Brexit Explained | What is the Single Market?
The EU single market is set up to make trading as easy as possible for the member countries. Those countries who agree to be in the single market can trade with each other without any taxes, tariffs or quotas. This means there’s no extra charges and no limit on the amount of products you can sell.
Trading Tariffs lead to Trade Wars
One of the main potential trading partners for the UK after Brexit would be the US. They are not in the single market so were able to recently put a tariff on imports of steel from other countries, encouraging Americans to use their own steel and making our steel comparatively more expensive and therefore less competitive than theirs. This can be expected from countries who are not in the single market, looking to reduce the competition for their own goods. However this means that people living in the US will end up paying more for things like cars or anything made of steel.
When outside of the single market, the UK could put extra tariffs on other countries’ products, although this would raise the price we pay for goods. It can also trigger a trade war where countries respond with their own increased tariffs and the situation escalates. We are currently seeing the beginnings of this as the EU respond to the increased tariff on steel imports with their own “rebalancing measures”, otherwise known as retaliation or revenge – you damage our economy so we hurt yours. In general everyone ends up paying more for their goods and it does not help the global economy.
Being a member of the EU customs union and single market prevents this kind of a protectionist move from taking place, at least from other countries within the EU who are part of the same agreement. Leaving this arrangement could mean that the trade deals we are hoping to secure look more like trade wars, as our main post-Brexit trading partner has recently illustrated.
No Quotas in the single market means unlimited products can be sold to any country
In the single market there are no quotas on goods, meaning there is no limit in terms of the amount you can sell to a particular country. If you have a business selling cars you can sell as many as you want to France, Germany, or any country in the single market. However if we are outside the single market, and have annoyed the EU enough during the Brexit negotiations, they could put a maximum limit on the number of cars being sold to them.
Same Regulations makes trade easier
Having the same regulations as all countries within the single market makes it easier to sell goods to a foreign market. Imagine you own a pharmaceutical company selling medicine in the UK. You want to expand and sell your products to USA and Brazil. However they have different rules on goods sold so for example, the US markets may require a different kind of label. Brazil aren’t too bothered about the label but their regulations say your medicine is too strong. This would require separate production lines for the labelled boxes going to the US, the special half-strength medicines going to Brazil and the original product matching UK regulations that would need to stay the same. As you can see, from a business perspective this could make the operation too costly to be worthwhile.
Single Market system benefits people living in it – workers protected
The alignment of regulation within the single market also helps the population in general as it stops governments from ripping their people off in order to be more competitive. They can’t for example take away your worker’s rights to try and make more money, or force you to work long hours, or every day of the week.
Of course our UK government would never exploit or jeopardise us in any way to further their financial aims, but it’s comforting to know those rules can’t be touched under any circumstance. Outside of the single market, none of your rights are guaranteed. Any or all of them could be sacrificed if the government thought it was worth it to secure a particular trade deal. Why would they do this? The size of our overall market that we can offer up to trade with will be significantly smaller when you take away the other 27 countries that make up the EU. This means we will have to offer a suitable bargaining chip to be allowed to trade on an equal basis with a much bigger market like the US. Far from being able to boldly make our own rules upon exiting the EU, we will most likely have them dictated to us by the larger economies we set up deals with – taking back our sovereignty so it can be divvied up and sold to the highest bidder.
What were the arguments for joining the single market in the first place?
You can take a look at the original arguments here in this YouTube video of the TV debate back in 1970 about joining the single market or common market as it was then known. Please forgive any diversions from political correctness found in said video, this was the 70’s after all.
Other options for Brexit
Apart from the Single Market, the other options available to the UK would be to stay in a Customs Union, Free Trade Area, adopt a Norway/Swiss Model, or fall back on WTO Rules. You can find more information on these options in the following articles in the Brexit Explained section or get in touch with us directly for more details.
To instruct the government to revoke article 50 and keep UK as a member of the EU, sign the petition here.