Communicating effectively about our EU membership is hard. It is a very complex issue, as a slight storm on my twitter account regarding the Single Market v. Free Trade Agreements (FTA’s) yesterday revealed.
I’d like to pick this issue up in more detail, which I feel is being misrepresented in this Brexit debate. The truth is that a Canada, Albania or any other type of Free Trade Agreement is considerably inferior to the EU Single Market we are a member of. The Brexit campaign has now loudly expressed their wish to leave the latter, but has given no explanation of the risks this represents to our economy.
Allow me to explain the difference between an FTA and the Single Market using a very practical, but real example.
I came to the UK with my family from Germany in 1974. One year after the UK joined the EU and therefore the European Economic Community. Prior to this the UK, like most European and Global markets had worked to protect their markets through import tariffs and protective regulation. So there was no single market and no or very limited free trade between the UK and Europe.
We wanted to import the car we had owned in Germany, a lovely and reliable Opel Kadett. It however made no financial sense, because the import tariffs and numerous technical changes that would have needed to be made to the vehicle, would have cost more than the value of the vehicle itself. Our next option was to buy an Opel Kadett ready imported by the manufacturer to the UK. This however would also have over stretched our budget, because Opel had to pay import tariffs and the cost of carrying out all the technical modifications in their factory before exporting. So instead, we had no choice, like most British people at that time and bought a Morris Marina. As anyone who owned one of these will no doubt confirm, it was one of the worst examples of British design and innovation to come out of UK’s 1970’s industrial decline. I can remember more journeys in which the car broke down than making it without trouble to our destination. Certainly not the Opel we were used to!
Introducing an FTA would have removed the import tariffs on the more reliable Opel we wanted. However the much larger cost both physically and from an administration point of view were the numerous required technical changes. And it is only the Single Market that can and has removed these ‘non-tariff trade barriers’. Put simply, an FTA alone, would not have allowed us import or buy the car we wanted in the UK. But the Single Market would have made that difference and today provides for that greater consumer choice at better prices.
The EU single market has successfully harmonised such regulations across the entire EU for automotive and numerous other industries. And it is still being worked on now, like the harmonisation of EU mobile phone charges recently demonstrated very visibly. Now, carrying out this harmonisation is very complex and takes a long time. Every nation naturally wanting to influence to ensure their own standards remain. But when achieved, we have the situation we largely have today. A Renault made in France is as accessible to the UK consumer as is a Toyota made in the UK. It is even now possible to buy British brewed beer in Germany that for a long time protective laws in Germany prevented. And the value for money, technology and innovation has massively improved for all in the EU, as opening, smartly regulating and standardising markets always does. Doubters at the beginning of creating this single market, were concerned it would mean the end of the last of British engineering industry. The truth is that the previous closed and protected market was killing the industry and the decline would have continued at pace, had we not joined the single market. Today, the UK’s automotive Industry can hold its head up high and we are exporting more cars than ever before – the EU and single market having been the enabler and not the barrier for this. An FTA with EU markets alone would not have achieved that.
It is true that sometimes EU regulators got carried away, we’ve all heard stories about bananas and cucumbers, and we must work to stop such nonsense, but to use those high profile yet minor issues and ignore the vast progress made over decades in breaking down thousands of protective practices, is plain irresponsible. And that is what leaving the single market would mean and no FTA can replace that.
In summary, when we are told that we can leave the Single Market but still have access and all the benefits of it, that is not true, as we would have no influence on the harmonisation of the market and we would increasingly be confronted with the non-tariff barriers as I describe above. And then there is another key reason I have not yet covered, which is that FTA’s provide no or very limited access to free trade of services. That is so for Albania’s and Canada’s FTA with the EU and even Switzerland’s very advanced deal under EFTA provides for no free trade on financial services.
The Brexit campaign arguments to leave the Single Market, simply do not stack up economically.