Sunday, 19 November 2017

We need a market called Europe


I am pleased to see increased urgency around the idea of remaining in the Single Market post-Brexit. Remainers are not solely behind this - it is a position being converged upon by representatives of both sides of the debate. This tends to suggest a level of objectivity, given the practical difficulties of leaving the EU which have been laid before us by reality. The case for the Single Market is actually quite easy to make, but it is made more powerfully by Leavers, who are far too often associated with prioritising levels of immigration in their approach towards Brexit. 

My stance on the issue is simple: I want a market called Europe, not a country called Europe. The former facilitates enormous amounts of trade, the latter creates a worrisome democratic deficit. The Single Market is not the EU. Staying in the European Economic Area (EEA) does not tarnish the mandate provided by last year's referendum, and nor does it mean staying in the EU by the backdoor, as the lazy ultras often like to claim. The EEA is, as we have discussed before, simultaneously configured yet configurable, flexible yet static. It takes into account the territory-specific interests of the add-on, non-EU member states. 

Inside the Single Market we have not only regulatory conformity with our largest trading partner, we also have the assumption of conformity, which is far more important. The assumption exists because checks and inspections - here we are referring to enforcement and surveillance strategy - take place at the point of production. They are carried out by a widespread market surveillance programme comprising of national authorities like government departments, who are charged with overseeing conformity to product standards and are themselves inspected by centralised EU bodies, such as the Food and Veterinary Office (FVO). 

This arrangement is designed in such a way as to eliminate technical barriers to trade at borders - so called non-tariff barriers. The real achievement of the Single Market since 1993 has been substantial progress towards the eradication of non-tariff barriers, which are now of far more significance than tariffs across international trade. Quite a number of intensive studies, such as this one, have suggested that their effects can add more than a fifth to the cost of global trade. A fraction much greater than that of the impact of tariffs. 

Leaving the Single Market does not mean we lose regulatory conformity, but it does mean we lose the assumption of conformity, so post-Brexit, our enforcement and surveillance strategy fundamentally changes. This is the reason for the increased warnings about lorry queues at Dover: customs checks will move to the border, just as they do for all third countries. Any exemption granted to Britain would break WTO rules governing equal treatment. (Dover, though, is only one part of the problem and our obsession with it merely reflects how South East-centric our media and political discourse is. Ports like Hull and Southampton will also struggle and customs declarations will pile huge pressure on both HMRC and shipping lanes)

Queues of this nature are a problem. They have material effects upon fragile and perishable goods being transported from one country to another. They may result in huge storage costs - reaching upwards of £700 - for exporters, if consignments need more thorough inspection. These are backdoor overheads which have largely been ignored by political commentators in Brexit discourse. Queues at ports and border entry points, if ground to a halt, may also have serious consequences upon the preservation of key supply chains. If customs logjams slow down trade flow too forcefully or quickly, importers in Europe may seek alternative products from elsewhere. 

But a relocating of enforcement procedure is not the crux of the issue. There will even be mechanisms at our disposal in the future, such as Mutual Recognition Agreements (MRAs), which I describe in more detail here, to help de-congest our borders. The more profound and immediate danger of leaving the EEA will be the invalidity of licences and qualifications which currently facilitate the exporting of both goods and services into the EU. Martin Donnelly, a trade wonk in Whitehall, has written a letter to parliamentarians in the Guardian, in which he warns that "large parts of our service businesses would lose their current passport into the EU market. UK qualifications, from accounting to hairdressing, would no longer be accepted across Europe."

Industry will not automatically qualify for access, both in terms of trade in goods and in services. I would add that this also applies to professionals like architects, doctors and dental nurses, as well as drivers of various kinds. There is a reason for my insistence that this damage is not in any way fictional. I maintain that the biggest problem with Britain's approach to Brexit thus far has been an insistence that it is in the EU's interest to offer us a preferential trading arrangement. This is immediately disproved by the mere fact that it would undermine the integrity of the Single Market. This has been the core of the European negotiating position from the very beginning, and it simply hasn't been grasped in Westminster. 

