Nouse Explains: Customs Union and Single Market


Peter Jacobs unpacks the difference between the single market and the customs union.

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By Peter Jacobs

The Customs Union and the Single Market are two of the major terms associated with the debate surrounding the United Kingdom's exit from the European Union. The terms are easily conflated, but are certainly not interchangeable. It is important to know what these two concepts mean as they are critical in understanding the choices the UK faces as we come close to a deal with the EU, or not. So, what is the difference between these two pillars at the heart of the European Project?

Both are tools of European integrated design used to further the goal of an "ever closer union" between the nation states of Europe. The European Union began as a free trade area; when Britain first joined it was called the European Economic Community (EEC). Free trade areas allow the free-flow of goods between the states inside the area. All tarrifs for goods coming from inside the area are removed.

This is where the Customs Union comes in. The UK has been part of the Customs Union since it joined the project. It is the agreement between states to apply the same penalties to goods coming from outside of the European Union. This is called the "common external tarrif ", which increases the prices for goods from outside the bloc, encouraging a preference for goods from inside of the European Union.

Countries within the Customs Union apply the tarrifs on behalf of the bloc once. Turkey is a member of the Customs Union but not a member of the Single Market. Norway, on the other hand, is a member of the Single Market but not the Customs Union.

Following in the footsteps of Norway and staying in the Single Market but not the Customs Union has been styled as the "Norway option". The Customs Union removes tarrif barriers for goods between countries inside the bloc and applies penalties to goods from outside the bloc, whereas the Single Market removes non-tarrif barriers and allows the free movement of goods, but also capital services and labour.

These are collectively known as the "four freedoms" of the European Union. The removal of non-tarrif barriers includes integrating professional standards and the harmonisation of regulations. All members of the Single Market must follow the same standards decided by the European Union. These are enforced by the European Court of Justice (ECJ). Failure to comply with regulations can result in nation states facing prosecution. It is these regulations that are often bemoaned by opponents of Britain's membership of the European Union. The "four freedoms" are, however, where the immigration debate has arisen.

The free movement of people means that all citizens of member states of the Single Market are able to live and work in any of the other member states as a right of European Union citizenship. Supporters praise this as a liberating force, allowing people to prosper all over Europe. Others decry the loss of national sovereignty and border control, also criticising the strict controls on those from outside the Single Market which have followed in the UK as a result. Remaining in the Single Market would allow British citizens to retain the "four freedoms" but would leave Britain as a rule-taker of EU regulations, with no say in the legislative process which creates them.