This weekend, we relaunch the expanded European Research Group (ERG) of Conservative MPs, which I chair. I am proud that ERG Vice Chair Suella Fernandes MP has taken the lead.
For the Telegraph, Suella writes ‘Britain must untie itself from EU shackles by using Brexit to leave the customs union’. Sixty Conservatives, plus colleagues from the DUP, Labour and UKIP have united behind her, agreeing on the statement, “The UK must leave the European Economic Area (EEA) and the Customs Union”, the so-called “Single Market”. The Telegraph reports, Heavyweight Brexiteers among 60 Tory MPs to demand clean break from the EU.
We should seek a broad and deep bilateral free trade deal with the EU but we cannot remain in the EU’s internal market without unacceptable costs. The Legatum Institute Special Trade Commission‘s briefing Cost of EEA Membership for UK explains:
Little has been said about the potential cost to the UK economy of remaining within the European Economic Area (EEA) or otherwise retaining single market membership through an associate membership. The reason why there is a cost associated with EEA membership is that if the UK remains within the EEA, and therefore subject to the laws and regulations governing the single market (EEA Regulation) then it will be unable to negotiate agreements on services with other countries. The reason for this is that every services negotiation is an agreement on domestic regulation, and agreements on domestic regulation require trading partners to be able to put their own domestic regulation on the table for negotiation. If the UK is bound by EEA Regulation, then it will not be able to negotiate its own domestic regulation.
Although it may be technically possible to negotiate the very basic market access and national treatment measures in services with other countries from within the EEA, it is not possible to negotiate on the issue that is the most important in any services negotiation which is on domestic regulatory issues because the UK would be bound by EEA Regulation and therefore would be unable to negotiate.
No country would negotiate on services in this context. Thus all the gains from deeper services liberalisation for an economy with 80% services exports would be lost. The UK exports about £230bn of which about £50bn is nancial services.
But if we leave and agree a new basis for global trade, which the Special Trade Commission sets out, the potential gains are enormous:
We have found that even if these countries merely lower their distortion by one third, this will result in a 1.5% year on year increase in overall Global World Product such that the global economy is 50% bigger in fifteen years than it would be if we remain on the same glide path as we have been on since the early 2000s.
To be in the EU internal market would mean retaining all the EU’s regulations and policies, barring reform and new trade. To be in the Customs Union would mean no external trade deals on goods, adopting EU product regulations on our domestic economy and suffering the EU’s import taxes.
Thanks to the Special Trade Commission, we know how to make the global economy 50% bigger in fifteen years than it would be otherwise. It is a prize worth winning. It can be done by embracing the world and relentlessly fighting crony capitalism. It cannot be done if we remain in the EEA or the Customs Union. We must leave both.
The UK is ideally positioned to catalyse a new global trading system which works for everyone by promoting free and fair trade and defending against predatory practices. If we remain in the EEA or Customs Union, we will squander a multi-generational opportunity to relight the torch of liberty and prosperity.
Membership of the EEA or Customs Union would be a fake EU exit, an expensive one for the UK and the world. That’s why we need a clean break.
- Trade Tools for the 21st Century
- Special Trade Commission: Financial Services Briefing
- 48:52—Healing a Divided Britain
- Introduction to Anti-Competitive Market Distortions and the Distortions Index