Rejoining the Customs Union Would be a Mistake

Do these two things instead

There has been a lot of talk about the UK joining a customs union with the EU. This has been the idea floated by Wes Streeting as well as the Liberal Democrats in order to increase ties and trade between the UK and the EU while avoiding the UK actually rejoining the EU. Such a move would be a mistake for five reasons.

First, there is no such thing as a customs union, only the Customs Union. Who knows, the EU might create something bespoke for the UK but this is highly unlikely for the same reason it was reluctant to give the country any special treatment while it was in the EU and why the Brexit negotiations were so acrimonious and took so long. So it would be the Customs Union and not a customs union.

Second, there is no guarantee that the EU would let the UK rejoin even if we wanted to. There is still a lot of bitterness and mistrust over Brexit and so from the EU’s side they would likely be thinking that it could go through the process, only for the UK to leave again a few years later, especially with the prospect of some form of Reform government being formed in the next few years.

Third, even if the EU decided it would be comfortable with the UK (re)joining the CU it would still be a colossal waste of time. I wrote back in July 2024 on why rejoining the EU would be a waste of time, and most of the arguments in that piece are applicable here. It would take up so much of the government’s bandwidth as it would have implications for almost every Whitehall department. Getting it through Parliament would be a nightmare (assuming Labour is still in power and probably propped up by the Liberal Democrats and maybe even the Greens) as it would be bitterly opposed by the Tories and Reform and perhaps even the Greens.

This is time and resources which should be spent on how to fix the UK economy. Of course trade is a big part of this (and we’ll come onto this later) but the country is in dire need of structural reforms. We need to liberalise the planning system so that more homes, offices, labs, and transport and energy infrastructure can be built. We need to look at repairing the public finances by eliminating the deficit, reducing the National Debt, and slashing public spending – including through moves such as eliminating farming subsidies, raising the State Pension age to 70, and scrapping the Triple Lock. We also need to look at reforming the tax system in a way which makes it simpler and actually rewards hard work and investment. A lot of this is highly controversial and so the government should not be wasting its political capital on fighting the Brexit battles once again.

Fourth, it would mean that all our post-Brexit trade deals would likely become null and void. I appreciate that they were not everyone’s cup of tea for various reasons but we did manage to achieve brand new comprehensive FTAs with Australia and New Zealand, enhanced deals with Canada and Japan, as well as joining CPTPP. This was all while negotiating Brexit as well as the many rollover deals which ensured that British firms could still trade and operate in other countries on the same terms as they had before. Since then the new government deserves credit for finalising the FTA negotiations with India as well as getting a bespoke deal with the US.

We would essentially be throwing all of this away. Not only would this mean that we miss out on the benefits of increased trade which these deals provide us with, it will also be incredibly damaging for Britain’s reputation. Australia and New Zealand were incredibly hurt when the UK joined the EEC which meant that their farmers no longer benefitted from favourable trade terms (although it did mean that they made the necessary reforms to massively increase agricultural productivity). They would likely be offended if we rescinded our deals with them – as would India, Canada, Japan, and definitely the US. Trump can get away with tearing up trade deals with friends and allies because he is President of the wealthiest and most powerful nation in the history of the world, the UK does not have that luxury.

Fifth, signing up for the Customs Union ignores the reality of the world we’re currently living in. The turmoil caused by Trump 2.0 shows the importance of being able to act in an agile way. The UK does have far less bargaining power than the EU as we are much smaller. However, although we are no longer a great white shark, we are certainly not a minnow. As discussed above, we were able to negotiate deals with Australia and New Zealand, enhance deals with other nations based on our own interests, and get an incredibly comprehensive deal with the EU. The UK was then able to act quickly in response to Trump by getting a bespoke deal with the US while also benefitting from India’s need for a trade deal. This is the new world order and so in these uncertain times it would be incredibly reckless of the government to jettison the country’s independent trade policy and tie Britain’s fate to that of the EU.

So, what should be done?

Mercosur has been in the news again. This is because after over 25 years of negotiations, a trade deal between the EU and South American trade bloc will finally be ratified. It will almost certainly be opposed by the French, Polish, and Irish in the European Parliament and there may be more concessions made to placate the farmers in those countries but it will likely be ratified and come into force.

In many ways this supports my argument against rejoining the Customs Union – it should not take more than a quarter of a century to agree a trade deal. It also means that the UK government should make striking a deal with Mercosur a priority. I wrote an article for CapX back in December 2024 on why this makes sense. The arguments still hold up in that it will give UK consumers greater choice and access to less expensive goods (especially in food). It will also give British businesses access to hundreds of millions of consumers while ensuring that firms can also obtain the components they need to make their own products. The fact that Venezuela will also be readmitted if it transitions to a democracy makes this prospect even more attractive. Who knows, if the French continue to drag their feet Britain could still get a deal negotiated and signed off before the EU.

The UK should also encourage the EU to join CPTPP. This would have the benefit of boosting trade with the EU by moving towards a mutual recognition of standards rather than the UK going down the path of dynamic alignment or rejoining the CU. The EU’s accession to CPTPP would also significantly increase the bloc’s power and influence in trade terms and allow it to counter the malign influence of China, an increasingly unreliable and erratic America, and stand up for the rules based trading system.

Nobody quite knows what is going to happen over the next few years, especially when it comes to trade. However, as I wrote back in December 2024, it looks as though the MFN principle is dead (at least for now). As such, it would be imprudent of the UK to bind itself by throwing its lot in with the EU and rejoining the Customs Union. Instead it should focus on implementing structural reforms to its own economy while seeking to strike new trade deals with other nations and increasing the power and influence of CPTPP. It should also start exploring all options for reinvigorating the rules based system for international trade, including ones which do not include the US and China.

Thanks as ever for reading. I might write something else tomorrow but we shall see. I hope that 2026 is a great year for you.

Ben