Believe it or not, the best Brexit deal still does involve leaving the customs union

There are two problems that would have to be solved. One is the Irish border and the other is migration

Remaining part of the customs union is an issue that has divided parliament (Reuters)

Anyone trying to navigate their way through the morass of the European negotiations should start with three troublesome matters. First, we are all over the place and don’t know what we want. Second, their negotiators are behaving like total s**ts. And third, it is hugely complicated and there is no time.

This does not come from me, though when I heard this a few weeks ago it rang very true. It comes from one of our civil servants – who shall remain anonymous – someone who I admire and whose judgement I would trust, and who is involved in the negotiations.

Let’s step back from our own current political ructions – others can cover that better than I – and focus on the economics.

The issue of disagreement has become very evident when it comes to the customs union issue.

So, from a purely economic point of view, should we be members? Well, the thing to be clear about here is that the two main European countries that are outside the EU, Switzerland and Norway, are not members of the customs union. They are members of the single market and trade successfully with the EU. Turkey, by contrast, is a member of the customs union but not a member of the single market.

What’s the better option for the UK? I can understand that opponents of Brexit and also some supporters of it would like to see a halfway house between full membership and total independence. But both options have advantages and disadvantages.

Being a member of the customs union means goods can pass freely between the countries. Europe would like that because it sells a lot of stuff to the UK, and big business would like it because their supply chains have become very complicated and it stops border-related hassles. It would make solving the Irish border issue much easier too.

But being a member would not cover services and the UK exports a fair amount of those to Europe, and it would mean that the UK could not do trade deals with other countries. It would have to accept the trade deals the EU negotiated.

Just being part of the customs union would, and this would be difficult for Europe, mean there would no longer be free movement of people. So in theory at least, EU citizens in the UK would not have similar rights to Britons living in the UK and vice versa. That would satisfy the UK’s efforts to curb immigration from Europe, one of the prime minister’s prime aims. So it solves some short-term problems, but as the balance of British exports are steadily shifting away from Europe, in strategic terms it is an unsatisfactory option.

I find this shift of exports really interesting. Back in the mid-2000s, some 55 per cent of our goods and services exports went to the rest of the EU. Now it is down to about 42 per cent, maybe less because some of our exports go through Rotterdam and are re-exported from there. This is not the result of any anti-EU policy. It is simply that the rest of the world has grown much faster than Europe. That will continue for demographic and other reasons. So the long game for the UK is to focus on non-EU markets, though of course it should be to preserve EU exports as much as possible.

Now what about the Norwegian/Swiss models? They are slightly different, because Norway is in an entity called the European Economic Area (EEA) and Switzerland is not. But the differences are small enough for me to bundle the two together here. They are also halfway houses. They offer much of what the UK and Europe have now but with two key differences from being a member of the EU. One is that the UK could import and export to the rest of the world under whatever terms it negotiated instead of having to follow the EU deals. The other is that while the UK would also be able to export its own non-farm goods tariff-free into the EU, it would have to demonstrate that these were really UK goods and not stuff imported from, say, the US or China. You can understand this. The EU would not want to have other countries use the UK as a backdoor to the European market.

If retaining membership of the EEA (technically we are members at the moment) sounds a vastly better halfway house than retaining membership of the customs union, there are two problems that would have to be solved. One is the Irish border and the other is migration.

In practice, the Norway/Sweden border and those borders between Switzerland and the rest of Europe are pretty porous, as anyone who crosses them knows. You just drive through. If you are driving into Switzerland, you have to have a sticker to show you have paid a road tax but that is it. There are border checks but they are minimal. With goodwill that same system could easily be set up both on the Irish border and at the Channel ports.

The other problem, having free movement of people, could surely also be tackled with goodwill. The UK would have to offer EU citizens the same rights as the British, but in practice that is pretty much on offer. If we wish to control immigration rather more effectively (and heaven knows we are not very competent at the moment) there are other ways of doing so.

So why are we not aiming to remain part of the EEA, which I believe is the obvious and sensible option? Let’s go back to the first point. We cannot agree on what we want.

A quick word about the other two points.

If the European negotiators wanted to help us, they could do so. It is in their long-term self-interest to have a prosperous and supportive neighbour, not a weakened and hostile one. But they are behaving, I understand, in a way to try to make matters as difficult as they can. The fact that the UK is divided on Brexit encourages them to be unnecessarily awkward, and they are seeking to gain tactical advantage rather than strategic aims.

And there is no time. What happens in the coming months, deal or no deal, will be an interim solution. On a long view, there should be a continental partnership, as sketched in great paper by the Bruegel institute in Brussels soon after the referendum, where Britain and Europe cooperate amicably. We are, alas, a long way from that right now.