British Chancellor Philip Hammond has refused to rule out the UK being part of a customs union with the European Union after Brexit.
The Remain supporter, whose opposition to a hard exit from the bloc has angered some of his colleagues, left the door open to the UK signing up to an agreement that could restrict international trade deals.
MPs have called on the Cabinet to urgently come to a decision about the key element of the upcoming negotiations with Brussels.
Mr Hammond was asked by a Treasury select committee to "explicitly rule out the UK participating in a customs union with the EU as part of its end-state relationship".
The Chancellor sidestepped the question and insisted the government would be "guided by what delivers the greatest economic advantage" to the UK.
A customs union would curb the need for border checks, but could also restrict the trade agreements the UK could seek outside it.
Nicky Morgan, who chairs the committee, said: "It was widely thought that being in a long-term customs union with the EU had been ruled out by the government.
"But the Chancellor's letter confirms that this is not the case.
"It is vital that the cabinet reach agreement on these central questions about the UK's future relationship with the EU, as a matter of urgency."
In his letter, Mr Hammond said the government wanted the most frictionless trade possible with the EU after Brexit.
"As the UK will no longer be a member state or under the treaties once it leaves the EU, it will not be part of the EU's customs union," he wrote.
"The UK will therefore need to seek a new customs arrangement with the EU that facilitates the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world.
"In assessing the options for the UK's future outside the EU customs union, the government will be guided by what delivers the greatest economic advantage to the UK and by three strategic objectives: ensuring UK-EU trade is as frictionless as possible; avoiding a hard border between Ireland and Northern Ireland; and establishing an independent trade policy."
The Liberal Democrats said breaking up the customs union would be complex.
Leader Vince Cable added: "This offers some reassurance that the Chancellor does understand the economic advantages of being part of a customs union with the EU."
