You don’t need to be in the Single Market to trade with it

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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.

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8 Responses to You don’t need to be in the Single Market to trade with it

  1. Ian Terry says:

    Well laid out Roger there surely can be no arguement with that.

    All this fear and bordering on hate for us that want to see us get our country back is sending out all the wrong signals albeit good for us I hope.

  2. B Hough says:

    I have a few queries that I wonder if someone could answer for me?
    What percentage of a modern motor car is made from plastic?
    What effect does using plastic have on our steel industry?
    How much less does it cost in the manufacture?
    If less was the price of our EU partners exports to us reduced?
    When they boast about the `greener` engines giving more mpg and helping `climate change` how much of it is down to the vehicles being lighter due to the plastic?
    I also assume that accident repair costs should be reduced, but they seem to be higher?
    Just curiosity !

    • I don’t know the detailed answers — ask the car industry! But it is certainly true that manufacturers seek to reduce weight and improve fuel economy, and extensive use of plastic helps in both areas — as does the substitution of aluminium for steel, which Jaguar is doing extensively.

      • B Hough says:

        Thank you Roger, it just annoyed me that if my observations were correct then our `friends` in Europe did not pass any reduction in production costs on to its `friends` in the UK.and also helped the demise of our steel industry.
        The news today is that some big businesses say we should stay in, this couldn`t have anything to do with tax avoidance within the UK could it, ie. pay tax in the cheapest country possible so long as they are in the EU.
        Also ex military leaders are against leaving, do they not know the intention of having an EU military?
        But the way the take over of Europe by stealth is going on none of it will matter in the long run, how many isil supporters have arrived with the refugees,
        Is this the way the EU protects us, what happens when the native populations are outnumbered, do we have another referendum to leave then?
        No point, it will be just the same here..
        Our grandchildren and great grandchildren can sort it all out!!
        Leave whilst we can.

  3. Richard111 says:

    It is quite amazing the number of goods I have in my home labled made or assembled in China. The latest item is my wife’s iPad4.

  4. Ex-expat Colin says:

    I don’t understand the statement rolling around about staying in this time means never being able to get out. I know about the never get back in again bit which is likely a plus, but why the “lock-in”?

    Distant rumblings about Holland and Czechoslovakia wanting a referendum because of our …er rumblings.

  5. Ministers, Media and Money…
    The three enemies of the Leave campaign.

    We are members of the EEA. We could easily become members of EFTA. In which case, our trade etc would not change in the slightest if we applied Article 50 of the Lisbon Treaty.

    If we leave, though, Father Christmas will not come ever again.
    The tooth Fairy will not get a visa.
    And the Bank of England will fall into a big hole in the ground.
    You have been warned!

    • B Hough says:

      And Mr. Cameron and his loyal supporters will not get their lucrative non jobs within the EU for keeping us in, as did messrs Blair, Mendelson and Campbell.
      We wouldn`t be in this mess if Iraq had been left to its own devices!

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