Who holds the cards?

A perennial problem with the Leave campaign is that they have no idea what situation we’d find ourselves in if we quit the EU.

Some of them glibly say we’d get a trade deal with the EU, keeping full access to the European market for our exports. Never mind that no country outside the EU has managed that without making a contribution to the EU budget and accepting free movement of capital and labour. According to the Brexit brigade:

Given that the EU sells far more to us than we do to them, the remaining EU member states will seek a trade agreement with the UK that seeks to maintain the same level of free exchange of goods, services and capital as is the case today.

But this argument has a number of obvious weaknesses:

  • Our exports to them represent half of our trade and 14% of our GDP — absolutely vital for us. Their exports to us represent just 2.5% of their GDP, markedly less crucial for them. It’s easy to see who would have the stronger hand in negotiations.
  • In any post-Brexit negotiations, there would hardly be goodwill towards a country that has just walked out slamming the door! Governments of other EU countries would not go out of their way to face down protectionist demands from economic interests in their own countries just to give a competitive advantage to British producers.
  • Even if Britain did manage to get a high level of access to the European market, its exporters would have to comply with EU rules on product standards, consumer protection, environmental impact and so on — but without any longer a British say on them. Such rules can easily be fine-tuned to disadvantage competitors.
  • Whatever we manage to negotiate is in any case going to take some time, at least two years, with the uncertainty putting a damper on investment and growth, as businesses wait to see the outcome before they take an investment decision.

The EU is our single largest export destination by far. Simply assuming that “things will work out all right on the night” is just not good enough for the millions of people in our country whose jobs could be on the line and the millions more whose standard of living would decline.

There’s an interesting article in today’s Guardian, by an economist and former Polish minister, which makes a similar point in the broader context of the UK negotiations:

I have seen for myself, at more than 60 meetings of finance ministers, the influence Britain has when in the room. Decisions to deepen the single market, cut the EU budget (unfortunately), reduce the legislative burden and increase competitiveness have all been taken in response to British voices. Over 40 years of membership, the UK has negotiated advantages for itself on a vast range of issues, especially financial services. This influence would be immediately relinquished at the point of a leave vote, as remaining members would position themselves to ‘divvy up’ the British cake.

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