Open Europe suggests the UK should leave the EU customs union altogether to ensure it is free to strike the best global trade deals

Open Europe, the leading Eurosceptic thinktank, has urged the prime minister to leave the European customs union entirely, arguing that a half-in, half-out option would be the worst of all worlds for the UK.

In one of the most detailed reports yet on the implications of leaving the customs union, Open Europe pointed out that Theresa May had suggested in January she is open to Britain being an “associate member” of the grouping or remaining a signatory to elements of it.

Open Europe believes no half-in option is better than being fully out and said a comprehensive free trade agreement with the EU that maintains the benefits of a customs union is perfectly achievable in talks with Brussels.

Remain supporters and some European diplomats based in the UK are increasingly exasperated at the way in which they believe the government, by saying so little about its key negotiating objectives, is handing the intellectual momentum to advocates of a hard Brexit and making it increasingly difficult for a compromise to be reached that does not damage business.

Open Europe has been one of the most influential thinktanks in the Conservative debate on Europe, with key staff often being seconded to Downing Street. Its recently appointed director, Henry Newman, previously worked for the former trade minister Lord Maude.

Its report said if the UK remains in the customs union it would not be able to sign its own trade deals or alter its own tariffs at the WTO. It also rejected a plan floated in Whitehall for the UK to levy “parallel tariffs” identical to the customs union’s common external tariff.

The report said: “The core trade-off is integration versus control. The more integrated the UK remains with the EU, the less control it will have over its trade policy. The best solution is for the UK to leave EUCU [the customs union] and conclude a comprehensive UK-EU FTA [free trade agreement] with full customs cooperation. This is in line with the direction of global trade negotiations, which now focus largely on non-tariff barriers – including customs.”

It also said a two-year transitional deal might be required in order to negotiate the details of such a free trade deal, adding that the key will be to minimise rules of origin burdens in the manner of the Canada-EU FTA.

It suggested that the free trade agreement could be achieved by two principal means. First the UK and EU could agree to waive origin requirements on all products below a threshold determined by the cost of transporting goods between them. At the same time the UK and EU should conclude a mutual recognition agreement (MRA) on product standards and conformity assessments, similar to one already negotiated by the EU with Switzerland, Japan and Canada.

In addition it argued that the UK already runs one of the most efficient customs bureaucracies in the world and adding electronic customs declaration and greater investment in new customs technology will minimise delays at borders.

It denied UK companies with complex supply chains will find it difficult to trade without a customs union. It pointed out: “For example, automotive supply chains cross the US-Canada border. Both countries are North American Free Trade Agreement (NAFTA) members, but are not in a customs union. Nonetheless, leaving EUCU will challenge companies with complex supply chains.”

The report also insisted a special deal could be secured for Ireland that does not require the restoration of a hard border between north and south. It said the UK and Ireland “should use technology to pre-clear almost all goods so trucks can cross without needing to stop. Inspections – when exceptionally required – should take place at dedicated zones away from the border, with UK checks recognised by Ireland and vice versa. This would remove the need for checkpoints or the presence of customs officials at the border.

Open Europe policy analyst Aarti Shankar said: “We have looked at the evidence and at international examples, and conclude that leaving the EU’s customs union is the right decision for the UK. If the UK remained in the customs union after Brexit, it would not be able to meet the government’s ambition of conducting an independent trade policy and achieving a truly ‘Global Britain’.

“There is a trade-off between minimising disruption to UK-EU trade and ensuring the UK is able to shape its own trade policy post-Brexit. Any model that keeps the UK ‘half in’ the EU’s customs union would constrain its ability to strike trade deals across the world.”