Leaving the Single Market and the Customs Union will not promote fairer trade

Advocates of 'Lexit' are wrong on almost every one of their arguments.

There is a myth put forward by some left-wing advocates of Brexit that the economic costs of leaving the Customs Union and the Single Market are overstated.

They argue that having an independent trade policy will allow a future UK government to strike new and more progressive agreements with countries around the world, which will more than compensate for any costs associated with reduced trade with Europe.

And that the EU’s trade agenda is tariff-heavy against the world’s poorest countries.

In reality, there is little evidence to support these arguments. The EU is, by some distance, the UK’s largest trading partner. In 2016, it was the destination for some 43% of UK exports in goods and services.

This is the case for good reason. The Customs Union allows for trade in goods that is unencumbered by customs duties or rules of origin checks, while the Single Market ensures common product standards, health and safety regulations and consumer and environmental protections, and the right to deliver services across the continent.

It is also a simple matter of geography. The countries of Europe are on our doorstep, and so it is of little surprise that we do the majority of our trade with them.

By contrast, many of the countries often talked up as targets for future free trade agreements are on the other side of the world.

For example, although they are important markets, Australia accounts for just 1.7% of UK exports, India 1.7%, Indonesia 0.2% and New Zealand 0.2%.

Many of those who advocate a hard Brexit argue that new trade deals will compensate for the economic cost of leaving the Single Market and Customs Union. Yet there is no evidence for this.

Given that some 3-4 million jobs in the UK are linked to our trade with Europe, the burden of proof is on those who advocate a hard Brexit to disprove this.

It is often claimed that the EU has high tariffs on imports from the world’s poorest countries, and that remaining in the Customs Union would mean Britain continuing to enforce these protectionist policies. But these arguments are deeply flimsy.

The EU’s ‘Everything But Arms’ scheme grants full duty-free and quota-free access to the EU Single Market for all products except arms and armaments, to all countries that are listed as a Least Developed Country (LDC) by the United Nations.

Far from imposing large tariffs against the world’s poorest countries, the EU has in fact done the opposite.

There are issues related to market access for certain areas of agriculture between the EU and many developing countries who do not qualify as LDCs – issues that are shared with other developed countries.

However, the EU is known for being the most generous of the major developed economies in this regard.

Another argument that is often made for leaving the Customs Union centres around the view that EU-negotiated trade deals are intrinsically bad for workers and the environment, and that they are anti-democratic.

Unshackled from the EU’s trade policy, so this argument goes, Britain will be free to strike more progressive deals than the EU does.

But this argument is flawed as well. Let’s look at the US as an example. At a minimum, US negotiators would demand that the UK lowers its environmental and food standards and accepts products like hormone-treated beef, GM crops and chlorinated chicken.

US healthcare companies would again lobby for the right to bid for NHS contracts.

The Labour Party has rightly rejected these demands in the past, and there is little reason to believe the US position will soften in the future. Trade negotiations with other countries, such as China or India, would involve different but equally unpalatable trade-offs.

A future UK government risks leaving the Customs Union and the Single Market only to find it doesn’t support any of the trade deals on offer, or that it cannot secure support for them in Parliament.

A better approach would be to remain in the Customs Union, retain access to the EU’s trade deals around the world, and seek to better leverage our large economic size relative to most European countries to get better deals via the EU than we could get alone.

Lord Monks is a Labour Co-operative member of the House of Lords and was the General Secretary of the TUC in the UK from 1993 until 2003, when he became the General Secretary of the European Trade Union Confederation (ETUC). He is a co-author of Busting the Lexit Myths, a report published today by Open Britain and the Labour Campaign for the Single Market.

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One Response to “Leaving the Single Market and the Customs Union will not promote fairer trade”

  1. Alan Brown

    Agree with this article. There is only a hard brexit for services industry as they will be excluded from any trade and I exclude banking from that sector for the moment as research shows that they will be hit but not hard by Brexit. In order to improve and rebalance the economy one cannot get off base without prosperity and like it or not the UK has prospered in the EU. The failure comes from bad unfair management of the economy which is not the fault of the EU. There are millions of people who would support a labour party in the polls that stands up to the tyranny of the majority and puts the national interest first. Clearly there are faults in EU structure as there are in the structures in the UK. There is a mood swing for change in Europe and we should be part of the process for change. WE need a brave labour voice making the case to stay in the EU and presenting a New Deal. The two go hand in hand. It is time to come off the fence. but not on the Tory side but on the side that values international cooperation and the national interest rather than party interests

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