Brexit minister, David Davis, said in Parliament yesterday that the Government might be willing to pay a fee for access to the single market. He seemed to be assuming that it brings economic benefits, but a study by Michael Burrage, to be published soon by Civitas, shows just how wrong this belief is.
Has the single market been good for productivity? No! Has it been good for jobs? No! Has it been beneficial for our goods exports to the EU? No! Has it been good for workplace regulation? No! Has it been advantageous for our services sector? No! Has it been good for financial services? No, although in this case there is a qualification, namely that ‘passporting’ is useful for parts of the sector. Strictly speaking, however, the granting of the right for banks to trade is not necessarily linked to single market membership and a number of banks from non-member nations have reciprocal rights to sell their products within the EU. In any event, banks can easily set up subsidiaries within the eurozone.
Take productivity. Before we joined the EU the Government’s white paper predicted that membership would “lead to much improved efficiency and productivity in British industry”. Later, the Cecchini report, the founding charter of the single market, predicted in 1988 that there would be GDP gains of up to seven per cent within the first few years. OECD figures allow us to compare output per hour worked by comparison with the USA. We can look at the performance of the twelve original members of the single market from 1993 to 2013. Ireland did best and improved its productivity compared with the USA by 23%. Belgium was the worst performer; its productivity fell 13 per cent. The UK’s fell by 6 per cent.
How good has the single market been for jobs? We can compare the twelve original members with eight other developed countries that are also in the OECD. Between 1993 and 2015 unemployment in the 12 EU members has been consistently higher. More worrying still, long-term unemployment and youth unemployment have been higher in the EU. The rate of unemployment for twelve months or more was 44 per cent for the EU 12 and only 20 per cent for the eight non-members. Among young people aged 15-24, the EU average unemployment rate was 31 per cent and for the others only eight per cent.
How useful has the single market been for UK goods exports? The most obvious advantage of EU membership is that we do not pay tariffs when we export goods to the other 27 members. Strictly speaking tariffs on goods are applied by the customs union as distinct from the single market. There are no tariffs on goods traded within the customs union but they are applied to non-members who export to the EU. We can compare the rate of growth of exports to the single market by 40 countries between 1993 and 2015. The UK is ranked 36 out of 40, which means that, despite paying the tariffs, numerous non-members have increased their exports to the EU at a faster rate than the UK. We might conclude that our exporters only have themselves to blame, were it not for the fact that UK exports to destinations outside the EU have been growing more rapidly.
During the referendum campaign it was said that workplace rights would be dismantled after Brexit. But, there are numerous examples of workplace rights in the UK that are well in advance of the EU minimum. The EU minimum for paid annual leave is 20 days; we have 28. The EU minimum for maternity leave is 14 weeks, paid at the same rate as sick pay. In the UK, it’s 52 weeks, with the first six paid at 90% of the normal wage and the following 33 weeks at the statutory rate.
It is sometimes said that the ‘four freedoms’ of the single market – goods, services, capital and people – are fundamental and that it is not possible to cherry-pick any one for alteration without undermining the whole edifice. But in two out of the four cases free movement has not been achieved. Goods and people move freely, but by common consent there is no single market in services and there is also no free movement of capital.
Free movement of capital was abandoned over a decade ago. It was actively pursued by the UK for many years, but the EU ‘takeover’ directive of 2004 prevented it, chiefly because German companies did not want to be vulnerable to takeover by ‘Anglo-Saxon capitalism’. There is continuing discussion of a ‘capital markets union’ but it has yet be implemented.
One of the strengths of our economy is services and the EU has continuously spoken about ‘completing’ the single market in services, but no one thinks it has succeeded. For example, in 2015, the New City Initiative, a trade group of City fund managers, conducted research to discover how the single market was working for the asset management industry. It concluded that there was no free market for financial services.
But isn’t the EU a magnet for overseas investors? The European Commission itself has long since abandoned this claim. The “Single Market Review” of 2007, for instance, pointed out that since 2001 the volume of foreign direct investment had gradually declined. The single market is “losing its attractiveness for international R&D investment”.
We are constantly being told by EU leaders that we can’t have the benefits of the single market without bearing the costs. What are the costs? They include the membership fee, the requirement to submit to the rulings of the politically-minded European Court of Justice, the application of regulations to all our companies when only a small minority trade in the EU, and our inability to control immigration even when it is economically harmful to our lowest paid workers, including earlier immigrants.
It is often forgotten in the rush to associate racism with calls for immigration control that many of those who lost out from EU immigration were earlier migrants from outside Europe, which is why a majority of “recent immigrants” want to control immigration. Moreover, many external tariffs are to our disadvantage. They are designed to protect food producers in EU states, but often we do not produce the protected items in the UK, which means that outside the customs union we could scrap the tariffs and import foods at a lower cost.
Does the Government really want to keep open the option of paying Brussels to be part of something so astonishingly unsuccessful? Surely we have already been overcharged.