Vote Leave has finally set out their plan for the UK’s future trading relationship with the EU, in the event of a vote to leave the Union in the forthcoming referendum. Justice secretary Michael Gove claims that Britain can have its cake and eat it: we can enjoy full trading rights with the EU, without being part of the single market – apparently, just like a host of other European countries which together form some vast free trade area stretching from Iceland to Turkey.
This plan is so detached from reality as to be simply breathtaking. It reveals a deep ignorance about the basic institutions, structures and processes of international trade in general and of the single market in particular. Gove’s vast European free trade area is nothing short of a fantasy – as is his belief that the EU would simply open the doors of the single market to any third state without insisting upon a heavy price in return.
Let’s be clear: the EU’s commitment to eliminating obstacles to cross-border trade – particularly non-tariff barriers which arise through differences in national regulation – far surpasses that of any other trade organisation or agreement on earth.
A single market means working together
The EU has evolved a unique model to build its single market: limited harmonisation of national rules in order to establish common standards for essential public interests, combined with an obligation upon the member states to accept the free movement of their respective goods and services – a model which presupposes a strong degree of mutual trust and close cooperation between them. The entire system is created and maintained by a finely balanced yet highly sophisticated matrix of legislative, administrative and judicial structures and processes.
As a full member of the EU, the UK enjoys the benefits of that unique degree of market access together with significant political influence over its development. If the UK wanted to secure the same or even a similar degree of market access as a non-member of the EU, there is no doubt that we would have to agree a deal comparable in nature to the European Economic Area agreement which currently applies to Norway, Iceland and Lichtenstein.
This would be a deal which integrates the UK into the single market – but on the basis that we agree to abide by all of the EU’s existing and future market rules (including the free movement of persons) and other rules such as environmental, consumer and employment legislation. In return, we would enjoy only a very marginal degree of influence over the substantive content of the single market rules. We would also pay a substantial “membership fee” to the EU – just as happens with countries such as Norway.
To argue, as Vote Leave tries to do, that the UK is bigger than and different from Norway, Iceland or Lichtenstein is entirely true, but it also entirely misses the fundamental point. It is the nature of the single market itself that requires such a high degree of integration in order to secure such a privileged degree of participation. Any state that wants to enjoy its benefits needs to sign up to its rules: legislative harmonisation, cross recognition of regulatory standards, mutual trust between domestic authorities, effective judicial enforcement mechanisms, a fair playing field when it comes to social and environmental rules.
For the EU, these are simply not a negotiable commodity – regardless of who comes calling.
Get used to less access
If the UK is not willing to subscribe to that sort of far-reaching trade arrangement – or if the EU is simply not willing to offer it – then two options remain.
Either we would seek to agree a narrower and shallower trade relationship with the EU (as have a host of other countries, such as Switzerland, Canada and Mexico). Or we would instead and by default fall back upon the general standards for international trade set out under the auspices of the World Trade Organisation.
In either of those scenarios, our understanding of “market access” would have to be very considerably less ambitious than that which we have grown accustomed to as full members of the EU. In particular, significant parts of the UK economy – not least the financial services sector – would have to adjust to a much less advantageous trade environment. Goods and services produced and provided in the UK would no longer enjoy automatic “passporting” rights into the single market.
The leave campaign have dismissed as “scaremongering” any and every attempt by defenders of UK membership to highlight the (economic and other) risks to this country of leaving the EU. Now that Vote Leave is finally starting to reveal its alternative vision for the future of the UK outside the EU, it is fast becoming clear that they have no credible case to offer.
Gove’s foolish and half-baked speech should act as a serious warning to anyone tempted to put their faith in Vote Leave: this is a campaign based not upon sound evidence or rational analysis, but rather upon the pursuit of an ideological fixation. “Project Fantasy” is a most fitting label.