one day without us
An EU flag blows in the wind during a 'Flag Mob' demonstration in Parliament SquareGetty

It's odd how political concepts come into fashion and assume a totemic significance. Pro-EU activists and MPs have suddenly latched on to the EU customs union. Staying inside it, they proclaim, is "the only way to avoid a train crash". Forty-nine Labour MPs backed an amendment to the Queen's Speech last week calling for the UK to keep the Single Market and the customs union – as though they were pretty much the same thing.

I can't help wondering how many of the people taking this line had heard of the customs union before last year. Even now, they seem to have only the haziest sense of what it is. I am reminded of Daniel Defoe's observation at the beginning of the eighteenth century that there were "a hundred thousand plain country fellows in England who would spend their blood against Popery, that do not know whether it be a man or a horse".

It's worth taking a moment to explain how a customs union works, and what makes it different from a free trade area.

A free trade area is a zone within which tariffs and other trade barriers have been scrapped, allowing for the free movement of goods and, in some cases, also services and capital. It is the normal form of institutional commercial association among nations. NAFTA, for example, is a free trade area, comprising Canada, Mexico and the United States. ASEAN is another, bringing together ten Southeast Asian states. EFTA, which Britain founded in 1960, still contains four members: Iceland, Liechtenstein, Norway and Switzerland.

Customs unions are much rarer. They provide, not just for free trade among the participants, but also for a common external tariff applied against non-members. When you join a customs union, you agree to let it dictate your trade with third countries. Trade talks are conducted collectively on behalf of the bloc, and individual members cede to the central authorities their right to speak and vote and the World Trade Organisation.

Customs unions usually exist when one country administers the external affairs of another. Swaziland is in a customs union with South Africa, for example, and the Palestinian territories with Israel. Other than the EU, there are only two significant examples on the planet. One is Mercosur in South America, which was so heavily sponsored by the EU that it might fairly be called a child of Brussels. The other is Vladimir Putin's Eurasian Union, a more or less explicit attempt to create a political bloc around Russia, in which economic considerations are secondary.

Most economists prefer free trade areas because they are non-exclusive. But if your primary aim is political integration, then a customs union makes sense. Disagreement on this point was the main reason that Britain didn't join the EEC at the outset. Throughout the years of our membership, we have generally been the only state, or sometimes one of two, that sells more outside the EU than to it. The global, rather than continental, orientation of our economy means that we are uniquely penalised by the EU's Common External Tariff.

Leaving the customs union will mean that we can sign our own trade agreements with the world's major economies. Staying in, by contrast, would be the worst of all worlds. It would mean that the EU continued to control our trade policy without our having even our current, minority say over its formulation.

Brexit, as almost everyone in Brussels agrees, will tilt the balance in the EU toward protectionism. This is one of my few regrets: I wish our European allies well, and I don't believe that they will maximise their prosperity under the "Europe first" interventionism that Emmanuel Macron champions. But, while we want to have successful neighbours, the impact on us of the EU failing to sign trade deals with China or the United States is slight and collateral. The impact on us of a more protectionist EU preventing Britain from signing such deals would be significant and direct.

This much should be obvious. So what are the 49 Labour MPs and their press cheerleaders on about? When pushed, they tend to talk about friction at customs borders but, frankly, this is a concern one hears from Europhile lobbyists, not from actual exporters. Customs checks these days are done in advance and online. Switzerland, for obvious geographical reasons, is far more dependent on EU trade than we are: the EU takes 64 per cent of its exports as against 44 per cent of ours. The customs border between the Helvetic Confederation and the EU is so flimsy as to be barely noticeable; the real reason you notice the frontier is that, if you're not a Swiss resident, you are required to have a tax disc to use the roads in that beautiful mountain country.

In Britain, where goods generally leave and arrive by sea, the infrastructure of customs inspections is already in place at our ports, and the change will be minimal. The only real challenge is to find a way to conduct the checks at Ireland's ports rather than at the land border.

So, to repeat, why should we aim to stay in the customs union when Norway and Switzerland, which sell far more per capita to the EU than we do, prefer to remain outside and to enjoy the advantages of free trade with China, Japan, Indonesia and so on?

It's impossible to avoid the conclusion that some supporters of the idea simply want "a win". Their objective is not to optimise the outcome for Britain, but to wipe the grins off the faces of those dreadful, triumphalist Eurosceptics.

I have argued since the day of the vote itself that we need to find compromises that reflect the narrowness of the result. I am open to any reasonable proposals on phased implementation, on remaining in the EU's common initiatives on education, research, policing and the like, on paying our share, on negotiating reciprocal rights to work and study and, indeed, on replicating much of the content of the single market through domestic law, as the Swiss do.

All of these things could, at least in theory, work to our benefit. Certainly they would be a sign that the 48 per cent were not simply being swatted aside. Staying in the customs union, by contrast, can only harm us. Its proponents should know better.


Daniel Hannan has been Conservative MEP for the South East of England since 1999, and is Secretary-General of the Alliance of European Conservatives and Reformists. Follow : @danieljhannan