UK to leave EU customs union after Brexit - government

21 June 2017 13:59 Source:ICIS News

Queen

LONDON (ICIS)--The UK will exit the EU’s customs union once it leaves the 28-country block in 2019, its government said on Wednesday.  

The EU’s customs union includes the 28 member states together with Turkey and the small states of Andorra, located between France and Spain, and San Marino, in the Italian peninsula. It allows tariff- and red tape-free trade among its members.

However, being a member of the EU customs union does not allow its countries to sign trade deals with outside nations.

Supporters of the UK’s exit from the EU made that a central argument during the membership referendum campaign in 2016 – the UK would need independent trade policies in order to capture commerce opportunities in emerging countries around the world.

In the traditionally pompous occasion of the Parliament’s opening after a general election, the UK’s head of state, Queen Elizabeth II, delivered the government’s programme for the next parliamentary term.

“My government will seek to maintain a deep and special partnership with European allies and to forge new trading relationships across the globe,” said the Queen.

“New bills on trade and customs will help to implement an independent trade policy, and support will be given to help British businesses export to markets around the world.”

The government explained in a separate release that the aim is to have a “standalone UK customs regime on exit” from the EU, which would give the country “flexibility to accommodate” future trade agreements.

Following the Conservative party's victory in the UK general election, its leader Theresa May was called by the head of state to form a cabinet, albeit a minority one after the polls delivered what in the UK is known as a ‘hung parliament’, with no party reaching an overall majority.

May’s cabinet said it will bring forward a ‘Repeal Bill’ which would replace EU legislation although would change it very little.

“This [Repeal] Bill will allow for a smooth and orderly transition as the UK leaves the EU, ensuring that, wherever practical, the same rules and laws apply after exit and therefore maximising certainty for individuals and businesses,” it said.

“[It will] replicate the common UK frameworks created by EU law in UK law, and maintain the scope of devolved decision-making powers [regions] immediately after exit.

“This will be a transitional arrangement to provide certainty after exit and allow intensive discussion and consultation with the devolved administrations on where lasting common frameworks are needed.”

The UK’s chemical industry is unlikely to be happy with the government’s approach towards the UK’s exit from the EU (Brexit).

The country’s trade group, the Chemical Industries Association (CIA), has repeatedly said access to the EU’s single market (excludes out-of-the-EU countries) and customs union is crucial for its members, which send 60% of its exports to the rest of the EU and receive from there 75% of imports.

The CIA reiterated on Wednesday those demands for access to the single market.

“Our fundamental position hasn’t changed in calling for tariff free access to the single market (plus the regulatory continuity and access to appropriate skills),” said CIA’s CEO Steve Elliott.

“That’s not us saying it must be membership of the single market or customs union, but it is us saying we want to play a part (as does all the business community) in determining what the post Brexit formal relationship with the EU 27 is. We obviously don’t know what that will be yet.”

The government did not disclose details about its short-term negotiating strategy with the EU after talks started in Brussels on 19 June.

Although the Queen’s Speech mentioned the government’s intention to support a strong industrial strategy, details on how it could be achieved were scarce, apart from a few mentions to three specific industries, all of them chemical-intensive: electric automobiles, space and high speed trains.

The government renewed its commitment to the Paris Accord to reduce greenhouse gases (GHG) emissions.

The US, one of the largest polluters in the world, withdrew from the Accord earlier this month, with US President Donald Trump arguing it negatively affected US corporates and consumers.

The EU chemical industry, through the voice of chemical trade group Cefic, also said it was “standing by” the Accord, after its director general Marco Mensink had said in an interview with ICIS in 2016 that climate change offered an opportunity for the industry for revival as a creator of key, greener industrial components.

Traditionally, planned state visits by heads of government and state are also announced in the Queen’s Speech. This year, however, a previously planned visit by Trump later this year was completely omitted.

Instead, the Queen said: “Prince Philip [her husband] and I look forward to welcoming Their Majesties King Felipe and Queen Letizia of Spain on a State Visit in July.

“My government will host the Commonwealth [former UK colonies organisation] Summit in April of next year to cement its relevance to this, and future generations.”

The UK's pound sterling, which has suffered a great deal of volatility since the general election, was slightly higher after the speech. Against the dollar, sterling was trading at £1:$1.27 by 13:30 London time, up from Tuesday's close by one penny.

Against the euro, sterling was also trading slightly higher at £1:€1.14, up by one euro cent compared to Tuesday's rate.

The main UK stock exchanges were losing ground compared to the latest close, with the global companies-focused FTSE 100 down by 0.54% by 13:30 London time, while the domestic corporates-focused FTSE 250 was trading 0.47% lower than on Tuesday close.

Pictured: Queen Elizabeth II delivers the government's legislative agenda in the House of Lords, London, on 21 June
Source: REX/Shutterstock

By Jonathan Lopez