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Analysis

Staying in single market would solve many Brexit headaches

by Luke Lythgoe | 29.06.2017

Following the election, pressure is mounting to keep the UK in the EU’s single market – a key criterion of a soft Brexit. Spearheading the fight in parliament are a band of Labour MPs alongside the SNP, the Greens and Plaid Cymru. Beyond Westminster, business leaders are becoming increasingly vocal.

With economic storm clouds gathering, the government should reconsider its rejection of continued membership of the single market. Here’s why.

Fewest possible barriers to trade

The aim of the EU’s single market is to reduce or remove barriers to trade between members. This allows the free flow of goods, services, capital and – controversially in the case of Brexit – people across the EU.

The emphasis is often on removing tariffs on trade in goods, but this is only one aspect of the single market. Tariff-free trade could largely be achieved by entering a customs union with the EU.

Single market membership tackles equally important non-tariff barriers: health and safety laws, packaging standards, emissions limits and much more. Countries must follow agreed standards and recognise those of other members, making it easier for exporters to sell their products seamlessly across the EU.

All EU member states are part of the single market, as well as Norway, Iceland and Liechtenstein via their membership of the European Economic Area (EEA). These three non-EU countries have negotiated a slightly different relationship with the single market – for example, separate agricultural and fisheries policies. Switzerland also participates in much of the single market through a complex series of bilateral treaties with the EU.

The services sector

Non-tariff barriers are much more important for trade in services. Covering everything from architects to business consultants, services account for 80% of the UK economy and 42% of our exports to the EU. The UK runs a trade surplus in services with the EU.

A big winner would be the City, with UK-based firms allowed to keep their “passporting” rights to sell financial services across Europe. Even a bespoke deal, for example one based on equivalence rules, is unlikely to deliver the same benefits as the single market. Sensing that, banks and insurers have announced plans to shift some business to various EU capitals.

The single market for services is not as complete as it is for goods, but the EU has introduced measures to fill the gaps. There is also a drive towards a digital single market, which led to the recent abolition of mobile roaming charges across the EU.

Certainty for business

In the short term, announcing an intention to stay in the single market would give business the certainty they crave. Renewed corporate confidence would encourage trade and investment in the UK, and potentially stave off a Brexit-induced economic slowdown.

Access to European workers

Another big concern for businesses, as well as the public sector, is the loss of EU-born workers. Highly skilled EU-trained staff are the most likely to leave. There has been a 96% drop in EU nurses registering to work in Britain since the Brexit vote. Other industries, such as the hospitality sector and fruit picking, are also being hit hard.

Staying in the single market and allowing free movement to continue would help repair the damage done by anti-immigrant rhetoric since the referendum and curtail the “Brexodus” of skilled labour.

It’s worth remembering that EU rules around free movement are not the free-for-all that most Brexiters make them out to be. EU citizens have the right to reside in any member state for three months, but after that they must have a job, be studying or be able to support themselves. They must not become an “unreasonable burden” on the local welfare system.

Maintaining EU protections

Members of the single market must all meet the same workers’ rights and environmental protections, agreed and safeguarded at EU level. Brexiters insist that leaving the single market won’t erase these rights. But at the same time they talk about “bonfires of red tape” and demand the UK “halve the burdens” of EU social and employment legislation.

Disputes over EU rights and laws are adjudicated by the European Court of Justice. Allowing a role for the ECJ post-Brexit is the reddest of red lines for the Conservative government. The EU is equally adamant that ECJ oversight of the single market is non-negotiable. Norway, Iceland and Liechtenstein bring disputes to the EFTA court, which in turn coordinates with ECJ rulings. However, even this relationship may still be too close for Brexiters.

Potential compromises with Brexiters

Although single market membership means the UK must follow EU rules in many areas, some Brexiter pet hates are excluded. For example, non-EU members have opted out of the EU’s Common Agricultural Policy and Common Fisheries Policy.

There is also no requirement for single market members to be in the EU’s customs union. This would allow the UK to negotiate its own trade deals and so have different tariffs with non-EU countries. Brexiters could thus hold onto their dream of “Global Britain” as a great trading nation. However, customs union membership arguably offers greater benefits, particularly on the issue of the Irish border.

There is even scope for a bespoke deal for single market membership. For example, Jean Pisani-Ferry, a close adviser to French President Emmanuel Macron, has proposed an arrangement where “goods, services and capital can be freely exchanged in a deeply integrated market without free movement of workers”.

Staying in the single market provides a solution to a number of Brexit issues which will become increasingly apparent over the coming months. But if the UK were to stick with much of the Brussels rule book – with very little say over its contents – wouldn’t it almost seem pointless to leave the EU at all?

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This article has been amended after publication to clarify Switzerland’s relationship with the single market.

Edited by Alan Wheatley

One Response to “Staying in single market would solve many Brexit headaches”

  • When will this government comprised of thick headed stupid idiots realise that we are much better off staying as we are.
    We are already a strong, influential full member of the EU, the only strategy for brexit that makes any sense is to withdraw the Article 50 notice.
    DD and TM are spending pointless, fruitless, hours at our expense, trying to negotiate what we already have.
    There is no realistic deal of any sort that these idiots can do with the EU, that is better than the existing arrangements.
    The way they are going on, we will pay the same price financially, and give up all political and fiscal influence. The other 27 EU member countries must be laughing at our arrogance!