U.K. Mulling Turkey-Style Trade Pact After Brexit, Liam Fox Says

  • Trade Secretary Liam Fox: ‘We need to look at all the options’
  • Tories split on Brexit as Osborne warns over ‘protectionism’

The U.K. could try to stay in the European customs union after Brexit, International Trade Secretary Liam Fox said, in a further sign that the British government is considering keeping some formal ties with the bloc.

Britain could model its post-Brexit relationship on Turkey’s trade deal with Europe, with some parts of its economy inside the tariff-sharing customs union, and others outside it, Fox told the BBC’s Andrew Marr Show Sunday in London.

Liam Fox on Dec. 18.

Photographer: Jeff Overs/BBC

“We need to look at all the options,” Fox said on the weekly current affairs television show. “It’s not binary. I hear people talking about hard Brexit and soft Brexit as though it’s a boiled egg we’re talking about. It’s a little more complex.”

Fox’s openness to keeping some form of membership is significant because he is one of the government’s most committed Brexit supporters and has previously called for the U.K. to leave the trade agreement, which sets common tariffs for all members on trade with external countries. His comments mark a further softening in tone from senior British ministers on the kind of exit deal the U.K. is seeking.

Prime Minister Theresa May has said she wants the U.K. to be a global leader in a new era of free trade but it will not be able to sign trade deals with countries such as India or the U.S. unless it first leaves the customs union. Countries in the customs union impose no tariffs on each other and set a common duty on goods of non-members. Outside the customs union, the U.K. would face these same tariffs, unless it negotiated a separate agreement with the EU, with new checks on goods crossing the border. The customs union consists of the 28 member nations and several other countries, including Turkey.

May has argued that customs union membership is not “binary” while last week, Brexit Secretary David Davis disclosed he was interested in Turkey’s accord with the EU, which allows it to do “very limited free-trade agreements” with external countries.

Free Trader

In the BBC interview Sunday, Fox said Turkey “is in part of the customs union, but not other parts,” adding: “what we need to do before we make final decisions is to look at the costs.”

Fox hinted that he was pushing inside the cabinet for a cleaner break with the EU, which would mean the U.K. leaving the customs union to strike trade deals with the rest of the world. He said he remained “instinctively a free trader,” warning that “there would be limitations on what we could do in terms of tariff-setting, which would limit what kind of deals you would do” if the U.K. remains.

Fox said he’s open to a transition deal to “minimize disruption” to businesses but warned that voters who chose Brexit in June’s referendum expected control over migration to be a red line in the negotiations with Brussels. May plans to trigger the two-year exit process by the end of March.

‘Act of protectionism’

May is still weighing whether to seek a so-called hard Brexit, leaving the single market and the customs union, or to keep the closest possible trading ties with the EU, in what has been called a soft departure from the bloc. Her Conservative party remains divided over the kind of new relationship the U.K. should have with Europe.

Former Chancellor George Osborne said there should be no red lines in the Brexit talks, including on free movement of people from the EU. He warned against cutting tariff-free trade with Germany and France.

“You can’t say ‘we are a beacon of free trade in the world’ and then the main thing you achieve is a huge act of protectionism -- the biggest in British history,” he told the Andrew Marr show.

In Scotland, the devolved government run by the Scottish National Party is also fighting to keep the U.K. inside the single market. SNP lawmaker Alex Salmond said his party colleague Nicola Sturgeon, Scotland’s first minister, would set out her Brexit plan this week, including a threat of a new independence referendum for Scotland if it cannot stay inside the single market area.

“We want the U.K. to stay within the single marketplace,” Salmond told the Murnaghan show on Sky News on Sunday. “If that’s not possible, and the government rules that out, we want Scotland to stay within the single marketplace as part of a special deal and arrangement, and if that argument is dismissed, swept aside contemptuously by Westminster, the first minister of Scotland has made it clear that it’s very likely that there will be an independence referendum within the next two years.”

Before it's here, it's on the Bloomberg Terminal.