Exploring the Possibility of a Pan-European Customs Area Post-Brexit

Europe’s recently appointed trade official, tasked with managing post-Brexit negotiations, has proposed the idea of a "pan-European customs area" to help redefine the relationship between the UK and the EU following Brexit. This concept raises questions about its practicality and what such an area would entail.

Currently, there is an example of a pan-European customs area known as the Pan-Euro-Mediterranean Convention (PEM), which boasts membership from various EU and non-EU nations, including countries aspiring to join the EU, like those in the Balkans, as well as nations like Georgia, Moldova, and Ukraine. It also includes several north African and Middle Eastern countries that share a Mediterranean coastline, such as Turkey, Israel, and Egypt. The PEM framework allows its members to source materials from each other for manufacturing without incurring tariffs.

In contrast, the UK's post-Brexit trade arrangement with the EU stipulates that UK goods must incorporate a specified percentage of domestic or EU-sourced materials to avoid tariffs when entering the EU. If the UK were to join the PEM, it could import components from countries like Turkey without facing these tariffs, which would benefit UK manufacturers by simplifying rules and reducing costs. Additionally, this membership could help address ongoing issues regarding inconsistent checks on goods crossing the UK-EU border and offer potential solutions for complexities involving Northern Ireland.

The idea was put forth by Maros Sefcovic, the EU's vice-president and chief trade negotiator, at the recent World Economic Forum in Davos. Sefcovic, a seasoned diplomat from Slovakia with a history of success in senior EU roles, is viewed as a key player in navigating post-Brexit challenges. While the UK government has not made plans to join the PEM outright, some discussions have been initiated regarding the potential benefits of such an arrangement.

A significant advantage of joining the PEM compared to negotiating a customs agreement directly with the EU is that a customs agreement would effectively mean rejoining the single market, which involves accepting free movement of workers—a condition the current Labour government, like past Conservative administrations, has deemed unacceptable. Meanwhile, joining the PEM would not impose any such obligations, making it a potentially more palatable option.

While adopting the PEM framework may not radically change UK-EU interactions, it could alleviate tensions that have marked the relationship since the Brexit vote. Nonetheless, the UK government has shown reluctance to embrace closer ties, having previously rejected a proposal allowing young people to live and work in each other’s countries. Although membership in the PEM may avoid free movement concerns, it does not guarantee a strengthening of relations with the EU.