18 June 2024
Alasdair Smith is a UKTPO Research Fellow, a researcher within the Centre for Inclusive Trade Policy (CITP), Emeritus Professor of Economics and Former Vice-Chancellor at the University of Sussex.

The 2019 General Election focused on the one issue of Brexit, and Boris Johnson’s victory enabled the UK to leave the EU. The evidence analysed by UKTPO and many others since then has confirmed the general expectation among expert economists at the time that Brexit would have negative economic effects. And recent  opinion poll evidence is that a majority of voters think Brexit was a mistake.

To say that Brexit was a mistake does not imply it could or should be simply reversed. Yet, it is reasonable to expect the political parties to address the issue in their current election campaigns.

The Labour Party’s ambition for the future EU-UK relationship is set out in two paragraphs in their manifesto published on 13 June:

“With Labour, Britain will stay outside of the EU. But to seize the opportunities ahead, we must make Brexit work. We will reset the relationship and seek to deepen ties with our European friends, neighbours and allies. That does not mean reopening the divisions of the past. There will be no return to the single market, the customs union, or freedom of movement.

Instead, Labour will work to improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary [my emphasis] barriers to trade. We will seek to negotiate a veterinary agreement to prevent unnecessary border checks and help tackle the cost of food; will help our touring artists; and secure a mutual recognition agreement for professional qualifications to help open up markets for UK service exporters.”

A firm commitment to stay out of the EU for the next Parliament is surely wise. The UK-EU relationship has been bruised by the experience of the last 8 years. Rebuilding the relationship will take time and patience, and the opportunity to solidify the long-term relationship lies some way in the future. The incoming government faces formidable challenges in many areas and even a long-term plan to rejoin the EU would be a diversion from more immediate priorities.

Since there is no plan to rejoin, it follows that a new government must indeed seek to “make Brexit work”. It’s also right to aim for the removal of any unnecessary border checks and other barriers to trade that have damaged the UK economy.

This is a more positive and less dogmatic approach to the UK-EU relationship than the Conservative manifesto whose main concern is to rule out “dynamic alignment” to EU rules and “submission to the CJEU [the Court of Justice of the EU]”.

Dynamic alignment means sticking to EU rules even when they change. There’ s a strong case for dynamic alignment in many areas, to create a climate of regulatory predictability in place of the regulatory uncertainty and instability of recent years. In any case, firms have to satisfy EU regulations for products they sell in the EU. In many important sectors of the economy (like chemicals and motor vehicles) that means virtually all their production has to meet EU requirements, so separate UK regulations are a deadweight cost.

The Labour manifesto’s red lines are clearly drawn: “no return to the single market, the customs union, or freedom of movement”. The political pressure for such clear lines is understandable. However, they will constrain the objective of reducing border checks and other barriers to trade.

The European single market (which encompasses some non-EU countries like Norway) is the regulatory framework which removes barriers to trade within Europe. Members of the single market adopt common regulations, common processes for assessing conformity with these regulations, and a common legal framework under the umbrella of the CJEU. Members of the customs union similarly have a common policy towards goods imported from non-member countries. Checks on trade between EU countries are unnecessary.

However, if the UK remains outside the single market and the customs union, checks on UK exports to the EU are necessary to make sure that EU rules are satisfied. It’s not enough for UK producers to satisfy EU rules – their products still need to be checked for conformity. However much trust and goodwill are built up with our EU partners and no matter how much alignment there is with EU rules, the scope for removing “unnecessary” barriers to UK-EU trade may be frustratingly limited in practice.

The main political barrier to UK membership of the single market is, of course, the additional single market requirement for the free movement of labour. But post-Brexit restrictions on labour mobility between the EU and the UK has had adverse effects in many important UK sectors: including business services, agriculture, hospitality, social care, and the creative industries.

It’s understandable that the Labour manifesto rules out free movement, but notable that it is silent on the recent EU offer on youth mobility: proposals which emphatically do not imply freedom of movement (not least because they involve visa controls). These proposals would restore to young Europeans in the UK and the EU some of what they lost as a result of Brexit, and would also help address some of the problems of the sectors most affected by Brexit. Surely an incoming government should take a more positive approach to the EU offer.

Opinion poll evidence is that a clear majority of the UK electorate favour a return to EU-UK freedom of movement. A new government may find the political constraints changing quite quickly, so that rejoining the single market becomes thinkable.

A manifesto commitment not to rejoin the single market applies to the next Parliament but doesn’t stop the government from preparing to rejoin in the following Parliament. The path to re-entering the single market would in any case be a long one, probably via the European Free Trade Association (EFTA) into the European Economic Area (the EEA). This path requires preparation and negotiation.

That preparation should include addressing the fact that the single market requires free movement of labour not free movement of citizens. The UK could develop rules for a regime in which EEA citizens are not unconditionally free to come to the UK but are free to relocate to the UK (with their families) in order to work.

The Liberal Democrat manifesto, in contrast to the Labour manifesto’s red lines, makes a positive commitment to rejoining the single market:

“Finally, once ties of trust and friendship have been renewed, and the damage the Conservatives have caused to trade between the UK and EU has begun to be repaired, we would aim to place the UK-EU relationship on a more formal and stable footing by seeking to join the Single Market.”

Realistically, the timetable suggested by these words could well extend beyond the 4-5 years of the next Parliament. In this case, the difference between the Labour and LibDem manifestos may be presentational, rather than real. The single market issue will not go away, even if it cannot be settled before another general election at which a proposal to rejoin the single market could be put to the electorate.

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The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

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