Our future trade relations are the major battleground in the Brexit process. Unfortunately the public debate on trade remains poor, fuelled by the Brexiteers' misleading, if not self-delusional, narrative of how the global world trading system works.
Brexiteers tell us the EU is more dependent upon us because we import their cars, cheeses and wines so we shall secure a good deal. When Brexiteers are reminded about our large trade deficit, International Trade Minister Fox blames our "fat and lazy" businessmen. Brexiteers argue we shall be free to conclude our own trade deals. However, a free trade deal with the EU will afford less market access than what we enjoy now as part of the Single European Market. It is no wonder why business organisations have responded with an open letter asking the Government to ensure we retain full Single Market access.
The UK will not have the upper hand in trade negotiations because 44% of our trade is with the EU whereas we account for only 17% of EU trade. With only 2% of world GDP compared with the EU's 22% of world GDP, it is no wonder why US Trade Representative Mike Froman stated in the Financial Times on 30th October 2015:
Washington is not particularly in the market for a trade agreement with a single nation like the UK … it is absolutely clear that Britain has a greater voice at the trade table being part of the EU (and) part of a larger economic entity.
The Brexiteers' free trade narrative appears deliberately reminiscent of schoolbooks. However, tariffs are hardly the issue they were before 1948 as they are now largely eliminated on goods. Today trade liberalisation efforts centre on approximating domestic regulatory rules which are equivalent up to 30% of deliverable costs (OECD). Instead of 28 different sets of national rules, the EU, spearheaded by an UK initiative, provides a single framework making it easier and cheaper for us to export throughout the EU. EU laws ensure the quality and safety of the products, food and services we purchase. The same supposedly onerous EU regulations have not held back Germany's successful export economy or even our own. Yet instead of acknowledging the Single Market's contribution to our greater prosperity, Brexiteers misleadingly portray the Single Market as rules imposed by Brussels.
It is astonishing that any country would want to turn its back on its major export market. Outside the Single Market, supply chains for our large and small businesses alike will be disrupted. Business and consumer prices will rise. Leaving also creates considerable uncertainty. As Boris Johnson argued in the Daily Telegraph on 7 February this year:
leaving would mean embroiling the Government for several years in a fiddly process of negotiating new arrangements (thus) diverting energy from the real problems of this country.
No country will conclude a trade deal with us until our new relationship with the EU is finalised. President Obama stated early this year "(the UK) would go to the back of the queue". Canada's CETA deal with the EU has so far taken 7 years to negotiate and could still be vetoed by a Belgian regional parliament. The UK outside the EU risks a similar fate, unless we settle for a bad deal. The much-heralded Commonwealth is not a unified trading bloc. Its members, such as Australia, constitute only 1% of UK trade, so their market will not make much difference. Australia is focused on high growth Asian markets and in Europe it too will give priority to trade relations with the EU 27. Canada is similarly focused on big markets, notably the US and EU. Whilst we take a decade finalising new trade deals, we risk losing export markets which will become even harder to enter as global protectionist sentiment grows.
Brexiteers erroneously champion 'regaining' our World Trade Organisation (WTO) seat. Yet having one of the WTO's 164 seats doesn't count for much other than granting Most Favoured Trading Nation (MFN) status (often referred to as "least favoured nation"). WTO rules largely cover trade in goods while its rules on services, which account for 80% of our economy, are relatively weak. Furthermore, rejoining the WTO is not a certainty, as just one of its members could block us.
The fewer trade barriers a country wants, the more it has to accept budget contributions, and supranational arrangements such as those of the EU, WTO and NAFTA. We have the best British trade deal as part of the Single European Market. Are we really going to trash our trade on the altar of reduced immigration? Brexiteers already admit leaving the EU will not reduce overall immigration substantially, so what's the point? As the feasibility of Brexit unravels, we should not hesitate to expose the serious threat this Brexit Government poses to our trade relations and economic prosperity.
This article was originally published in the Liberal Democrat Voice on 10 October 2016
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