The Institute of Directors (IOD) has published a policy paper, https://www.iod.com/Portals/0/PDFs/Campaigns%20and%20Reports/Europe%20and%20trade/IoD-Customising-Brexit.pdf?ver=2018-02-15-083137-800, that proposes that a new bespoke partial customs union, allowing tariff-free and frictionless trade in manufactured products and processed agricultural products, but not for raw primary agricultural produce, should be negotiated.
It argues that it would remove the need for the UK manufacturing firms to face costly ‘rules of origin’ that would impact particularly across those sectors, while it would provide scope for the UK to forge its own trade policy in seeking free trade deals with other countries in areas not covered, including lowering or removing remove tariffs on raw agricultural products from the world’s poorest countries.
Such a partial customs union would be complemented by a a wide-ranging free trade agreement with the EU on areas not covered in such a new replacement customs union arrangement.
The example of Turkey, which is currently part of a partial customs union with the EU that excludes agriculture, and, as it is outside the single market, services, is highlighted as a possible model.
The IOD proposal appears to accept SM exit without considering the relationship between a CU and the SM . The UK could, however, commit to continuing regulatory alignment for manufactured and processed agricultural goods.
The impact of removing or lowering agricultural tariffs on the the domestic agricultural sector is also not modelled or discussed.