An important factor in persuading many to vote Remain, according to several polls, was the economic benefits of the Single Market. And fear of losing those benefits, and one imagines that the predicted consequences for employment and incomes accounts for some of the rage and recrimination currently being directed at Leave voters and their leaders.
The only economic benefit mentioned in the referendum debate was the 44% of UK exports of goods going to other members. But that can hardly be considered a benefit of the Single Market since it is a fair bet that 44% or more of the exports of every country in the world go to its 27 nearest neighbours. In any case the proportion going to the other 11 founder members in 1993, when the Single Market was inaugurated, was considerably more: 56%. To find that the proportion has fallen to 44%, despite the EU adding 16 new members, does not suggest that the Single Market has justified its costs and obligations. Benefits would, one imagines, show themselves by an increase of one or other significant economic variable, by growth, or acceleration, rather than by steady decline.
In hindsight, one of the more curious aspects of the 43 years of UK membership of the EU, is that no British government, over all that time, ever thought of monitoring, analyzing, explaining and regularly publishing the evidence about its impact on the UK economy. Prime ministers and ministers repeatedly referred to its benefits, but in vague terms, and could never pinpoint or document them. And of course none of its past benefits ever surfaced during the referendum debate, since the government decided that its argument would not be based on what has happened over the past 43 years of membership, or the 23 years of the Single Market, but on highly speculative expert predictions of what might happen by 2030, were the UK to leave.
Now, however, it is time to insist that these benefits be precisely identified, partly to decide whether there is any substance in the gloomy forecasts of the many disappointed media commentators, but more importantly because the Leave side will soon have to decide what exactly has to be traded and sacrificed if they are to continue. Should the UK concede free movement of labour with the EU for these benefits? This is a difficult question to answer if nobody knows what the benefits are.
The common assumption over the years seems to have been that the UK pays the subscription, sits around the table and helps to make the rules because it helps to increase UK exports. Hence the number one measure of the benefit of the Single Market would be the growth of UK exports to other members, by comparison with the exports of non-member countries.
A second related benefit, which Tony Blair was fond of mentioning, is that, by virtue of the ‘clout’ and ‘heft’ of the EU, the European Commission was able to negotiate trade agreements with many other countries around the world, far beyond what the UK on its own would have been able to do. And this benefit of these agreements can also, of course, be measured by the growth of exports to countries with which the EU has signed agreements.
All the authoritative, publicly-available trade databases, such as OECD, IMF, UNComtrade and the ITC, provide evidence on the growth of UK exports since 1993. And they all show that UK exports, of both goods and services, to other EU members since 1993, have grown more slowly than those of numerous non-member countries, both developed and emerging economies, including many who have traded with the EU under WTO rules and without the benefit of any kind of trade agreement.
No doubt UK exporters have benefited from the minimal paperwork and the convenience that trade within the Single Market makes possible, but there is no sign that it has yielded significant tangible, measureable gains in terms of the growth of UK exports or in terms of the UK’s balance of payments. In these terms, the Single Market has been of no benefit at all to UK exporters.
There is little reason to pay much attention to the benefits from the EU agreements with 58 agreements around the world, since their impact has been grotesquely exaggerated by the remain campaign. Most of these agreements have been with small or mini-states. All together, excluding EU itself and those with EFTA countries, they cover just under 7 per cent of UK goods markets around the world, and 1.85 per cent of its services export markets.
After studying EU-wide statistics on productivity, Wolfgang Munchau of the Financial Times decided that ‘the Single Market is not visible in the macro-statistics’, and that ‘the Single Market is a giant economic non-event.’ The statistics on export growth lead to exactly the same conclusion.
Leaving it cannot, therefore, possibly be the catastrophe that many disappointed Remain-supporting commentators would like us to believe. Nor will it require the concessions that some Leave supporters already seem ready to make. Why accept EEA membership and freedom of movement in return for participation in a non-event? Why worry about leaving a club which has inflicted misery on a generation of its own young people, and where non-members have been its major beneficiaries?
The economic benefits of the Single Market do not include either growth of its exports or its productivity. Until such time as other, as yet unknown, benefits are identified, the UK would be foolish to prepare to concede anything at all. And if the EU declines free trade, the UK should be ready to trade with its members under WTO rules, as most other larger countries have done over the past 23 years, many of them with considerably more success than the UK or other EU members.
George Osborne called this the worst possible option, but the evidence from many countries suggests that it would be entirely acceptable.