Wednesday, August 10, 2016
The cost of leaving the single market
The votes have been counted, the result has been announced and the UK is leaving the European Community. But what will we put in its place?
That is question that voters were not asked to give their verdict on and as a result it has been left to politicians to 'interpret the will of the people'. In doing that they must act in the best interests of the UK, yet according to the independent Institute of Fiscal Studies, our interests are best served by staying within the European Single Market.
As the Guardian reports, the IFS believe that membership of the European single market is worth an additional 4% of GDP to the economy:
The Institute for Fiscal Studies said that Britain could enjoy the same sort of access to the world’s biggest market on the same World Trade Organisation terms as other non-EU member states such as the US, China or India.
But it said membership of the single market provided additional benefits that might be lost depending on the deal struck by ministers in Theresa May’s government.
Ian Mitchell, research associate at the IFS and an author of the report, said: “From an economic point of view we still face some very big choices indeed in terms of our future relationship with the EU. There is all the difference in the world between ‘access to’ and ‘membership of’ the single market.
“Membership is likely to offer significant economic benefits particularly for trade in services. But outside the EU, single market membership also comes at the cost of accepting future regulations designed in the EU without UK input. This may be seriously problematic for some parts of the financial services sector. Choices in these domains will most likely be far more important than any deal on budget contributions.”
The IFS said single market membership meant elimination of trade barriers not possible under existing trade deals. These included so-called “non-tariff” barriers such as licensing or regulations that make it harder to export goods and services.
The thinktank added that service sector exports were becoming especially important to the UK, accounting for 44% of total exports in 2015, up from 31% in 1999. Two-fifths of service sector exports go to the UK, whereas the Bric countries (Brazil, Russia, India and China) account for less than 5% together.
The choices facing us therefore are difficult ones, but the conclusion is clear and stark: outside of the single market, whichever way you finesse it, we are worse off, everything else is second-best and will cost jobs.
That is question that voters were not asked to give their verdict on and as a result it has been left to politicians to 'interpret the will of the people'. In doing that they must act in the best interests of the UK, yet according to the independent Institute of Fiscal Studies, our interests are best served by staying within the European Single Market.
As the Guardian reports, the IFS believe that membership of the European single market is worth an additional 4% of GDP to the economy:
The Institute for Fiscal Studies said that Britain could enjoy the same sort of access to the world’s biggest market on the same World Trade Organisation terms as other non-EU member states such as the US, China or India.
But it said membership of the single market provided additional benefits that might be lost depending on the deal struck by ministers in Theresa May’s government.
Ian Mitchell, research associate at the IFS and an author of the report, said: “From an economic point of view we still face some very big choices indeed in terms of our future relationship with the EU. There is all the difference in the world between ‘access to’ and ‘membership of’ the single market.
“Membership is likely to offer significant economic benefits particularly for trade in services. But outside the EU, single market membership also comes at the cost of accepting future regulations designed in the EU without UK input. This may be seriously problematic for some parts of the financial services sector. Choices in these domains will most likely be far more important than any deal on budget contributions.”
The IFS said single market membership meant elimination of trade barriers not possible under existing trade deals. These included so-called “non-tariff” barriers such as licensing or regulations that make it harder to export goods and services.
The thinktank added that service sector exports were becoming especially important to the UK, accounting for 44% of total exports in 2015, up from 31% in 1999. Two-fifths of service sector exports go to the UK, whereas the Bric countries (Brazil, Russia, India and China) account for less than 5% together.
The choices facing us therefore are difficult ones, but the conclusion is clear and stark: outside of the single market, whichever way you finesse it, we are worse off, everything else is second-best and will cost jobs.
