Britain’s future tariff arrangements with the European Union will be set out in a UK government position paper aimed at creating a temporary trading partnership with the bloc.
The government will spell out its aims for new customs arrangements in documents released by Brexit Secretary David Davis.
The EU insists that it will not discuss customs arrangements until there is agreement on several key issues including the amount Britain will pay to exit and the future status of the border in Northern Ireland.
Downing Street says there must be a clear idea about the shape of the future relationship in order to establish the detail of how it will come about.
The prime minister’s official spokesman said: “We had the first rounds of the negotiation and those talks have shown that many of the withdrawal questions can only be settled in light of the future partnership, so now is the time to set out our approach to that partnership to inform the upcoming negotiations and to provide citizens and businesses at home and across Europe with a deeper understanding of our thinking.”
As a sign of a growing consensus in Cabinet the chancellor, Philip Hammond, who is regarded as a “soft Brexit” supporter, has agreed with Liam Fox the international trade secretary, that Britain would be outside the customs union during the post-Brexit transition phase and that at that point it would not be party to the EU treaties.
Under the Customs Union EU members trade without customs duties, taxes or tariffs between themselves, and charge the same tariffs on imports from outside the EU. Customs union members cannot negotiate their own trade deals outside the EU.
Mr Fox was concerned that if Britain remained part of the Customs Union he would be unable to strike trade deals with countries outside the EU.
A government spokesman said: “The customs union as it currently stands has an impact on our ability to make trade deals.”
Mr Hammond appears to have accepted that remaining a member of the customs union is no longer possible.
The Department for Exiting the European Union is due to publish a separate paper on the Northern Ireland border later this week.
Josh Hardie, CBI Deputy Director-General, said: “Companies will welcome the progress Government has made today in publishing these papers. Over the past year, businesses have been providing policymakers with the evidence, ideas and solutions to make a success of Brexit.
“So it’s encouraging to see that these papers propose a time-limited interim period and a customs system that is as barrier-free as possible.
“We at the CBI have always been clear that new ideas on crucial issues like this should be brought to the table quickly. But the clock is ticking and what matters now is giving companies the confidence to continue investing as quickly as possible.”
On customs, he said: “Business wants to see as frictionless a customs system as possible, with a strong emphasis on digital systems that make it easier to trade.
“But to secure frictionless trade, negotiations on regulation, tariff and non-tariff barriers will have to take place. All efforts should be made to deliver a single-step transition, so that businesses don’t have to adapt twice.”