Richard North produced a damning summary of what is expected to happen to the British car industry only a few days ago, highlighting the importance of seeking vehicle type approval by Brussels post-Brexit. He references the evidence provided by Patrick Keating, a spokesperson for Honda, to a select committee earlier this week. Keating told the committee: "What we're picking up from the Commission is that type approvals issued by the VCA, the UK Vehicle Certification Authority, will either no longer hold validity or not be able to be extended. So we need to find a way to bridge that gap."

We also face not only the relocation of the European Medicines Agency (EMA), but the very frightening problem of not being able to export medical products into the EU. For the pharmaceutical industry, market authorisation is an EEA-wide system and thus has Single Market relevance. The EMA notes that "a partnership between the European Commission, the medicines regulatory authorities in EU Member States and the European Economic Area (EEA), and the European Medicines Agency (EMA) – works to ensure that patients in the EU have access to high-quality, effective and safe medicines." 

In other words, two major industries could be unnecessarily undermined by an action Britain does not need to take. Here I do not pretend that staying in the Single Market solves every conceivable issue - it does not. But a considerable, industry-saving burden is lifted from our shoulders if remain party to the EEA, and this is without referring to the impact upon the chemicals industry and our ability to register 6,000 chemicals with REACH. I will need to delve into this topic in more detail as I currently lack sufficient knowledge to provide any informative overview of the challenges we may face. Regardless, the point here is that rejoining EFTA after a stay in the EEA would be a much cleaner and more orderly Brexit, and if the country did not like the eventual position, it could quite easily mobilise to change it in the future. 

The Single Market is in need of reform and is not perfect. I don't like the hold the EU has on it and I think an EFTA 5, which sees the UK partner its more natural allies, would be better (though not completely) able to shape the progression of the acquis. I also acknowledge the pertinence of the immigration issue, which I believe Article 112 of the EEA Agreement gives us some breathing space on and will help us to leverage some kind of improved deal. On Friday I argued with Jonathan Lis of British Influence about the use of Article 112 on Twitter. He claimed invoking it would in a practical sense undermine our membership of the EEA, but I think safeguards against excesses of the four freedoms exist in the treaty for a reason. 

The big picture here is that the continent of Europe benefits from collective efforts to reduce technical barriers to trade. Most of us are made richer as a result and, if we can protect and champion the initiative of the Single Market, we avoid the harshest elements of Brexit. It will also help to reinforce the image of Britain some leavers are doing their utmost to promote: this idea of a global Britain, which risks evolving into nothing more than vapid sloganeering if the ultras get their way. And if we leave the Single Market, it appears increasingly likely that vast sectors of the British economy will not be getting their way either.  

6 comments:

  1. Can the EU prevent, or put onerous conditions on, UK joining EEA (or rather remaining in it)?

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    1. No. The EEA is a ready-made package, it is already configured. Altering it to damage us would require agreement from all signatories. Also, the EU wants the UK in the EEA because it wants the closest possible cooperation with European neighbours. Barnier himself has hinted at it directly on multiple occasions.

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    2. Thanks for that helpful reply. "If you buy a big house you put up a fence and gate around it - there doesn’t need to be a technical definition" you responded on Twitter when I asked what "the integrity of the Single Market" might mean. I expect many people put "prison" for "house" and wondered whether the aim of punishing the UK for the "crime" of leaving might result in attempts to spoil the EEA option. I am somewhat reassured on that.

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  2. So now the plan is to stay in the EEA and then reshape it .... cant you leavers just give it a rest .... either remain or leave

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    1. Binary choice you provide doesn't elaborate upon the type of withdrawal and eventual relationship

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  3. Bravo after screwing up the EU for years with your tantrums and opt outs, you now want to do the same to the EEA .

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