After backbench Brexiteers accused Remain-backing Chancellor Philip Hammond of trying to take control of Britain’s future relationship with the EU and keep the UK as closely aligned as possible with the EU, a No 10 source said: “It is not our policy to be in the customs union.”
In a customs union Britain would retain tariff-free trade within the EU but would be unable to strike its own deals with other countries.
Many Brexiteers remain adamant Britain must leave the customs union in order to reap the trade benefits of quitting the bloc, with superpowers including the United States, China and South Korea among the countries thought to be keen to strike trade deals with the UK.
Speaking to the BBC’s Andrew Marr yesterday, Home Secretary Amber Rudd suggested “a form of customs agreement” would be needed to maintain the “frictionless trade” between Britain and the EU.
The news comes as the EU’s chief Brexit negotiator Michel Barnier warned Britain to respect the EU’s red lines as he prepared to travel to London for talks with his British counterpart David Davis and Theresa May.
He said both the EU and the UK have not a minute to lose in Brexit talks as he revealed he has a busy week ahead before Brexit talks resume.
Mr Barnier said: “There’s so much work so for this reason we have decided to accelerate all the useful contacts.
“I will be in London today, tomorrow in Strasburg to get the European Parliament. I will be in Frankfurt on Wednesday to meet Draghi and the European Central Bank.
“I will be meeting national governments, trade unions and business communities.
“We want a deal respecting the guidance of the European Council, respecting the rules of the single market and the euro.”
The EU’s chief Brexit negotiator is due for talks in London later today ahead of a week of negotiations set to focus on Britain’s future relationship with the EU.
What is a customs union?
A customs union goes one step further than a free trade area with members agreeing to apply the same tariffs to goods entering the union from external countries.
Once goods are inside the union, they can move across borders tariff-free. For example, if an American good enters France (part of the EU customs union) if can travel onwards to Italy or Germany without having to pay additional taxes.
Downing Street has ruled out staying in the EU customs union but has backed the prospect of staying in a customs union – that is, a similar arrangement but with the ability to strike trade deals with other countries.
Turkey is part of a customs union with the EU but not in the single market. The deal does not cover food or agriculture, services or government procurement.
Liam Fox has suggested that Britain might remain a part of the EU customs union as part of the transitional period.
Alternatively the UK could follow Norway’s lead. Norway is part of the single market but not the customs union, meaning it sets its own tariffs on external goods, while Norwegian products are imported freely into the EU.