Back To Basics:
What is the Single Market?
The single market eliminates tariffs, quotas or taxes on trade, it also includes the free movement of goods, services, capital and people.
The single market also has “Mutual Recognition” this means that if under UK law Cadburys Dairy Milk is called chocolate then we can sell it across Europe as chocolate despite the fact thta the cocoa butter level is below that required by other countries. This means that Cadbury does not need to produce 28 different types of chocolate to sell into each of the EU countries which keeps costs down and prevents governments enacting local legislation which favours the local product.
It also removes “non tariff barriers” such as packaging, labelling and safety standards by standardising the rules across the EU and facilitates trade in services (the dominant force in the UK economy).
If the UK wants to trade into the EU, our biggest market, after BREXIT we will still need to meet these standards/rules. Further access to the single market is deemed critical for services (80% of the UK economy).
(Norway is a member of the single market)
What is the Customs Union
The customs union is an agreement whereby countries agree to apply the same tariffs on goods coming from countries outside the customs union. Once items have been cleared in one country they can then be shipped to others without additional tariffs being imposed. To avoid companies doing a quick one there have to be “rules of origin” to certify that an item originated in country X.
In practice this means that the EU negotiates external trade deals using its considerable muscle and its considerable attraction as a market of over 510 million consumers to negotiate deals. It is EU negotiated deals that stopped China from dumping steel and other products into the UK and European markets, destroying the domestic steel industry.
Leaving the customs union would mean we have to renegotiate all of those deals and also means (probably) the creation of a hard border in Ireland. The hard border would be necessary to stop goods which should be tariffed entering the EU illegally via Ireland and then being free to travel across the whole of the EU.
(Turkey is a member of the EU customs union; Norway is not)
Let’s Look At The Position Papers – Briefly
As you are probably aware the government has published two long awaited position papers.
The first Future Customs Arrangements (16 pages long) on the UK position vis a vis the EU and customs / single market membership.
Taken from the paper:
Or to put it differently. We need to replace the current system with something exactly like it (including complying with EU regulations). To do this we will have to implement additional regulations and paperwork plus add a complex untested and expensive IT system which (based on every other IT system the government has implemented) will be over budget and won’t work.
However replacing a tried, tested and simpler system with a complex, expensive, untested one which will (as far as possible) replicate the old system will enable the UK to say we have implemented Brexit. Hurrah!
The second position paper is this one Northern Ireland and Ireland.
This can be summarised as “leave things as they are”. The hard right types such as Nazi apologist and fear monger Nigel Farage are already complaining that vote Leave requires a hard Irish border – but there are questions as to what this will do vis a vis the Good Friday Agreement . Ian Dunt states here that the Good Friday agreement committed to the removal of security installations and therefore arguably precludes the addition of border checkpoints.
A few months ago the rumour mill was that Theresa May intended to crash out of the EU and then blame the EU for the failure of negotiations; and headlines such as “Britain is fighting to save Ireland from an EU-imposed hard border” reinforce this view (spoiler alert: we voted to leave EU not vice versa).
The Root Of The Problem
The root of the problem is that David Cameron launched a referendum to try to appease parts of the Tory party and that he never expected to lose. Leave has won a pyrrhic victory because the promises it made cannot be kept without destroying the economy and imperilling the Northern Ireland peace process. Even Gisela Stuart, the co-chair of Vote Leave, called the referendum an “abuse of democratic process” because the winners could not and did not then take responsibility for delivering the result.
Although as a Remain voter I think the whole idea impractical, damaging and should be dropped I suppose one could, at a push, give the Tories credit for trying to deliver on an impossible remit. The problem remains that it is impossible. Conservative peer Baroness Altmann “the path that we seem to be on doesn’t look like it’s going to deliver for us a better outcome than we currently have“.
Negotiations have been hampered by arrogance, playing to the tabloid press (while apparently forgetting that EU members can read them too), poor leadership and fundamental misunderstanding not only of the complexity of the negotiations (see euratom) but of failings even more basic. There is a worrying tendency to regard Germany and France as the totality of the EU and that we can deal with them individually and on a sector by sector basis. The first is just lunacy and the second hardly better.
It is true that the UK leaving will be damaging to the EU, not just because it is a net contributor to the EU budget but also because we receive 8-17% of EU exports and account for 3-4% of EU trade. The argument goes that because of this the EU will bow down and give us our free access with terms and conditions as we have now but without having to pay for it because the EU, like the UK, also doesn’t want huge queues at the border.
However this misses the point that Angela Merkel, EU leaders and even businesses are willing to take a financial hit to protect the single market, that the EU is more than just a trading block but also an ideal which they will fight to protect and which would be damaged beyond repair by granting the UK cake and eat it status. If it comes to straight up fisticuffs the EU can take the hit far better than the UK – particularly as EU trade represents 12% of the UK economy and because we import 40% of our food.
It also ignores the fact that the EU comprises 27 member states, each with their own priorities and for some of whom UK/EU trade is relatively unimportant. It is not just Germany and France.
Each of these countries has a veto on the final deal so it would be politic to be friendly and conciliatory rather than overbearing and arrogant. We do not have a big stick so it behoves us more than ever to speak softly. The first goal of successful negotiation is to build understanding and rapport. Are we succeeding? I have my doubts.