Free Trade Agreements, access and membership of the Single Market

Now that we have made the momentous decision to leave the EU, we are constantly asking ourselves what does Brexit look like?

In much the same way as people get confused about the difference between debt and deficit, there is a great deal of confusion between free trade agreements, membership and access of the single market. I thought I might give you what I understand to be the differences, and what I think we should aim for.

Firstly, free trade agreements are generally agreements between two countries in which they agree not to impose tariffs (a tax) on imported goods and services. This may be across the board or only on goods, or in certain sectors of the economy. Many countries have these and there are some cases where there is a free trade agreement between a country and the EU. Within the EU we are in effect in a free trade agreement with the other 27 nations of the EU.

What is the EU single market? It is a customs union in which all members agree not to impose import tariffs, i.e. a free trade agreement between the 28 nations including ourselves.

Is that all? No. The single market is more than that. When you sell goods into the US the goods you sell must adhere to US regulations, likewise with the EU. The Single Market makes it so that every country within the EU has the same regulations, so as a member you know that if you make something for France it will also be good enough for Germany. Being a member of the Single Market means that you agree to adhere to all the EU regulations for all your goods and services (though the single market in services is not yet harmonized).

That sounds great, so we must have access to the single market? Yes, of course we must have access to the single market - but that's not really in question. The US has access to the single market, Western Samoa has access to the single market. Access just means that you are able to sell into the single market - well you can as long as the goods you sell adhere to EU regulations, just like with the US.

So what's the confusion? Some politicians and commentators confuse access to the single market with membership of the single market. We will have access, but whether we are a member is the crux.

It sounds good to be a member of the single market, so why would we not want to be? Those EU regulations which we need to adhere to, we also need to adhere to them for any goods which we don't intend to export to the EU. In fact around 95% of our economy does not export, and some of this regulation is very heavy handed. We could have lighter British regulation for all our economy, and then apply EU regulations for only those exporting to the EU.

Any other drawbacks on being a member? Yes. The EU has made it so that the single market negotiates with other countries on free trade agreements as a Block, which is why we have not been able to have FTA's with like minded countries like the US, Australia, Canada, New Zealand and tigers such as India and China. Being outside, we can push ahead with new FTA's.

Furthermore as a custom's union, the single market does impose import tariffs on external countries, even if the UK does not wish to. Agricultural goods from Africa are cheaper, but with tariffs are more expensive. This is to protect inefficient french farmers and the common agricultural policy. Outside the single market we can drop those tariffs and get cheaper food from Africa which will help us and help Africa.

Also the EU single market membership holds that free movement of peoples is a pre-requisite which is why immigration has become an issue and, unless the EU becomes more flexible, the reason why we will have to stop being members.

The way in which Theresa May has set up the new departments, one for Brexit and an International
Trade seems to infer that we will have to stop being members of the single market (otherwise we could not negotiate FTA's).

I would bet my bottom dollar on not being members of the single market but having a free trade agreement with the single market in all areas which are already covered.

Hope that explains.

Squiffy,