastructure needs to be in place – i.e. a hard border.

Customs duties will need to be collected (import tax, excise, clearance fees, any possible tariffs if they’re not all removed via a FTA, VAT), certain additional certification or licenses will be required (which aren’t currently, due to us being in a CU-SM). This process is usually done either during purchase, or importers are invoiced after – but there needs to be a processing method.

If the physical checks (for larger consignments) aren’t carried out at the actual border, then they will need to be diverted to customs offices (ports, rail, airport, etc) for unloading and reloading.

IDS suggested using TIR sealed lorries or containers for said larger consignments, but they still need to be unsealed by customs – and the system itself would cost billions (i.e. if all consignments needed to use TIR) and it would add even more extra costs for importers.

The ONLY way to achieve no customs border between NI<=>ROI and no customs duties (customs excise, import tax, handling & clearance fees, tariff & quotas, previously unrequired additional licensing & cert costs, VAT) between UK<=>EU is for the UK to be in a bilateral customs union with the EU after Brexit.

Even then it’s still not guaranteed, due to said BCU needing to cover ALL goods (i.e. a Turkey-style BCU which only covered industrial goods but not agriculture, raw materials, fish, food & drink, etc) would be disastrous – but unlike Turkey, we are already aligned, so Turkey cannot be used as a comparison. We would need a better than Andorra and San-Marino type BCU, which included additional preferential agreements to as good as simulate/emulate the same single market for goods we already partake in (note: “goods”, not “services”) – i.e. being in a BCU is not the same as being in a Single Market with an interal customs union – and we’d also need a UK government which is both committed and trustworthy (i.e. unlike the current one).

Bilateral customs unions with the EU do not involve fees, FoM, ECJ jurisdiction, Common Agricultural Policy, Commmon Fisheries Policy – i.e. we would still be able to take back control of our money, borders, laws, and fisheries – just not our own tariff system or trade deals – hence why “no independent trade policy” is the only red line under the Turkey flag on the EU’s official “options on the table” graphic.


Switzerland is in Schengen, EFTA, and the European Single Market, but there’s still customs checks required.

Sweden is in EU, EUCU, ESM, Schengen; Norway is in EFTA-EEA, ESM, Schengen, but there’s still customs checks required.

Ireland is in EU, EUCU, ESM.

UK/NI won’t be in any of the above.

NI-ROI border will become an external customs union border, meaning customs checks will be required, because that’s how customs unions work.


May needs to do a first, and for once be honest with the British people by telling businesses the consequences of leaving the EU-CU-SM – that there will be customs checks & customs duties for trade in goods, and that financial services sectors/companies will need to apply for equivalence rights asap.

UK exporters to EU don’t know the half of what’s about to hit them due to the UK government’s decision to no longer be in any customs union:
Sanitary & Phytosanitary Requirements
EU Import Procedures
EU Customs Clearance
Buying goods online from a non-EU country


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