Ben Somervell explains why failure to leave the single market would leave us with the worst of both worlds: adherence to the stringent regulations of the EU, while not having a seat at the table to influence our legislative future.
According to the EU’s treaties, there is no such thing as the “single market” – there is only the internal market/European Economic Area (EEA) which shows that it really is an inherent part of the EU and that, if you leave the EU but don’t leave the EEA, you haven’t really left the EU. During the referendum campaign, both Remain and Leave campaigners made it clear that a vote to leave would mean leaving the EEA.
In October, a YouGov poll showed that 47 per cent of voters support leaving the EU and the EEA, compared to only 39 per cent who support leaving the EU and remaining within the EEA and another YouGov poll from 16th January this year showed that 74 per cent of leave voters supported our exit from the EU and the EEA. The House of Commons and the House of Lords effectively approved a clean Brexit when they voted to invoke Article 50.
The Prime Minister said on the Andrew Marr Show that the German Finance Minister had made it clear that upon a vote to leave the EU, the UK would have to leave the EU and the EEA. Since the referendum, the President of the European Council has also made the same point. He said there is no hard or soft Brexit – you leave the EU and the EEA or you don’t leave the EU at all. The only way in which we are currently a member of the EEA is through our membership of the EU. Before we joined the EU, we were not members of the EEA. Therefore, after we officially leave the EU, we will no longer be members of the EEA. Robin Walker confirmed this when he was Parliamentary Under-Secretary of State for Exiting the EU when he said the “EEA Agreement will automatically cease to apply” on 1 April 2019. Philip Hammond also confirmed this recently when he said, “when we leave the European Union we will leave the single market and the customs union. That’s not a matter of choice; that’s a matter of legal necessity”.
Only countries which are already members of the EU or the EFTA (European Free Trade Association) can become new members of the EEA but on 1 April 2019, we will not be members of the EU or the EFTA. It could take months for us to apply for EFTA membership and, through that, EEA membership. A government minister in Norway has said that they may veto an application from the UK to join the EFTA after Brexit. It’d be legally impossible for us to seamlessly remain a member of the EEA even if voters wanted it to.
Leaving the internal market is crucial as even its name alone implies that it is an intrinsic pillar of the EU whose ultimate arbiter is the European Court of Justice (ECJ) in Luxembourg. The EEA was specifically designed as a temporary stepping to full EU membership for countries like Norway whose government and political leaders support EU membership but whose electorates don’t.
Furthermore, the official Vote Leave campaign had a number of key pledges: to take control of our laws, money and borders. We can only do any of these things if we leave the EU and the EEA. Leave campaigners talked about the EEA as being a “single regulatory zone” and argued against our membership as it means that 100 per cent of UK businesses have to abide by 100 per cent of the EU’s pedantic, unnecessary and burdensome regulations, even though only six per cent of UK businesses ever export to the EU. This burden is particularly heavy for small and medium sized businesses. If we leave the EU and the EEA and negotiate a unique, bespoke, bilateral UK-EU free trade agreement, only the six per cent of UK businesses that ever export to the EU will have to abide by its regulations. If we were to stay in the EEA, we’d still have to make net annual payments of billions each year and accept free movement.
So what will our trading relationship be? It will either be a bilateral UK-EU free trade agreement or reverting to most-favoured nation status on World Trade Organisation (WTO) rules. However, the former outcome is more likely as a free trade deal is in our own interests and is even more so in the EU’s interests. Even the EU’s own Trade Commissioner has stated that there will be a free trade deal with the UK ‘for sure’. Even if we were to leave the EU without any deal at all we’d still be better off than we are now and we’d still be better off than the EU would be from this arrangement. Around five to six million EU jobs depend on exports to the UK and so the EU are unlikely to put these jobs and €290 billion of export profits at risk.
Every country in the world has access to the EEA. Over 50 non-EU countries have free trade agreements with the EU which don’t involve annual payments or the freedom of movement of people. Hong Kong is the EU’s 7th largest single market and so is much less important to the EU than the UK is and yet the Hong Kong has its own free trade agreement with the EU which gives it free access to the EEA. This deal took just over 2 years to negotiate. Under Tony Abbott, Australia negotiated three new bilateral free trade deals in just one year. With the UK, this should be quicker because we already have 100 per cent regulatory equivalence with the EU, we’ve no tariffs or quotas to negotiate away and are the EU’s most important export destination.