Michael Gove’s “free trade” fantasy

by Sam Ashworth-Hayes | 21.04.2016

Vote Leave supremoes Michael Gove and Dominic Cummings have a message for the British people: Don’t worry about the scary Remain talk about damage to trade, because there will be no damage. Britain will stay in the “European Free Trade Zone” which stretches “from Iceland to Turkey”.

“All European nations have access” to it, Gove assures us, and “after we vote to leave we will remain in this zone”. Only Belarus sits outside of this happy grouping.

There is indeed a trade bloc, mostly free of barriers, that stretches from Iceland in the North West to the Russian and Turkish borders in the East. It’s called the Single Market, and it’s the construct that Gove wants us to leave.

There is no “European Free Trade Zone”, per se. As Dominic Cummings told the Treasury Select Committee, there is instead a patchwork of different agreements that provide for largely tariff-free trade in goods. But tariff-free does not mean “barrier-free”. There are still regulatory barriers to trade, and costly rules-of-origin procedures to be followed.

Most importantly, tariff-free trade in goods does not mean liberalised trade in services. That is limited to the members of the single market; countries within the European Economic Area (EEA). Countries on the outside are not so lucky; Switzerland does not have a passport for its banks, and has limited access to the single market for services. Turkey has no special access at all.

Leaving the EU would pose a very real risk of reducing our trade with the rest of Europe. The Treasury found that even membership of the EEA would damage the British economy, knocking 3.4% to 4.3% off UK GDP. This analysis wasn’t without its critics. As the Centre for Economic Policy at the LSE pointed out, the damage is “likely to be higher” than the Treasury estimate.

Vote Leave did not respond to requests for comment.

Edited by Geert Linnebank