Imagine going to a funeral where it turns out that most of those present never actually knew the deceased, although they were convinced they did. The thought comes to mind listening to the obsequies for Britain’s membership of the single market delivered by Theresa May yesterday.
Thatcher-worshiping Brexiteers from the Tory right are flushed with excitement at the prospect of finally “taking back control” of the British economy from meddling Brussels bureaucrats – something they are convinced leaving the single market will now permit.
Many journalists, on the other hand, highlight the single market’s tariff-abolishing benefits. Meanwhile, Theresa May says Britain will retain a high level of “access” to the single market after we’ve left. Labour’s shadow Brexit Secretary Sir Keir Starmer sternly demands it.
Yet all these reactions reflect fundamental misconceptions about what the single market actually is – and a lack of understanding of why leaving it is likely to be so harmful to the British economy.
The place to start is with some history. The single market was a significant achievement of Margaret Thatcher’s government in the 1980s – something that the sponge of amnesia has apparently wiped from the minds of her former acolytes such as Iain Duncan Smith and John Redwood.
The single market was designed, with considerable influence and impetus from London, to prise open European markets to British exporters, to level the playing field for UK firms across the Continent.
“A single market without barriers – visible or invisible – giving you direct and unhindered access to the purchasing power of over 300 million of the world’s wealthiest and most prosperous people,” was how Thatcher herself described the single market at Lancaster House in 1988 to an audience of business leaders.
What a bitter irony that, 28 years on, Theresa May has used the same mansion in St James’s as the venue to announce that Britain is walking out.
And for what? The harmonising product regulations that Brexiteers (ever since Boris Johnson first pitched up in Brussels as a bowdlerising reporter for The Daily Telegraph) ridicule and condemn as anti-democratic EU micromanagement are, in fact, designed to prevent free market-distorting discrimination by European governments.
Why is there a European directive on “jam”, defining what fruits may, and may not, be used in the condiment’s manufacture? To ensure that anything classified as jam can thereby be sold anywhere within the single market without the risk of some jumped-up local official – anywhere from Bucharest to Belfast – banning it from the supermarket shelves on the grounds that it doesn’t conform to local labelling or health and safety rules.
The new trade department recently tweeted about Britain’s “innovative jams”. That EU jam directive is a designed to help those innovative jam-makers sell their wares into a market of 500 million people (it’s grown since 1988) on our doorstep. Multiply that jam example by the size of our entire goods export sector to get a sense of the size of the benefits.
What about control? We submitted to the supremacy of the European Court of Justice because we needed a referee on trade and regulatory disputes within the single market. Was that a “loss of control”? In one respect, yes. But this was symmetric submission. Other nations agreed to abide by the ECJ rulings as well, preventing them from discriminating against British companies. In that sense we gained economic control on behalf of our exporters: control that we will now lose.
And tariffs? The single market was not really about tariffs – financial levies on imports. Any common or garden free trade agreement can abolish those. The single market was primarily about non-tariff barriers, such as local regulations and licensing rules that prevent, for instance, a British architect establishing an office in Milan because she or he does not have a local qualification. Or, conversely, that hinder a dentist who qualified in Slovakia operating in the UK.
“Insidious … differing national standards, various restrictions on the provision of services, exclusion of foreign firms from public contracts,” as Thatcher put it at Lancaster House.
And that is where the “access” argument made by Theresa May and Labour betrays a catastrophic muddle.
You’re either a member of this single market or you’re not. You have influence on the rules as a member – or you take the rules. You push for the extension and completion of the market to favour sectors you are strong in – such as services in Britain’s case – or the rest of the members concentrate on their own interests in its ongoing development.
The best you can hope for short of full membership is being in the European Economic Area, like Norway.
This means you benefit from the dismantling of non-tariff barriers, but don’t get to set the rules. If that sounds like a pointless deal, consider the fact that Norway values it sufficiently to pay annually into the EU budget in return. But in any case, Theresa May has now ruled even this out. The limit of her ambition, revealed yesterday, is a tariff-free trade deal with Europe.
Yet economists’ consensus forecasts of long-term damage to UK trade are not based on the scenario that we fail to get a free trade deal with Europe. They are based on the scenario that we are out of the single market; that our dominant services sector will not benefit from future progress in completing it. All our experience suggests this means we will export less to Europe and import less too, which means less productivity growth for the UK economy, which means lower living standards than otherwise for us all.
“Don’t it always seem to go – that you don’t know what you’ve got till it’s gone,” sang Joni Mitchell in her song “Big Yellow Taxi”. Perhaps we will realise what the single market is only when we’ve left it.
Brexiteers insist they will create a paradise of new free trade deals for Britain with the likes of America and China in the wake of Brexit which will more than compensate us for the economic damage from the loss of our membership of Thatcher’s single market. But what else was it that Joni sang? That’s right: “They paved paradise and put up a parking lot.”
This article appeared in The Independent on 17/01/17