(Bloomberg) -- U.K. Chancellor of the Exchequer Philip Hammond said quitting Europe's customs union would impose a “frictional cost” on exporters, signaling he is at odds with those government colleagues seeking an immediate withdrawal.
Being in the union allows the U.K. to trade freely with fellow members, yet prevents it from striking commercial deals of its own with outside countries. Trade chief Liam Fox is among those wanting to leave so he can line up the pacts the U.K. needs to prosper after Brexit. The Sun newspaper on Thursday cited a cabinet minister as saying either Hammond or Fox “will end up walking” out of government because they can't agree.
“The truth is that after 40 years in the European Union we've got an economy that's heavily integrated with economies of the European Union,” Hammond said in an interview with Bloomberg Television in New York. “There would be a frictional cost to not being involved in a customs union.”
Those costs would include more bureaucracy at borders with companies required to submit their shipments to security checks and to detail the origin of the products they're exporting. There is also a concern that the border between Northern Ireland and the Republic of Ireland would need to be strengthened.
Prior to June's referendum, the Treasury warned an hour of delay at customs would mean 5 percent less trade and estimated companies would have to fill in forms with more than 50 boxes. On the other hand, leaving would allow Fox to reach out to the likes of China and the U.S. to line up new relationships.
“We have to look at this in rational terms -- there are costs and there are benefits,” said Hammond, whose department is conducting a fresh study of the issue.
To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net, Scott Hamilton in London at shamilton8@bloomberg.net. To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net, Ben Sills
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