This a few months’ old, but I thought of this excellent point on the issue of Single Market access, made by Tim Worstall, when reading some bleatings from Remainers on the subject:
“We could in fact argue that a payment into the EU budget in return for Single Market access is illegal state aid. And thus not allowed under the usual rules of trade with the EU. Because it is state aid. Exporters will face tariffs if the payment is not made. The payment thus benefits exporters. But the payment is made by taxpayers, this is thus aid from taxpayers to exporters. It’s a subsidy for exports – something that isn’t allowed.”
And:
A reasonable guess at the amount the EU would demand for continued Single Market access is £8 billion a year or so. Around and about the current nett contribution and not far off the correct multiple they charge to the far smaller economies of Switzerland and Norway. And recall again, this is what they demand be paid by taxpayers to grant that profitable privilege to exporters.
What we should therefore do is charge that £8 billion to the exporters. This has two useful effects. Firstly, the charge for the privilege now falls precisely and exactly upon those who profit from the privilege. This is where costs are supposed to go, to those who gain the benefits.
And then this:
The crucial point is that the benefits, as far as the UK is concerned, of Single Market access lie with those making the exports. Thus those making the exports should be those paying the cost of Single Market access. If those who benefit think it not worth the cost then no one should be paying such
bribesillegal state aidaccess fees. And simply by applying the costs, correctly, to those who benefit we find out which is the truth.It’s very difficult indeed, nay impossible, to see the down side of this suggestion. If exporters want Single Market access then exporters can pay for it, not taxpayers. If they won’t pay it then it’s not worth it, is it?
Worstall rightly says that this sort of idea is politically difficult, precisely because it is so logical.
There is another issue. The Single Market, as envisaged by the late Margaret Thatcher, may have been about trade and economics, but as far as much of the EU political class is concerned, it was part of a wider architecture of a European superstate – hence the way debate is linked to its access being tied up with free movement. Even so, as Worstall says, if access to this market really is so important, and denial of entry is going to be “catastrophic” (to quote an excitable Facebook acquaintance of mine), then exporters should not mind paying a fee. It would be no different to, say, paying an annual membership fee, or “tithe” (Worstall’s neat term) to be a member of the London Stock Exchange, or some other market, such as the Tattersalls bloodstock market, etc.
As cannot be said too often, the Single Market is a customs union, surrounded by tariff and non-tariff walls that, for example, have significant costs on consumers. To be a member of such a protected zone ought to be a privilege that those who wish for its membership should pay for, and that payment should not come from the general taxpayer.
Worstall’s logic is impeccable.
The EU (so-called) Single Market is a Customs Union but a Customs Union is not necessarily a Single Market, for example the EEC (before the EU which came into being in 1993) was a Customs Union but not a Single Market.
This term ‘access to’ the Single Market is an odd one. China has ‘access’ to it, USA has ‘access’ to it, what is actually the issue here is whether the EU will trade freely with the UK or not, that is goods can move from the UK to the EU free of tariff and non-tariff barriers.
If the answer is no, then the EU will apply import restrictions just as they do now to China, USA,etc.
This is a cost that falls on EU consumers, not exporters.
Why the UK should pay billions so EU citizens are not made poorer by their own Governments is a puzzle. Even loading this cost on to exporters makes no sense because it ultimately leaves the UK worse off than if the EU applied WTO conditions.
Export companies that might lose some business should look to other markets to replace it… or hire new export managers if they cannot. Why should UK taxpayers be made worse off to ‘save’ a handfull of jobs and shareholders’ dividends?
Why is it assumed that exports and those ‘jobs’ are all guaranteed by EU membership or ‘access’ to the Single Market? In what World do people live where export jobs are not being continually lost because of competition from other companies inside or outside the EU?
And why does nobody consider the many more jobs associated with imports?
This whole issue is bizarre. Declare the UK unilaterally a free trade Country and tell the EU where it can go.
“Why should UK taxpayers be made worse off to ‘save’ a handfull of jobs and shareholders’ dividends?”
That is precisely the question which should be asked of all protectionist schemes. And it applies not just to taxpayers, but to the larger universe of consumers as well: Why should they have to pay higher prices to “save” a relative handful of jobs and/or companies?
In terms of payments, if the UK leaving the EU would cost €100,000,000,000, might one not ask what would happen should the EU be dissolved, presumably the ‘bill’ would be in the region of €600,000,000,000 but if there is no one left to receive it, what is the ‘cost’?
Of all the ghastly beats of states to die, the USSR was in fact almost a model of how a ghastly federation should die.
Arrrgh!
