What is the pan-Europe customs area that the EU is open to the UK joining?

Posted by Admin January 23, 2025 World

Šefčovič, who is responsible for post-Brexit relations for the EU, told the BBC that allowing the UK to join the Pan-Euro-Mediterranean convention (PEM) was “something we could consider”.

What is PEM?

Launched in 2012, the Pan-Euro-Mediterranean convention aims to make it easier for 25 countries, mostly in Europe and north Africa to trade with each other through common rules.

Signatories include the EU, Norway, Switzerland, Turkey, six western Balkan countries, Ukraine, Morocco, Syria and Palestine. The UK is one of a handful of European countries not signed up.

How does it work?

When countries sign free-trade agreements, they agree to reduce or lift tariffs on each others’ goods. Products, whether cars or chocolate bars, that benefit from reduced or zero tariffs must be made with a certain percentage of local materials to count as domestic goods. PEM expands the definition of “domestic”.

If, for example a Swiss manufacturer made a machine from EU-sourced parts, the item would be considered as “made in Switzerland” when exported to Turkey, benefiting from preferential trade agreements.

Would it help UK businesses?

Yes, but trade experts put different weight on PEM’s importance. The Centre for Inclusive Trade Policy has concluded that it would not be “a gamechanger” for UK exports to the EU. In research published in 2024, the trade thinktank said the share of ingredients in UK-made products sourced in PEM countries mostly ranges from 1.1% to 2.8%.

David Henig, a former UK trade official, now at the European Centre for International Political Economy thinktank, said PEM would make a difference to any manufacturing sector with broad supply chains, such as cars, chemicals and the food industry. “It allows you basically not to worry about sourcing bits and pieces from around Europe, combining them and sending them around the region,” he said. “There’s really very little downside to it.”

Not right now, it appears. Asked about the proposal on BBC Radio 4’s Today programme, the housing minister Matthew Pennycook said: “As for this particular arrangement, no, we’re not seeking to participate in it at the present time.”

The business secretary, Jonathan Reynolds, appeared open to possible membership of PEM, noting that it was “obviously not a customs union”, which the UK has said it will not rejoin. “It’s a wider, set of arrangements that do help in some sectors,” he added.

What does this tell us about the wider EU-UK relationship?

Šefčovič’s suggestion comes as Brussels and London seek to improve economic and diplomatic ties, with the first post-Brexit summit pencilled in for the first half of 2025.

Nearly five years since Brexit, the return of Donald Trump to the White House has raised the stakes for the EU-UK relationship, highlighting for both sides the importance of alliances with like-minded allies. But the details of the reset are tricky, especially for a government that seems anxious to avoid accusations – however farfetched – of trying to reverse Brexit.

The UK has ruled out seeking membership of a customs union or EU single market, which limits deeper economic ties that could boost the British economy. Meanwhile, the EU is disappointed in the government’s flat refusal to consider a youth mobility scheme. In this context seeking to join PEM is low-hanging fruit.