Monday, 2 July 2018

No cherrypicking means no cherrypicking.

So why is a goods only single market no use? To understand it you have to reset your working definition of the single market. It's not just a regulatory union. It's a system. A piece of legal technology. Cherrypicking is like removing the carburettor from an engine.

The moment you start puling core components out of it it stops working. It does not split rules along the lines of the four freedoms. It produces technical legislation according to specific sectors. And why wouldn't it?

Mercedes isn't looking to sell you a car. It wants to sell you a loan and a service contract. The car is just bait they don't make much profit on. And if I sell a escalator to a an underground station I want the 20 year maintenance contract too.

Very often it's not even worth selling goods unless you can sell a service with it. PC World doesn't like selling PCs. If you buy a computer they want you to buy their extended want and they want you to buy it on credit. Selling stuff is not where the money is.

So when we talk about services we are not just talking about financial services in the City. We're talking about a whole range of commercial activity intrinsically linked to the sale of goods. Without permissions on services the sales in goods collapse.

This extends from retail all the way up to nuclear power stations. There's even an open market on government procurement through the OJEU system. Lucrative for UK engineering. And if you are selling service contracts then you need the visa free arrangements for engineers.

You also need to ensure that the work carried out by those engineers is certified and insurable so you need mutual recognition of qualifications. Remove any one of these elements and the barriers make it more expensive to operate.

And what is true of tariffs is also true of non tariff barriers. If you introduce costs then it's the consumer who pays in the end. So the EU takes the integrity of the single market very seriously. Tinkering with it for the sole benefit for the UK is not on the cards.

To have a goods only single market would require a bespoke regulatory framework (which isn't) going to happen) and member states do not see why the UK should be allowed to pick and choose when they can't. Indivisibility is a core function of the single market.

So while we could more or less cook up a trade deal to ensure that we can send over lorries full of basic produce it would eliminate much of the more lucrative trade that goes with being in the regulatory union while adding crippling overheads to trade in goods.

Then of course there are rules on intellectual property which not only protect market participants, IP rights and patents are also tradable. Intellectual property is a massive business worth a magnitude more to us than fishing. UK IP market estimated worth of £63.5 billion.

And then there's common standards and frameworks for contracts which create trust within the system which allows trade to happen with confidence. This is to say nothing of eliminating costly border delays.

This is why a rag bag full of FTAs with commonwealth countries and CANZUK states comes nowhere close to rivalling single market trade. Trade is more than just lorries full on potatoes. Not forgetting the massive aviation market.

Consequently there is a good reason why trade deals take years. We have to consider everything from food safety controls to dispute resolution systems. There are over three hundred areas of technical cooperation.

And for all that Toryboys complain about regulatory compliance costs, for most businesses that is a sunk cost already absorbed from the beginning of the single market which allows them to trade with a wider market. Reversing that means more costs and smaller markets.

So there is no economic gain to be had by leaving the EEA and there is no real scope for rebuilding a single market with Aus/NZ and Canada as some have suggested. They are already integrated with their nearest regulatory superpower.

There is a massive gulf between an FTA and the EEA. An FTA would see us becoming a third country will substantially diminished participation rights and crippling overheads. Trade would not continue on the same basis. WTO rules don't come close either.

There's no way that leaving the EEA won't cause massive job losses. It will take a decade or more to rebuild anything close to that level of trade and there's no guarantee of that unless we rebuild relations with the EU - and it will be on their terms.

This is why the smart move is to join Efta and retain the EEA. There are some controls we can put of freedom of movement and it's not the same as EU citizenship. It's free movement for workers which is a different animal. It's not open borders.

The EU is quite clear that cherry picking is not on the cards. It can flex but will not break rules because to do so would give the UK an unfair advantage and would interfere with the efficient functioning of the Market. It would need a parallel governance system.

This of course does costs money to maintain but the advantages outweigh the costs of paying for the upkeep of the system. This is why Norway pays for the systems it uses. It's not a "membership fee". It's chump change considering the overall value of EU trade.

It should be noted that the single market comprises of only 25% of the EU body of law so remaining in the EEA would allow trade to continue but it would repatriate most of what Brexiters want. There is nothing to be gained from an uncompromising stance.

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