Years ago, in my early days as an MEP, when challenged to cite any benefit of EU membership, I fell back on the mantra “Well at least the Single Market is an unequivocal benefit of EU membership”. There was (and in some places still is) an assumption that being outside the Single Market is a serious barrier to trading in the EU. Odd, then that the three biggest sources of imports into the EU, the USA. Russia and China, are not only not in the Single Market – none of them currently has any special trade arrangement with the EU at all.
So my eye was struck by a report in the Daily Telegraph of Feb 22nd. “The EEF (Engineering Employers Federation) warned of the dangers of ‘cutting ourselves off from our biggest export market'”. For good measure the EEF’s Chief Executive Terry Scouler adds “These findings show that the majority of our members of all sizes are pragmatically pro-EU”. They also show, I would argue, that those members have an exaggerated view of the benefits of the Single Market.
Cutting ourselves off? In what sense would we cut ourselves off? Would these smart guys at Mercedes and BMW and Audi – and Renault and Fiat and Volvo – decide not to sell us cars anymore? Are the USA and Russia and China “cut off” from the EU market? This is really a ridiculous concern. Dozens of countries around the world trade successfully with the EU, and many have free trade deals with it.
When we joined the Common market in 1973, average industrial tariffs were 30 to 40% — a real barrier to those outside. Today they are typically three or four percent, and declining. So even if we had to pay the EU’s Common External Tariff on UK exports to the EU, the sums involved would be relatively small – much less than half of our current net EU budget contributions, for example.
But of course we won’t be paying those duties, because we will have a Free Trade Deal. How do I know that? First, because WTO rules would prohibit punitive tariffs. Second, because the Lisbon Treaty requires the EU to negotiate favourable trade deals with neighbouring countries.
But most of all, because of sheer economic logic. When we leave, the UK will be the rump-EU’s largest export market. Bar none. Bigger than the USA, bigger than any other country in the world. And that’s not all. We’re also running a £60 billion deficit with the EU. We also their largest net customer. They need us more than we need them. If the European Commission in a temper tantrum delayed in setting up a deal, there’d be a line of EU exporters kicking their doors down and demanding action.
Digby Jones, former Director General of the CBI, has said that when we leave we’ll have a Free Trade Deal within twenty-four hours, and I’m not about to argue with Digby.
Ask yourself, what exactly is the Single Market? It’s not a free trade area. It’s an old-fashioned Customs Union, tied up in red tape, and overlaid with a mountain of (mostly damaging) regulation. Outside the EU, we should continue to trade with it, arguably on more favourable terms than we have today. And we should continue to attract investment from major companies using the UK as a base for their European business, and preferring the lighter regulation and lower energy prices that we should be able to offer. An example: a few years ago Ford moved their van operations out of the EU (to Turkey), believing that they could better serve the EU market from outside it than in it.
This is not merely my view: distinguished economist Roger Bootle of Capital Economics makes much the same point.
So take heart, you EEF members! You can vote for Brexit with confidence, knowing that there is no danger of being “cut off from your biggest export market”. Let’s vote for independence and prosperity.