May proposes new customs plan to divided government

LONDON (Reuters) - Prime Minister Theresa May will propose on Friday a new plan to ease trade and offer Britain more freedom to set tariffs after Brexit, a last-ditch attempt to unite her divided government on plans to leave the European Union.

Her Downing Street office said May will unveil the plan - the “facilitated customs arrangement” - to her team of ministers at her country residence Chequers, trying to secure an agreement to push on with all-but-stalled Brexit talks.

May is under increasing pressure from EU officials, companies and some lawmakers to move forward with negotiations to leave the EU, a departure that will mark Britain’s biggest trading and foreign policy shift in almost half a century.

The new plan will see Britain closely mirror EU rules, use technology to determine where goods will end up and therefore which tariffs should be applied, and hand Britain the freedom to set its own tariffs on goods.

Aides suggest it “offers the best of both worlds”.

But Friday’s crunch meeting will not be plain sailing.

Her Brexit minister, David Davis, has sent a letter to May to describe the plan as “unworkable”, a source close to him said, and supporters of Britain leaving the EU fear being kept in the EU’s customs sphere - something they see as a betrayal.

Business minister Greg Clark said he was confident ministers would reach an agreement on future customs plans, with the government focused on supporting jobs.

But even if there is an agreement at home, May will then have to get the support of the EU, which poured cold water on her earlier suggestions for customs arrangements. May met German Chancellor Angela Merkel in Berlin on Thursday to restate her wish to negotiate a deep trade and security partnership after Brexit, her spokesman said.

Merkel again said it was the European Commission, rather than member states, which was leading the Brexit negotiations, possibly dampening May’s hope of winning support from Germany before the so-called Chequers away day.

With the clock ticking towards a March departure date and passions running high, May needs to thrash out a deal or risk Britain crashing out of the bloc with no deal - something that businesses say could cost the country tens of thousands of jobs.

May was forced to ditch her preferred option for a customs partnership, which would have seen Britain collecting tariffs on goods entering the country on the EU’s behalf, under pressure from Brexit campaigners in her government.

They had backed a streamlined customs arrangement now known as “max fac”, which would see traders on an approved list or “trusted traders” to cross borders freely with the aid of automated technology.

The facilitated customs arrangement is seen by her aides as a way to use the best bits of both options. For Brexit supporters wanting a clean break from the EU, it seems to be a re-branding of her preferred option that would essentially keep Britain in a customs union with the bloc.

The plan suggests there will be a type of customs union for goods, something that should please manufacturers. But based on the detail offered so far, there is little on how Britain’s large services sector will trade with the EU.

Several ministers suggested they would read over the plan later on Thursday, ready for a meeting which is expected to run late into the evening. Health minister Jeremy Hunt called for ministers to “get behind our prime minister.”

But just hours before ministers began the journey to Chequers, a 16th-century manor house 40 miles (60 km) northwest of London, businesses issued warnings of what impact their decisions could have.

Britain’s biggest carmaker Jaguar Land Rover said a chaotic Brexit would cost it 1.2 billion pounds ($1.59 billion) a year, curtailing operations in the United Kingdom, while the retail industry said a no deal might see “food rotting at ports”.

Britain’s biggest union Unite also made its demands, calling on the government to drop its “red lines” on leaving the EU’s customs union.

“Drop your red lines and secure a decent deal, one that is to the benefit of the working people of this country,” general secretary Len McCluskey said in a statement.

Additional reporting by William James and James Davey in London, Davis Milliken in Newcastle; Editing by Janet Lawrence and Toby Chopra

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