UK studies tech answer to customs chores

Posted on September 13, 2016

Cranes and shipping containers stand on the dockside at the Port of Felixstowe Ltd., a subsidiary of CK Hutchison Holdings Ltd., in Felixstowe, U.K., on Tuesday, Feb. 2, 2016. A vote to leave the EU could force the Bank of England to keep interest rates at a record low for an "extended period of time" or even lower them to shore up the economy as Britain ends its 43-year membership in a 500 million-person bloc that buys almost half its exports. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

Philip Hammond has ordered the Treasury to study whether new technology can facilitate goods inspections if Britain leaves the EU’s customs union.

Ministers are deadlocked over whether Britain should leave the customs union, which allows UK exporters to sell into the European single market without having to fill in forms or face customs checks.

    Treasury officials say they have been set “an exam question” for the autumn to work out whether digitisation of trade information can cut the administrative burden on exporters and ease bureaucracy at the border.

    Theresa May’s Brexit cabinet committee met last week to discuss trade and the customs union issue but broke up without agreement.

    Liam Fox, international trade secretary, and Boris Johnson, foreign secretary, are pushing for a clean break from the customs union, arguing that Britain cannot otherwise pursue an independent trade policy.

    But the Treasury is sceptical. It warned before the Brexit referendum that every one hour of customs delay leads to 5 per cent less trade and that all goods imported into the EU would have to be declared on a form with 50 boxes and 78 pages of guidance.

    It also cited research in which the Organisation for Economic Co-operation and Development says that “crossing the border, documentation and other delays can increase the transaction costs of trade by up to 24 per cent of the traded goods”.

    Leaving the customs union could also restore a “hard border” in Ireland, with the EU requiring checks to stop Britain becoming a backdoor into the single market, with its common external tariff.

    The EU has been working on new technology to cut the administrative burden on exporters from third countries selling into Europe, and Whitehall is looking at the integrated auto industry that spans the US-Canada border near Detroit.

    The Treasury is particularly interested in whether digitisation can simplify EU “rules of origin” that require exporters to obtain certificates showing the domestic content of goods — an issue that could arise under a free trade deal with the EU.

    The chancellor, who met exporters this week including Honda, the Scotch Whisky Association and GlaxoSmithKline, is said by aides to be open-minded on the customs union issue.

    Nick Clegg, former deputy prime minister and once an EU trade negotiator, said at a Westminster press lunch that Dr Fox would be “out of a job” if Britain stayed in the customs union, because the UK’s trade policy would be set by Brussels.

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    “I’m prepared to bet a fair amount of money he will resign in a huff in the next 18 months,” Mr Clegg said. Dr Fox would still have little to do even if Britain quit the customs union because he could not begin serious trade talks with third countries until after Brexit was complete.

    Downing Street this week rejected the suggestion that Dr Fox would be redundant if Britain stayed in the customs union, arguing his department could continue the work of David Cameron’s government in pursuing “other trading opportunities”.

    Mrs May’s spokeswoman said: “I would not take the establishment of a department as defining what the terms of our relationship with the EU is going to be.”

    The working assumption in government is that Britain will leave the customs union, rather than let Brussels continue to strike trade deals with third countries and set external tariffs on its behalf.

    But Japan and Barack Obama, the US president, are among those putting pressure on Mrs May to retain maximum access to the single market, ensuring their companies continued access European markets with minimum fuss.

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