But the customs union is not enough, we must be fighting for membership of the single market.
Yesterday Liam Fox made a very convincing argument for avoiding a hard Brexit – it’s a shame he ended up at the wrong conclusion! While he argued that we should leave the customs union, the priorities he lays out provide the perfect basis for a powerful case as to why we must remain in both the customs union and the single market.
First he argued that we have to start to look beyond Europe and at developing countries, where increasing prosperity means the demand for the goods and services in which we have a comparative advantage is growing. This is true. Fox pointed to the success of ‘Africa’ – one day politicians will stop homogenising an entire continent, but that is another debate.
The figures do support the view that countries in this part of the world are doing exceptionally well – Ghana has been the fastest growing economy in 2018 with real GDP growth estimated at 8.3% and it’s closely followed by Ethiopia which is at 8.2%. The lack of resource dependency means that, particularly for countries like Ethiopia, growth is likely to be sustained despite the inevitable fluctuations in commodity prices, making it a key player in future trade negotiations. This also means that demand for financial services, in which the UK is world-leading, is likely to grow as more households and firms look to invest, making it vital that there is a global market in which we can operate and supply to these countries.
But Fox makes an illogical jump, assuming that engaging with new economies necessitates a hard Brexit.
The single market was founded in 1993 with the intention of facilitating greater growth and cooperation between what were some of the world’s biggest economies. This principal is not redundant. We can work within the single market and customs union to push for more trade deals with emerging economies. This is especially true if we’re as much of a key player, able to influence other dependent member states, as Fox suggests. Furthermore, staying in the single market will mean we are able to influence the kind of trade deals the EU pushes for; working to ensure they are fair and equitable for all the countries involved.
Not only is it possible to pursue this expansion from within, it’s preferable. Bilateral trade agreements with separate countries lead to a web of complications, arising from the need to individually negotiate terms and conditions, separate from those which the EU already has. Pushing for these deals from within the single market instead would also maximise the extent to which we can ‘spread prosperity’ – something which Fox repeatedly claimed was vital. The benefits of free trade for countries like Ethiopia would be even more significant if the likes of Germany and France were involved, limiting barriers and giving them access to larger markets.
Fox then goes on to argue that the UK needs to be more flexible and able to adapt to an ever-changing economy, where technology and the rise of China threaten to diminish our global standing. This is true. The IMF reports that as a region, Asia accounts for over half of global economic growth, with China, India and Japan in particular, becoming of undeniably critical importance.
But here Fox makes an even more illogical jump, assuming that the way to counteract these rising powers is by going it alone.
The UK does have valuable markets and a strong economy, particularly in terms of the high-value services that are becoming ever-more important. This is not however a substitute for the strength that being part of a customs union gives us. It’s intuitively obvious that the potential for trade with and access to more than one market will make countries like China more likely to cooperate with us. Some may suggest that the focus of those in the customs union is primarily inward-looking, with no appetite for expansion. Assuming this is true, the UK can and should be challenging it, putting forward the argument for multilateral trade deals and global negotiations.
But the customs union is not enough, we must be fighting for membership of the single market. The alignment of standards that this entails ensures the removal of non-tariff barriers, eradicating any difficulties in terms of internal trade and enabling us to focus on competing and cooperating with the likes of China and India. Abandoning the ‘four freedoms’ would also make the UK less competitive. Ending free movement of capital and people in particular would exacerbate the skills shortage and raise costs for domestic firms. The pan-European supply chain relies on free and frictionless trade – it is estimated that 63% of EU firms who work with UK suppliers will relocate their supply chains following a hard Brexit, where we leave the single market and abandon the rights of EU citizens to freely live and work within the UK.
Liam Fox argued for a UK that is competitive and able to work with new powerful economies; one that is outward-looking and ready to embrace new opportunities. Yet he seems to advocates for an approach to Brexit that will do the opposite of this. Households will be the first to suffer if we get it wrong, especially if a fall in GDP and loss of jobs means higher unemployment and more austerity. As the party for the many, Labour has a duty to challenge this at every level of government, ensuring that the economic argument against a hard Brexit is not lost.
Rania Ramli is a Young Fabian member