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| We shouldn’t even be contemplating leaving the single market | We shouldn’t even be contemplating leaving the single market |
| (2 months later) | |
| Whitehall trade expert Martin Donnelly writes an open letter to parliamentarians | |
| Martin Donnelly | |
| Sun 19 Nov 2017 00.04 GMT | |
| Last modified on Sat 2 Dec 2017 02.29 GMT | |
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| We are now just 16 months from Brexit – the biggest shock to the UK economy in living memory. And over the weeks ahead parliament will have to decide what the UK’s negotiating goals for a future economic relationship with our European neighbours should be. | We are now just 16 months from Brexit – the biggest shock to the UK economy in living memory. And over the weeks ahead parliament will have to decide what the UK’s negotiating goals for a future economic relationship with our European neighbours should be. |
| The choice you make will determine the jobs and prosperity of millions of people across Britain, and quite possibly the future shape of the United Kingdom. Once we have left the EU, amending our status will need the legal agreement of 27 other member states, a process taking years of painfully slow negotiation. So you will want to get it right first time. | The choice you make will determine the jobs and prosperity of millions of people across Britain, and quite possibly the future shape of the United Kingdom. Once we have left the EU, amending our status will need the legal agreement of 27 other member states, a process taking years of painfully slow negotiation. So you will want to get it right first time. |
| What are the facts? We know the rest of the EU contains 450 million of the richest consumers on the planet, in a wide-ranging single market and customs union. Over the last quarter-century, the British economy has become highly integrated with this market for goods and increasingly for services too – now 80% of our economy. The value of trade flowing through Dover and the Channel tunnel has more than tripled since open EU markets became a reality. Foreign investment has come to Britain to serve integrated EU supply chains and just-in-time production. A range of supporting business services from insurance to software has boomed. Asian and American companies have grown their European headquarters here as the market has expanded | What are the facts? We know the rest of the EU contains 450 million of the richest consumers on the planet, in a wide-ranging single market and customs union. Over the last quarter-century, the British economy has become highly integrated with this market for goods and increasingly for services too – now 80% of our economy. The value of trade flowing through Dover and the Channel tunnel has more than tripled since open EU markets became a reality. Foreign investment has come to Britain to serve integrated EU supply chains and just-in-time production. A range of supporting business services from insurance to software has boomed. Asian and American companies have grown their European headquarters here as the market has expanded |
| Britain’s science and research base has benefited from that outside investment. Long-term US investors have been joined by newcomers from Japan, Korea and now Chinese firms like Huawei, developing links with our universities and startups as they trade across Europe using the digital single market that Britain has helped to develop. Free movement of people and data has attracted the best European talent to our world-class research teams, making Britain the favoured base for digital and life science startups, despite strong competition from elsewhere in northern Europe. | Britain’s science and research base has benefited from that outside investment. Long-term US investors have been joined by newcomers from Japan, Korea and now Chinese firms like Huawei, developing links with our universities and startups as they trade across Europe using the digital single market that Britain has helped to develop. Free movement of people and data has attracted the best European talent to our world-class research teams, making Britain the favoured base for digital and life science startups, despite strong competition from elsewhere in northern Europe. |
| Our service sector is the leading success story in financial, legal and business services across the EU, creating thousands of well-paid jobs in London and many regional centres including Leeds, Belfast, Glasgow and Norwich. The recent opening of the audiovisual market has made the UK film and TV industry the new hub of European broadcasting. Air travel, telecoms, energy, medicines … the list of direct UK beneficiaries from the single market’s shared regulatory structures is a long one. All of them depend on EU membership. So after we leave, what best protects these benefits? | Our service sector is the leading success story in financial, legal and business services across the EU, creating thousands of well-paid jobs in London and many regional centres including Leeds, Belfast, Glasgow and Norwich. The recent opening of the audiovisual market has made the UK film and TV industry the new hub of European broadcasting. Air travel, telecoms, energy, medicines … the list of direct UK beneficiaries from the single market’s shared regulatory structures is a long one. All of them depend on EU membership. So after we leave, what best protects these benefits? |
| One option would be to retain effective economic ties through negotiating to join the European Economic Area (EEA) in some form. That would not be straightforward. It would cost money, require us to follow existing and new EU regulations, accept the court of justice as an economic referee of fair play and continue with some mutual free movement of workers. But it would keep prosperity and jobs that would otherwise be lost as firms and investors sought to avoid new costs and uncertainties. The alternative – leaving all EU legal structures – would make us more protected, more regulated and poorer. Building border posts, enforcing rules of origin certificates, paying for thousands of new customs officials and setting up 30 or more exclusively national regulators would cost money which would either be diverted from other public services or need higher taxation. | One option would be to retain effective economic ties through negotiating to join the European Economic Area (EEA) in some form. That would not be straightforward. It would cost money, require us to follow existing and new EU regulations, accept the court of justice as an economic referee of fair play and continue with some mutual free movement of workers. But it would keep prosperity and jobs that would otherwise be lost as firms and investors sought to avoid new costs and uncertainties. The alternative – leaving all EU legal structures – would make us more protected, more regulated and poorer. Building border posts, enforcing rules of origin certificates, paying for thousands of new customs officials and setting up 30 or more exclusively national regulators would cost money which would either be diverted from other public services or need higher taxation. |
