UK Can't Be in Europe Customs Union After Brexit, Fox Says

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The U.K. must not enter into a new customs union with the European Union after it leaves the bloc, Trade Secretary Liam Fox said, setting a new red line for Theresa May’s negotiations with Brussels and her own party on Brexit.

Fox, a long-standing euroskeptic, told Bloomberg that the U.K. must not sign up to the EU’s common external tariff, which binds all EU member countries to the same rates. His comments follow a report in the Financial Times that said May’s officials are considering keeping Britain in a new customs union, and the external tariff arrangement.

“It is very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we’d be following behind that,” Fox said Friday in Shanghai. “One of the reasons we are leaving the European Union is to take control, and that’s not possible with a common external tariff.”

Fox’s comments represent a potentially explosive intervention in the U.K. political debate at a time when the Cabinet remains divided on the kind of relationship Britain should seek with the EU after it leaves. The country’s main business lobby wants the U.K. to remain in the customs union, and the opposition Labour Party is advocating a similar arrangement.

A spokesman for May said Fox was speaking for the government but also said the prime minister has an "open mind" going into negotiations.

The EU is keen for the Cabinet to reach a decision on how close it wants to remain to the bloc after the split, and chief EU negotiator Michel Barnier will be in London on Monday to see Brexit Secretary David Davis. A round of talks is scheduled for next week, and the EU is expecting an "update" from the U.K. on the future relationship on Feb. 9.

May is under pressure from euroskeptic lawmakers in her Conservative party who want her to sever ties with the EU single market and customs union. While still a member of the EU’s customs union, Britain isn’t free to strike independent trade deals with countries outside the bloc.

Gaining freedom over trade policy is a key prize for Brexit supporters such as Fox, Foreign Secretary Boris Johnson, and influential lawmaker Jacob Rees-Mogg, who has also made customs union membership a red line.

May is also facing calls at home to raise her game and show a bolder vision for government or quit. In the interview, Fox defended her character and leadership, saying May’s “middle name” is “resilience.”

Responding to a leaked analysis of the impact of Brexit on the economy, Fox said there would always be some people who refused to accept that British voters chose to leave the EU in a referendum in 2016.

“There will always be an element that will be not reconciled to the democratic wish of the British people,” Fox said, comparing the analysis to the pre-referendum warnings of remain campaigners. “We’ve been given an instruction. I think it’s now our duty to carry that out to the best of our ability.”

— With assistance by Tim Ross, and David Tweed

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