Customs Union != Single Market
You seem to be forgetting non-tariff barriers. Without the compliance with these that EU membership entails, goods will be massively held up on import to the EU. It isn’t the cost of WTO tariff that is the important bit. Exporters cannot pay to overcome these barriers for themselves. Also very unlikely that the UK government will be wise enough to unilaterally declare no tariffs on EU imports, let alone no non-tariff barriers.
Let the smuggling begin!
Actually, I’m pretty sure it already has, along with every other kind of activity to cheat the governments of the EU and the EU itself.
There is no number coming out of that place that can be trusted, not even the German ones. Economic statistics are scheisse, immigration statistics are merde, crime statistics, especially rape by the youfs of the “migrants” are scheisse, merde and skit all combined.
I have cousins in business in Germany who do an astonishing amount of cash business. Perhaps I am reasoning by analogy, but 2000 years of history support my theory.
Being a dumb Astrayan I can’t see why you Brits are required to pay for the privilege of participating in a trade bloc that you have a substantial trade deficit?
Spot on.
Non tariff barriers can’t be overcome/ paid for by exporters acting alone and so this argument is void. The EU is likely to use non tariff barriers more than tariffs to hurt British exporters, even though it also hurts their own consumers.
Tomsmith, if your point is valid then it still makes sense for exporters to pay direct. if Europe wants to impoverish itself by such means,it will. If Remainers really believe in free trade they would lobby for reductions in such barriers, but most haven’t cared a damn about this until now
Could someone please explain what non-tarriff barriers we are talking about, and how exporters from other nations outside the EU cope with them? Does the Ayatollah pay the EU so I can enjoy pistachio nuts? Are they Government Nuts?
It is all so demented “pay us for us allowing you to buy stuff from us”.
We have a massive trade deficit with these people – and they want us to pay them on top of that. They can shove that – where the sun does not shine.
Non tariff barriers include complying with EU regs and crucially having the paperwork to show that. When we leave the single market we will comply but will no longer have the paperwork, meaning that everything exported to EU will need to be examined by understaffed customs which will add massively to time and cost. Countries like Australia, USA and China all have complex trade deals with the EU which took ages to negotiate.
Preposterous. In no way does that ‘void’ the argument, it at worst makes it arguable.
WTO rules take care of many of the most egregious examples and in any case, once outside the EU, the UK workplace, where the stuff or services being sold from UK to someone from the EU are produced, become EU regs-free.
Perry beat me to it. Also, consider the fact that if the EU wants to harm itself by denying export of superior services and goods, that in no way means it makes sense for any other country to do the same. Not only should unilateral free trade apply to tariffs, they should apply to non-tariff barriers, as well.
Of course some bilateral trade deals can take a long time to negotiate, although Australia and China, for example, did a deal on trade inside two years, which is relatively quick.
While we are members of the customs union, the UK lacks the ability to do deals with scores of countries where tariff/non-tariff barriers apply.
The argument is void because while it does indeed apply to tariff barriers, it does not apply to non-tariff barriers, and these are what will be used to damage exports.
We know that the EU will use such barriers to damage UK trade because they are basically saying so. In light of this the argument from Tim Worstall, while correct in terms of tariffs, is only of academic interest; it cannot be used in support of a course of action since tariffs are not the route via which the EU will attempt to punish us for leaving.
We can of course unilaterally declare no non tariff barriers to EU imports, but that doesn’t address the problem of non-tariff barriers for exporters.
WTO rules do not help with the kind of non-tariff barriers the EU will use, otherwise other external importers into the EU would not have to worry about these barriers and would not need to negotiate trade deals with the EU (which of course they do).
Damage to British trade will be done using rules and regs, not tariffs, so this is what any argument needs to address.
It’s doesn’t take long to negotiate if the will and incentives are there. I don’t recall the French and Germans taking two years to negotiate terms in 1940.
I agree, and it is therefore important not to hesitate in the negotiation of mutually agreeable terms without entertaining ideas like falling back on WTO rules, which would be damaging since it is non tariff rather than tariff barriers that are the main problem.
Tomsmith, as I pointed out, use of non-tariff tricks to hurt UK exporters/firms are likely to be examples of self-harm by the EU. Here’s an example.
In any event, dozens of countries have access to the Single Market that are not in the EU; sometimes they simply create a subsidiary firm in one of the countries and take it from there. It is a cost, of course, but just like paying a fee to be a member of a club. If a UK firm wants access to the US or Canada it has to jump through some hoops. A point to also bear in mind that much of the angst around non-tariff barriers is linked to UK financial services. The newswires are full of stories about European bank A or B threatening to pull some staff out of the UK. This happened back before the Euro was launched. One major reason why this is unlikely is that London is where the critical mass of financial liquidity is, and second, Contintental labour laws are a nightmare. Of course, the French/others might slash back those laws, but that would be a good thing not just for France, but for the global economy, because trade is a positive-sum game, is it not?