The Leave movement confused membership in the EU single market and access to said market. The former is far more important than the latter, and the public deserves to be informed of the difference.
The aftershocks of Britain’s vote to leave the European Union have barely subsided. The process of leaving under Article 50 has not yet begun. Meanwhile, the fate of everything from London’s financial sector to immigration is a bargaining chip for Number 10’s new cabinet.
Last week, the UK’s Institute for Fiscal Studies (IFS) released a report outlining Britain’s post-Brexit economic options. It argues that the UK’s biggest issue is whether it will retain membership in the EU’s Single Market.
The EU Single Market: The Value of Membership versus Access to the UK concludes that retaining Single Market membership is essential; failure to do so could drop the UK’s economic output by four percent. The report also confirms that the financial services industry is especially reliant on Single Market membership. If this sector can no longer directly work with EU-based businesses, its value could continue to decline.
Not synonymous
The IFS report also distinguishes Single Market membership from access.
“Despite the efforts of some to confuse the issue ‘membership of’ the single market is entirely different to ‘access to’ it,” the report reads. “Membership may come at the cost of continuing to contribute to the EU Budget and accepting future regulations designed in the EU. Those costs are salient and the benefits of membership are diffuse – but the financial benefits are real and, at the moment at least, likely to outweigh the financial costs.”
The report goes on to say that access to the EU’s Single Market is more theoretical than tangible.
“Any country in the World Trade Organisation (WTO) – from Afghanistan to Zimbabwe – has ‘access’ to the EU as an export destination,” the report says. “Single Market ‘membership’ by contrast involves elimination of barriers to trade in a way that no existing trade deal, customs union or free trade area achieves.
“In particular it means reducing ‘non-tariff’ barriers like licensing and other regulatory constraints to supplying goods or services. These sorts of barriers have become relatively more important to trade than tariffs (taxes on trade), and especially so for services.”
Membership versus Access
This distinction is not inconsequential. Post-Brexit data shows most Britons prioritize access to the EU’s Single Market over immigration control. One in five Leave voters holds this opinion; more than three quarters of Remain voters agree.
This suggests that the nuance of Single Market membership versus access is lost on many. The UK could retain access to the EU Single Market even if it leaves during negotiations. In that sense, the UK could control immigration while retaining Single Market access; it does not have to be an either-or scenario.
But forfeiting its Single Market membership means that the UK would lose its free access to EU trade. Such trade accounts for 44 percent of British exports and 39 percent of service exports. The IFS warns that this trade loss could depress tax receipts by a larger amount than the eight billion pounds the UK would save in EU budgetary contributions.
Next steps
This report’s results should not be surprising. The IFS warned before Brexit that voting to leave the EU could add two years of austerity.
They were not alone in their outlook; the IMF, Bank of England, OECD, and others agreed that leaving would hurt the UK economy. These warnings were dismissed by Leave campaigners as “paid-up propaganda” – and enough voters believed them.
The next step is for those in positions of power – the media, government, think tanks, and more – to be crystal clear about what Single Market membership means for the UK. Contrary to common implications, it is not the same as Single Market access. The public deserves to know the difference. Surely the new cabinet should negotiate in the public’s best interests.
