• Toby Irwin

Brexit: The Global Economic Opportunity

In 2012, the share of British exports to the EU fell below 50% for the first time. By 2016 it was 45% and continues to decline. This comes at a period of great economic uncertainty. Should the UK leave the single market, and the customs union?

Continued access to the single market is essential for retaining ‘passporting’ rights for financial services. This industry makes up around 80% of the UK economy, and as such is clearly indispensable. Should the government fail to negotiate continued access to the single market then trade would fall back onto World Trade Organisation rules, potentially involving tariffs. This is not ideal, but I feel the negative impact of this is greatly exaggerated. The EU would almost certainly be inclined to (should they fail to agree on continued access to the EEA) establish a free trade deal. The EU currently has 43 free trade agreements with non-EU countries and is currently negotiating a further 89. I am under no illusion of the complexity and hard work a trade deal of this kind requires (free movement of goods, products and services), though it is nonsense to believe it impossible. Furthermore, only a quarter of financial services exports go to the EU *. Additionally, the relationship is mutually beneficial; many European companies rely on the financial capabilities and affordability of London’s markets. That said, declarations have also been made by many conservative MPs explaining that the UK has absolutely no desire to impose tariffs on imports, and as such it is likely to be reciprocated from third parties: protectionism and tariffs help nobody.

This all considered, that the UK’s financial services should be secure in the long run, how is the EU faring relative to the rest of the world? The EU’s share of world GDP is set to fall below 15% by 2020, from 36% in 1980. India, China and Latin America are all growing at the expense of Europe. Why? Almost certainly due to the inclusive and exclusionary customs union, acting like a wall around its members constricting trade and growth with the major economic powers of the world: The United States and China. Considering the UK runs a vast trade deficit with the EU (around £67 billion) then it is almost certainly beneficial for Britain to look to new markets. For reference, Germany and France sell 63% and 64% of exports to the EU. It is possible then to suggest that while the EU works for some, it absolutely does not for Britain **.

I further reject claims that the EU represents the pinnacle of economic liberalism. On the contrary, the EU is the absolute opposite. EU regulations stifle competition and productivity. Between 1994 and 2014, the EU imposed over 62,000 pieces of legislation onto its member states ***. That’s over eight laws and regulations every single day. The EU is not a shining beacon of free trade, it is a marginalising and protectionist body failing in its purpose. As Roland Smith, of the Adam Smith Institute, writes:

“This Brexit vision is therefore a global, outward-looking and ambitiously positive one. It eschews the inward-looking outlook of…the Remain lobby… So a parochial inward-looking “little Europe” and a demographically declining one, ranged against an expansive, liberal and global outlook. …The crux of the matter is that we in Britain want trade and cooperation; our EU partners want merger and a leashed hinterland.” ****

If this has not yet proved sufficient to persuade against continued membership of the EU, then consider the position of Norway. Inside the single market, outside the EU and its customs union, and one of the most well-off and developed nations on the planet. In both 1972 and 1994 Norway rejected calls to join the EU. Those in favour of EU membership claimed that unemployment would rise by 100,000. They claimed that the fishing industry would collapse. They claimed that the EU would subsequently completely ignore the interests of Norway. They claimed inflation would be crippling, investment would stagnate, and that Norway would be isolated if it refused membership. Put simply, none of this happened. Sound familiar?

To offer some form of conclusion would be that continued single market access is preferable, but not absolutely essential. The customs union should be utterly abandoned as it is not in the interests of the UK.

· https://www.instituteforgovernment.org.uk/explainers/brexit-and-financial-services

· https://fullfact.org/europe/uk-eu-trade/

· Daniel Hannan MEP, What Next, p87

· https://www.adamsmith.org/the-liberal-case-for-leave/

At the time of writing, Toby Irwin is a second year student at the University of St Andrews. He is studying Modern History and International Relations. Areas that interest him the most are UK defence strategy and foreign policy.