| The delays and complexity of negotiating a bilateral free trade deal with the EU inevitably make UK firms less competitive, and chill foreign investment into key growth sectors such as cars, aircraft chemicals and pharmaceuticals, on which we have relied for decades. Inevitably, large parts of our service businesses would lose their current passport into the EU market. UK qualifications, from accounting to hairdressing, would no longer be accepted across Europe. UK goods and services would have to prove that they continued to meet EU standards, a time-consuming and costly process which would undercut our firms’ ability to compete successfully in the single market. | The delays and complexity of negotiating a bilateral free trade deal with the EU inevitably make UK firms less competitive, and chill foreign investment into key growth sectors such as cars, aircraft chemicals and pharmaceuticals, on which we have relied for decades. Inevitably, large parts of our service businesses would lose their current passport into the EU market. UK qualifications, from accounting to hairdressing, would no longer be accepted across Europe. UK goods and services would have to prove that they continued to meet EU standards, a time-consuming and costly process which would undercut our firms’ ability to compete successfully in the single market. |
| That option leaves us permanently disadvantaged in EU markets. But some argue that over time there is a third way, a wider world waiting for us to join them and prosper if we can only free ourselves from Europe. Is there? The critical importance of the EU’s single market for Britain is simply a matter of arithmetic. We could double trade to China and triple trade to Australia without making up for half for the service access we would lose in Europe. The Germans already sell more than three times as much to China than the UK from inside the EU. t is hard to argue that the single market is somehow holding us back from being more successfully globally. And it is size of that market which has helped the EU negotiate over thirty preferential trade deals, with more underway. | That option leaves us permanently disadvantaged in EU markets. But some argue that over time there is a third way, a wider world waiting for us to join them and prosper if we can only free ourselves from Europe. Is there? The critical importance of the EU’s single market for Britain is simply a matter of arithmetic. We could double trade to China and triple trade to Australia without making up for half for the service access we would lose in Europe. The Germans already sell more than three times as much to China than the UK from inside the EU. t is hard to argue that the single market is somehow holding us back from being more successfully globally. And it is size of that market which has helped the EU negotiate over thirty preferential trade deals, with more underway. |
| Even those countries that seek better access to UK agricultural markets, which want more visas for IT software engineers to work here, or more British healthcare funding for their own suppliers, are clear that the European single market is the most important prize. It is, after all, five times our size. So before doing deals with us, they want to know what level of access they will have from the UK into that larger EU market. | Even those countries that seek better access to UK agricultural markets, which want more visas for IT software engineers to work here, or more British healthcare funding for their own suppliers, are clear that the European single market is the most important prize. It is, after all, five times our size. So before doing deals with us, they want to know what level of access they will have from the UK into that larger EU market. |
| The US is a protected market for many services, and even the EU’s negotiating clout has been unable to open it very far. We can choose to follow US rules in farming, healthcare and product safety, at the expense of access to bigger European markets. But no one seriously expects US regulators to guarantee our bankers, lawyers and accountants the market access they enjoy in Europe today. | The US is a protected market for many services, and even the EU’s negotiating clout has been unable to open it very far. We can choose to follow US rules in farming, healthcare and product safety, at the expense of access to bigger European markets. But no one seriously expects US regulators to guarantee our bankers, lawyers and accountants the market access they enjoy in Europe today. |
| Is it likely that making our firms less open to Europe would make them more successful in global markets? We have spent the past 40 years opening up the UK economy to stimulate growth and competition. A vote to leave the EU single market would take us back to a protected, smaller-scale economy – while our competitors move towards digital manufacturing across a huge European home market. So vote to leave the single market if you must. But do it with your eyes open. A long and tortuous free trade negotiation with the EU leading to something like the EU-Canada deal, with very limited services access, will damage UK competitiveness and leave us with less investment, lower living standards and long queues at the border. | Is it likely that making our firms less open to Europe would make them more successful in global markets? We have spent the past 40 years opening up the UK economy to stimulate growth and competition. A vote to leave the EU single market would take us back to a protected, smaller-scale economy – while our competitors move towards digital manufacturing across a huge European home market. So vote to leave the single market if you must. But do it with your eyes open. A long and tortuous free trade negotiation with the EU leading to something like the EU-Canada deal, with very limited services access, will damage UK competitiveness and leave us with less investment, lower living standards and long queues at the border. |
| There is no credible free trade deal outcome able to deliver the guaranteed market access, shared regulation and consumer protection that Britain needs. Wishful thinking does not create well-paid jobs, pay taxes or fund public services. | There is no credible free trade deal outcome able to deliver the guaranteed market access, shared regulation and consumer protection that Britain needs. Wishful thinking does not create well-paid jobs, pay taxes or fund public services. |
| If you are not sure what to do, wait. Keep the UK in the EEA for a transition period and judge for yourselves if we can find a realistic alternative that meets our economic needs. But please don’t throw away our hard-won competitiveness, our knowledge-based economy which attracts global talent and investment, and our successful services sector exporting across Europe because of false promises that we can leave the single market and everything will be fine. That is not what the facts tell us. | If you are not sure what to do, wait. Keep the UK in the EEA for a transition period and judge for yourselves if we can find a realistic alternative that meets our economic needs. But please don’t throw away our hard-won competitiveness, our knowledge-based economy which attracts global talent and investment, and our successful services sector exporting across Europe because of false promises that we can leave the single market and everything will be fine. That is not what the facts tell us. |
| Sir Martin Donnelly was permanent secretary at the department for international trade | Sir Martin Donnelly was permanent secretary at the department for international trade |
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