Press Release - 20th March 2008

Ruth Lea asks, "Is the single market necessary?"

In a paper for Global Vision, Ruth Lea argues that it is time for Britain to negotiate a new trading relationship with the EU.

The UK, as a full member of the EU, is currently a member of both the EU's customs union and the single market. It is frequently argued that membership of the customs union and, especially, the single market is a requirement for trade to flourish between the UK and the EU.  Ruth challenges this viewpoint and concludes that membership of neither the customs union nor the single market is essential for a thriving trading relationship between the UK and the EU.  In fact, membership of the EU's customs union has negative ramifications for our trading relationships with the rest of the world and membership of the heavily regulated single market has implications for our international economic competitiveness.

By following the Swiss example of a free trade relationship outside the EU customs union and single market, the UK would be free to negotiate trade deals that profited the people of Britain rather than be forced to accept the terms of EU brokered compromises.

Critics of this proposal would argue that the EU will only trade with the UK if we are a full member of the EU (including the single market) and the ‘privilege' of access to EU markets would be denied to us if we sought a looser relationship.  But this ignores some basic realities:

• The UK has a huge visible trade deficit with the other members of the EU. In 2007, the UK had a deficit of £40bn with the EU27, of which £19bn was with Germany. It can fairly be concluded that the other EU states "need us more than we need them".
• In 2007 imports of goods from the EU were nearly 30% higher than British exports of goods to the EU. If it is true that 3 million British jobs depend on visible trade with the EU then, as a crude rule of thumb, nearly 4 million jobs in the EU must depend on their trade with the UK. No EU exporter (or EU Government) would wish to see a cessation, or even a disruption, of UK-EU trade.
• German businesses, for example, trade with the USA and China, even though the latter are clearly not members of the EU (or its single market). And trade is conducted under the rules of the World Trade Organisation (WTO).

Ruth Lea said:

"Given that opinion polls consistently show that the British electorate does not wish to sign up to the Treaty of Lisbon, we need to debate what sort of alternative relationship the UK should develop with the EU. 

It is often assumed that any future relationship has to be based on continuing membership of the single market for us to trade with the EU. But if we wish to escape from the burden of imposed EU regulations, which damage our international competitiveness, we should be willing to challenge this assumption and demonstrate that Britain would continue to have a thriving trading relationship with the EU outside the single market."