Are we leaving the customs union or not?

The government’s new proposals can appear confusing, some might say deliberately so. Britain will be leaving the customs union of the EU after the article 50 negotiating phase expires in March 2019. But this is because participation is only available to EU member states and Britain will not be a member after this point. It will however be seeking to negotiate new membership of a customs union with the EU’s customs union, clinging to the side of existing trade arrangements in an interim phase described as “continued close association”. In most respects, it will look the same. The UK hopes to be a bit more explicit than now in its trade talks with other countries, but won’t be able to implement new deals because it will be sharing the EU’s existing common external tariffs.

Is that it? How does that “bring back control”?

Not so quick. This is only the interim stage, designed to give trade negotiators an unspecified period after March 2019 to negotiate a new and lasting deal on customs arrangements and a wider free trade agreement. The government describes this as “time limited”, but is reserving the right to determine what that means in future. In practice, it could prove a lot like the unspecified standstill period demanded by the CBI in July, but without formally adopting the language of the existing customs union and single market, perhaps to give politicians something to cling on to at the Conservative party conference.

What happens after the can is kicked down the road?

Here, even the government admits it does not know what will happen. Officials were keen to stress that Tuesday’s policy paper is not the same as the formal “position papers” they have been publishing before the Brexit negotiating rounds in Brussels. This is intended more as something for everyone to chew on as they ponder how the ambitions of the divorce stage, such as open borders with Northern Ireland, can be reconciled with still distant discussions about future post-Brexit arrangements. The paper imagines these will fall into two broad camps: a “highly streamlined customs arrangement” that looks to soften the blow of border controls with technology, and a “new customs partnership with the EU” that seeks clever ways of avoiding a border entirely.

Association, arrangement, partnership? What’s the difference?

The “new customs partnership” is the more ambitious of the two, but comes with significant compromises. It envisages the UK copying, or “mirroring”, EU tariffs for imported goods ultimately bound for other member states. A smartphone flown into Heathrow could be put on a truck and sent to Paris without passing through another physical customs barrier because any EU duty would be charged in the UK. Importers would either have to submit to electronic tracking to show that UK-only goods were not sneaking off to the continent, or else would just be charged the higher tariff rate upfront and then claim a rebate if it ends up in a British shop. The unspecified corollary of this is that UK-produced goods would also get to escape EU import tariffs because we would strike a far-reaching free trade deal at the same time. If everything heading for the continent or Ireland is tin effect duty free, we don’t need physical customs checks – or so the logic goes.

That sounds difficult. Is there an alternative?

Officials concede that their plan has never been tried before and is highly ambitious. It depends on substantial goodwill among the EU27, who will have to have the same faith in HM Customs and Excise and the honesty of British business as the UK government seems to be ready to extend. If it cannot be agreed, the UK proposes trying to mitigate existing customs controls with the “highly streamlined arrangement”. This also relies on companies agreeing to report exports in advance, or perhaps once a month for big shippers, so border controls can be reduced to number plate recognition cameras and similar mechanisms. Officials point out that much enforcement from non-EU countries already takes place far from the borders, but this system could also require them to be checking on EU consumer standards as well. They may be able to persuade Dublin to accept such a scheme in the interests of Northern Irish peace, but it is hard to imagine France, for example, taking everything on trust. The EU’s chief Brexit negotiator, Michel Barnier, is understood to have advised the French government to invest in new customs infrastructure at its Atlantic ports. How “streamlined” it proves is anybody’s guess.

Will Liam Fox have anything to do?

In the interim phase, Britain will face many of the same obstacles to striking new trade deals with non-EU countries as it does now. Officials hope Fox may have some more leeway to negotiate, but they are adamant that implementing new tariff arrangements is incompatible with abiding by the common EU tariff during the interim association. Once Britain moves to arrangement or partnership, things become a little easier, although maintaining key aspects of EU law could still prove a hindrance to new bilateral deals. The biggest worry, however, is time. Nigel Farage was quick to criticise the government on Tuesday for showing “weakness” and “delay”. If an interim phase lasts three years, which many experts regard as a minimum, Fox may not be able to sign and implement any new deals until March 2022. This would be well into Donald Trump’s second term (if he gets one) and approaching the point when any US president is seen as a lame duck by lawmakers in Congress, who have to ratify trade deals. Britain may be at the front of the queue in Trump’s eyes, but the UK won’t be ready to do anything beyond talking about a deal until he is nearly gone.