I wish Sir Keir Starmer no ill, but I am sure that his desire for economic growth will force a rethink on his ‘pledge’ of no return to the single market in his lifetime. Likewise, Lord Mandelson, who predicts no talks on rejoining for ten years. As a former EU commissioner for trade, Mandelson knows how influential a role the UK played in formulating EU trade policy, and how vital that is for any growth strategy for the UK.
When looking for reasons to rejoin the EU, it is useful to remind ourselves why we joined the common market in the first place. The 1957 Treaty of Rome establishing the then European Economic Community was committed to the ‘Four Freedoms’: movement of goods, capital, services and labour, with this last being later amended to read ‘people’. As such, it was a re-commitment to the 19th-century liberal free trade theory that countries which trade with each other would not war with each other.
The other main precepts of the common market were to erect a common external tariff against imports, and to pool member states’ sovereignty to provide a springboard for export beyond the common market. These were two major reasons which attracted UK business to consistently support membership, despite rebuffs from President General De Gaulle of France. It also attracted support from UK politicians, particularly from the Conservative Party which saw membership as a way of shoring up Britain’s decline as an economic power.
Slow British economic recovery post-World War II
Britain’s post war recovery had been sluggish and by 1960 Britain’s exports had lost 18% in value over the previous decade. In addition, the Commonwealth countries were increasingly eager to find their own economic way in international trade.
Within the common market, and beyond – on the other hand – trade was booming, given the added collective negotiating power of Brussels in the world market. In 1950, for example, the then West Germany’s share of world trade was 7% – compared to Britain’s 25%. By 1960, the same figures were respectively, 16% to 19% (as detailed by Robert Saunders in his 2018 book Yes to Europe. The 1975 Referendum and Seventies Britain).
A key factor in the Brexit referendum was that, by 2016, British manufacturing and exporting had declined in importance and influence, compared to the financial and services sector. There was a mistaken belief that the service sectors would compensate for any loss of manufactured goods.
Britain needs to be an attractive prospect
Any successful movement to rejoin the single market and the EU will have to appeal to revive Britain’s manufacturing exports to larger markets – and the EU is the world’s largest. It should also be noted that outside the single market, the financial and services sectors have suffered from competition from inside the EU. International firms are still moving away from London to Frankfurt, Paris, and Amsterdam. The Office for Budgetary Responsibility has calculated that remaining outside the EU’s single market will see a drop in the intensity of trade of 15% in the longer term.
In trade, size matters not only in the collective export power of the trading entities, but also in terms of what internal market a country or regional group can offer in any negotiation. Put bluntly, Brexitland’s population of around 67 million is not as attractive as the EU’s 449 million, and nowhere near being the important bargaining chip needed in trade negotiations.
Brexit deals, rollovers and no deals
Despite the often ludicrous claims of ‘new’ deals: the risible deal made by Liz Truss which increased the UK’s share of Japan’s cheese quota, or the fanciful notion of trading with an ‘Asia/Pacific’ which has yet to develop even the basis of a regional trading bloc; all Brexitland has achieved is so-called ‘rollovers’. Rollovers simply tweak existing EU deals made when Britain was a member. The catch though, is that ‘rollovers’ can only happen if the other partners agree.
The ‘new’ deals with Australia and New Zealand will only realise marginal increases in volume; moreover, in the desperation to show ‘successes’ these deals have involved major concessions on the part of the UK. The deals came into effect in 2013 when previously the UK National Farmers’ Union had predicted a “huge downside” for UK dairy and meat farmers through increased agri-imports, whilst the deals “secured almost nothing” for UK agri-exports, according to the union.
This loss of negotiating power was spotted by President Obama, who warned against any optimism based on the myth of a special relationship with the USA in trade terms. Obama said Brexit would mean Britain would be “back of the queue”.
Protection from rogue operators
Another area where the protective power of the EU has proven safeguards are in the social and political spheres. Recently, the Gulf States threatened to abandon trade talks with the UK, if the eventual agreement included observation of human rights clauses (see also my article for Yorkshire Bylines from March 2023).
All EU trade agreements have basic conditionality concerning the observation of basic International Labour Office working standards. In addition, EU trade agreements have a built-in monitoring agreements to ensure the partner observes basic human rights.
Concern has been expressed about Rachel Reeves’s budget announcement of further ‘Freeports’ in the UK as a method of enhancing growth. The apprehension is that ruthless entrepreneurs can avoid working conditions and financial regulations, which exist outside these freeports.
Rishi Sunak, as prime minister, argued retrospectively, and falsely, that the establishment of freeports was blocked by the EU. What is true, is that the regulation of freeports is more strictly enforced inside the EU as the UN reported in 2005.
Rebooting growth by rejoining the single market
Rejoining the EU trade regime would entail some concessions by the UK but, inside the EU, everyone acknowledged that Britain was always skilful in promoting its own interests within the framework of a consensus EU trade policy.
Economic growth was, and will be again, boosted by membership of the EU. As Margaret Thatcher acknowledged in her Mansion House speech in April 1988: “Just think for a moment what a prospect that is. A single market without barriers – visible or invisible – giving you direct and unhindered access to the purchasing power of over 300 million [now 449 million] of the world’s wealthiest and most prosperous people. Bigger than Japan. Bigger than the United States. On your doorstep.… It’s not a dream. It’s not a vision. It’s not some bureaucrat’s plan. It’s for real.”
Trump victory
Donald Trump’s victory in the US presidential election ought to speed up Starmer’s deliberations on Europe. Trump seems set on trade wars to satisfy his backers’ and followers’ assertive politics. In his campaign Trump said that he loved the word ‘tariffs’ (in effect a tax on imports) and though that would bring a temporary rise in domestic US economic activity, it spells trouble for international trade.
Smooching up to Trump will prove as pointless as Theresa May’s excruciating hand-holding in his first term of office. Starmer may find sooner than he expected that there’s safety in the numbers in the coming trade storm.
Emmanuel Macron has immediately grasped this by calling on greater European cohesion in the face of an anticipated ‘America First’ policy. A more serious approach to Brussels is the sensible precaution for the UK. Besides, taking the Eurostar is more climate friendly than the transatlantic jet.
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