Britain’s membership of the single market and customs union is not about economics but implementing Labour values, argue Rupa Huq and Roger Liddle
Fifteen months on from the referendum on the United Kingdom’s membership of the European Union with the clock ticking on the article 50 negotiations, our government, which seems to have carelessly lost its parliamentary majority along the way, has categorically proven to have no coherent vision and consequently no credible Brexit policy. All we have are platitudes including ‘cliff edge’, ‘transition deal’ and, worst of all, ‘Brexit means Brexit’ – as damaging as it is tautological and vacuous.
Standards and structures
In education we have long heard the argument ‘standards not structures’. Here we argue that for EU purposes the two go hand in hand: standards are the product of structures. Subtract UK membership of the EU’s single market and customs union and we endanger our ‘frictionless trade’ – accounting for half of UK exports to the EU and 70 per cent of our total trade if you count other countries Britain enjoys preferential deals with as a result of EU trade agreements. Surely this deficit is no match for the well-worn cliché ‘the will of the people’ uttered by ‘Leavers’ to silence all critics.
Pre-referendum, terms such as Euratom and ‘customs union’ were only the preserve of experts which the Leavers said they had had enough of. In the cold light of day they become vital. Scuppering bilateral nuclear cooperation and the imposition of tariffs and ‘rules of origin’ customs checks on Britain’s trade in goods do not equate to ‘taking back control’ but a costly and unnecessary bill.
And even before the papers have been formally laid on the Brussels negotiating table the government’s trade position has problems. First, the transitional customs union proposed is a nonsense. As part of the EU customs union, the EU has ‘sole competence’ in Brussels-ese in negotiating trade agreements on member states’ behalf – cue the possibility of ‘chlorinated chickens’ and US corporations to secure access to European health provision. Of course at a simplistic level it is true that anyone could negotiate a trade agreement that increases trade flows but there is no guarantee that trade advantages gained outweigh the sectors destroyed and the standards lost. ‘Free trade’ is not what the rest of the world wants: just listen to Donald Trump and his ‘America first’ rhetoric. Once outside the EU, we will be well and truly on our own in trade negotiations as a medium-sized economy being kicked around the global trading park by emerging economic powerhouses serving their own interests.
Second, membership of any sort of customs union does nothing to mitigate the ‘cliff edge’ brink that Britain’s service exporters teeter on. Yet this is the fastest growing sector of all UK exports across sectors, encompassing intellectual property and the ‘digital economy’ and faces the loss of automatic rights for businesses based in Britain whether they be banks, lawyers or film and television producers, to do business on the continent; the loss of ‘free movement’ entitlements which enable British personnel to work anywhere – with no notice or bureaucratic formality – to service clients anywhere in the EU; and the forced separation of British businesses from strong and stable (to quote a phrase) EU regulatory requirements and processes.
Modern Britain’s great intellectual, cultural and creative strengths are bound up with our world class university system and strong research base. Yet vice chancellors too lament the direction we are taking while Theresa May dismisses modern Britons working in these sectors as ‘citizens of nowhere’ rather than welcoming their setting free of hidebound hierarchies and class distinction and the high tax revenues they generate, enabling prosperity for all. With a weakened pound and remittance values drastically down it is little wonder that from June 2016 the London hospitality sector has reported it harder to recruit from European countries. EU student applications are also down.
Third swerving to avoid a cliff edge in the transitional arrangements set out does not seem to preclude reaching a painful and possibly life-threatening cliff bottom. The referendum campaign can be seen as a failure of project fear. Voters saw the predictions of doom as hysterical and alarmist. In a campaign where all was subsumed into immigration, too little was made of the mechanics of the single market and consequences of being much poorer outside it than within. Manufacturing is now made up of complex supply chains where components are made in many different countries but production is integrated across national borders without tariffs or bureaucracy getting in the way for all those in the single market. Britain outside that factory floor could really pay a high price.
No ‘race to the bottom’
There is a natural leftwing aversion to ‘markets’ per se but the truth is that the single market is a social market underpinned by social democratic rules. Together they guarantee everything from minimum workers’ rights to consumer protections, environmental obligations and health and safety standards. Imperfect with room for improvement maybe but there is no evidence that EU state aid rules would restrict the ability of a Labour government to pursue a socialist industrial policy. President Emmanuel Macron’s recent nationalisation of a failing French shipyard proves as much. Owen Tudor of the Trades Union Congress recent argued for LabourList that ‘it is government choices, not the single market, that are limiting British control over our own industries’. The single market is the best existing defence against a ‘race to the bottom’ in the modern world. Furthermore, it simultaneously provides a model of political economy which could permit a much better regulated capitalism.
We should be levelling up, not watering down. If business has to agree standards across the whole EU, it makes it less likely that the unscrupulous among them will attempt to cut corners – when done together they are even less likely to get away with it if they do. A future Labour government could argue for a European charter of rights for workers in the gig economy, rules on corporate tax harmonisation that drastically weaken the current incentives for tax avoidance, and for rules on the determination of top pay, as the European parliament did in the case of bankers’ bonuses. But you have got to be in it to win it.
The leftwing argument that a Labour government in Britain could enact these measures of their own accord without waiting on Europe runs into the difficulty of regulating capitalism in a global economy where national controls have limited effectiveness. It goes to the heart of the problem of the Leave campaign’s great promise: outside the EU you can ‘take control’ of the decisions but not the consequences. In the club you can do both by virtue of working with others. The reality is simply that the European Economic Area is still the most world’s most wealthy single market with far more clout in the world global businesses than even a radical socialist Britain could ever enjoy alone.
In the dark days of the 1980s EU rules were a bulwark against untrammelled neoliberalism – and a very British form in Thatcherism – by in effect constitutionalising social, industrial and economic rights. When the Brexiteers complain about loss of sovereignty and profess hatred for the EU for holding Britain back it is because they lament it being an obstacle to the liberation of business from oppressive bureaucratic rules. They relish the opportunity to destroy the European social model that they despise. The cautionary tale of Grenfell Tower shows the dangers of dogmatic deregulation and doing away with ‘red tape’.
The government has made it abundantly clear that it is making it up as it goes along. But we cannot just point the finger at it. The voters who turned up for the first time because May’s government was robbing their futures and the ‘Remainers’ who swelled Labour’s vote share across the country would appreciate a clearer line from the Labour leadership as the studied ambiguity of the manifesto can only last so long.
In the meantime standards are determined by structures. This is realpolitik, heard in the voices of business small and large across the economy. Indeed, anyone changing their holiday money will have seen the sad decline of the pound – and we have not even left yet. Our shrivelling on the world stage should not follow suit. All options should remain on the table as we enter the next phase of negotiations – why cut off our nose to spite our face? The best damage limitation to limit uncertainty and maximise opportunity in these uncertain times is to stay in the single market and customs union rather than shooting ourselves in the foot fuelled by delusions of grandeur. The best way of implementing Labour values in the economy and the labour market and to protect public services like the NHS from Liam Fox-esque trade deals is exactly the same. Staying in the single market is about morals, not money.
Rupa Huq is member of parliament for Ealing Central and Acton. She tweets at @RupaHuq
Roger Liddle is a peer and a member of the Progress strategy board. He tweets at @liddlro
This article is part of a series of pieces for the September 2017 edition of Progress magazine on the United Kingdom’s membership of the single market being ‘In Corbyn’s gift‘. Please check out the other pieces now and support the Labour campaign for the Single Market while you are at it
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