Prime Minister Theresa May has come under fire recently for refusing to provide any clarity on Brexit. Abi Kay explores what we do know about the Government’s position on trade.
The Prime Minister caused a storm last weekend when she said the UK could not hold on to ‘bits’ of its membership with the EU – implying she wanted to leave the single market.
To readers of Farmers Guardian, this news may not have been a surprise. In September we revealed Mrs May’s private admission to NFU president Meurig Raymond that staying in the single market would be ‘difficult’.
But no-one else should have been taken aback either. Mrs May has already said many times she intends to ‘take back control’ of immigration and law. This means putting an end to freedom of movement and leaving the jurisdiction of the European Court of Justice (ECJ).
Both of those pledges would place the UK firmly outside the single market.
The single market is much more than a free trade zone; it is a single regulatory regime. Free movement of goods, capital, services and people are its foundation. That is why, as German Chancellor Angela Merkel has made clear, the ‘four freedoms’ are regarded as indivisible on the continent.
As things currently stand, it is not possible to have free movement of goods, capital and services – the essence of single market membership – without allowing free movement of people.
Members of the single market – unlike countries with free trade agreements – must accept EU control over domestic technical standards, which means they are obliged to abide by ECJ rules.
The job of the ECJ is to ensure European law is interpreted and applied in the same way in every member state. If the UK does not accept the rulings of the ECJ, it cannot retain its single market membership.
Leaving the single market does not mean the UK would be unable to trade with the EU. Many countries buy and sell in the single market – they have access to it – without membership.
What matters is how good the access is.
It seems almost certain tariffs will be erected after Brexit – Defra Secretary Andrea Leadsom told Farmers Guardian she was hoping for ‘low tariff access to the single market’ – but new non-tariff barriers to trade are also likely to be created as the UK and the EU’s regulations begin to move away from each other.
The Prime Minister has repeatedly said the issue of access to the single market is ‘not binary’ and Business Secretary Greg Clark has previously hinted the UK could seek to negotiate sector-by-sector deals.
This suggests the Government is looking at different ‘single markets’ – the single market in financial services, the single market in pharmaceuticals etc. – and choosing where and how the UK would like to be involved.
Entering into a customs union with the EU has been mooted as another possible option.
Customs unions are effectively free trade areas, but they have a common external tariff. Remaining in a customs union with the EU would mean the UK would be obliged to accept the EU’s external tariff, making the Government unable to negotiate free trade deals with other countries.
This seems unlikely given the Prime Minister’s comments about the UK being a ‘global champion of free trade’ and her decision to create the Department for International Trade.
Both the Prime Minister and the Chancellor have hinted at the possibility of a transitional agreement to smooth the transition from EU member state to independent country.
Theresa May told MPs late last year there would be a ‘necessity for adjustment to new arrangements, for implementation of practical changes’ once a deal had been struck, but made clear this would not be about delaying the point at which the UK leaves the EU.
Chancellor Philip Hammond has also said ‘businesses, regulators, thoughtful politicians and civil servants on both sides of the English Channel’ believe a period to ‘manage the adjustment’ would be required.