Brexit: Liam Fox warning of customs union 'sellout'

Any form of customs union with the EU after Brexit would be a "complete sellout" for the UK, International Trade Secretary Liam Fox has said.

The UK would find itself in a "worse position" than it is now, he said, if it left the existing arrangement but negotiated a similar new one.

Having to accept EU rules and limits on doing other deals would make the UK "less attractive", he said.

But his former top official has criticised the government's strategy.

Sir Martin Donnelly, who was permanent secretary in the Department for International Trade until last year, said any deals done after Brexit would not compensate for leaving the single market and the customs union.

Giving up access to the EU market and its existing trade agreements was "rather like rejecting a three course meal now in favour of the promise of a packet of crisps later", he said.

Sir Martin, who has previously warned about leaving the single market and has worked for the European Commission in the past, said that negotiating full access to the single market without accepting EU rules would require a "fairy godmother specialised in trade law".

Foreign Secretary Boris Johnson said he did "not agree for a moment" with Sir Martin's verdict, because the "real growth opportunities" were outside the EU.

Mr Johnson told BBC Radio 4's Today programme that a long-term customs union, as Labour has proposed, would lead to "colony status for the UK", which would not get a say in trade policy.

And Mr Fox hit back at Sir Martin as he took questions after his speech, saying it was "unsurprising that those who spend a lifetime working in the European Union see moving away from the European Union as being threatening".

He added: "The UK Brexit process is, as we've all discovered, a little more complex than a packet of Walkers."

The government has said it wants a customs agreement with the EU - which is the UK's single largest trading partner accounting for 43% of exports - but one that does not stop it from doing free trade deals with other countries.

Mr Fox, one of the most prominent Brexiteers in the cabinet, is the latest minister to set out his stall as part of the government's attempt to map out "the road to Brexit", which is due to happen in March 2019.

His speech came the day after Labour leader Jeremy Corbyn set out his approach to Brexit, saying he backed the UK being in a "new and comprehensive" customs union with the EU.

Mr Corbyn says a new customs union will help protect existing jobs and supply chains while giving the UK a say in future deals negotiated by the EU.

But Mr Fox rejected this, saying the UK would have to cede "considerable control" of its trade policy to Brussels in any customs union.

In his speech, at Bloomberg in London, Mr Fox said that changing economic and trade patterns meant the EU was a less significant partner than 15 years ago and the UK must have the freedom to exploit the "opportunities of the future", particularly in services and digital industries.

"As rule takers, without any say in how the rules were made, we would be in a worse position than we are today," he said. "It would be a complete sellout of Britain's national interests."

Citing Turkey's experience of being outside the EU but joined in a customs union with it, he said that if the UK found itself unable to set its own rules in key sectors of the economy, this would "remove the bulk of incentives" for other countries to enter into comprehensive free trade agreements.

"The inevitable price of trying to negotiate with one arm tied behind our back is that we would become less attractive to potential trade partners and forfeit many of the opportunities that would otherwise be available."

Flexibility, he said, must be the basis of the UK's trade policy if it is to support the fledgling industries that will provide much of the employment and income of the future.

"There is a growing awareness that a full-blown gold-plated free trade agreement may not be the only solution in a fast-changing global economy," he said.

There is a "global trade toolbox" of different options, including "multi-country alliances of the like-minded", he said.

"All of these options are available. But only to countries with independent trade policies."

Labour said it made more sense for the UK to be negotiating new trade deals alongside the EU, adding: "Liam Fox is divorced from reality and isolated from British businesses and workers."

But Conservative MP Nigel Evans told BBC 2's Daily Politics: "When you're doing trade deals between one country and another country, it's a lot easier than when you're doing it with somebody representing 28 countries."

Meanwhile former World Trade Organisation chief Pascal Lamy argued that whatever Brexit option was chosen "will necessitate a border" between Northern Ireland and the Republic.

"There will have to be a border", he told the Commons Brexit committee, because checks will have to be carried out on goods and people. He suggested a "Macau option" for Northern Ireland.

"You should think about giving to Northern Ireland the same autonomous trade capacity that China has given to Macau, which doesn't mean that Macau doesn't belong to China," he said.

The European Commission will publish the first draft of its proposed withdrawal treaty on Wednesday, which it wants both sides to agree to by the autumn to allow for an orderly departure.