Understanding the Single Market and Customs Union: Explaining the Impact of Brexit
Minding my own business, on an unusually peaceful evening, I came across an interesting tweet from Professor Brian Cox. It reads as follows:
“We’re going to spend decades negotiating to help tackle the impact of Brexit on everything from the music industry and the City of London to car manufacturing and tourism. Instead, why can’t politicians explain to voters why it’s in the U.K’s interest to be inside the single market and customs union. There is no country in Western Europe that isn’t in some combination of these or is applying to join. How are we the only one whose national interest is to be entirely separate from the continent’s market structures? I honestly think politicians underestimate the intelligence of voters. Nobody has really bothered to explain to people what the single market and customs union actually do.”
So without further ado… challenge accepted… so let’s see what it’s all about.
In the aftermath of Brexit, the impact on various sectors of the UK economy has become evident. The above mentioned recent tweet highlights the need for politicians to explain to the average British citizen why it is in the country’s interest to be part of the single market and customs union. It’s important that we shed light on these economic structures, their significance, and why they have been embraced by other Western European countries.
So, What is the Single Market? Imagine the single market as a football league where teams from different countries come together to compete. In this league, teams have the freedom to recruit players from any country, forming diverse and talented squads. The matches are played on a level playing field, with common rules and regulations ensuring fair competition. Just like in the single market, the football league represents the free movement of players and teams across borders, creating an environment of collaboration, healthy competition, and the exchange of skills and expertise. It's like a football league where teams from different countries unite, bringing their unique strengths to create an exciting and vibrant game.
The single market, also known as the internal market, is an economic arrangement among European Union (EU) member states that allows for the free movement of goods, services, capital, and people. It facilitates the removal of trade barriers, such as tariffs and quotas, within the participating countries. By eliminating these barriers, the single market creates a large, integrated market with over 450 million consumers, providing businesses with access to a broader customer base.
What of the Benefits of the Single Market? Imagine the single market as a vibrant marketplace with countless vendors offering their goods. It’s like being at a bustling farmer’s market where you have access to a wide range of fresh produce, local crafts, and homemade delicacies. You benefit from the abundance of choices, competitive pricing, and the opportunity to support local businesses.
First of all, there would be an Increase in Trade. The single market encourages cross-border trade by reducing bureaucratic hurdles and promoting standardisation, making it easier for businesses to sell their products and services across EU member states. This expanded trade leads to economic growth and job creation.
There would be Consumer Choice. Consumers within the single market benefit from a wider range of goods and services at competitive prices due to increased competition among businesses.
Investment Opportunities would present themselves. The single market attracts foreign direct investment (FDI) as companies seek to establish their presence in a large market with harmonised regulations and unrestricted access.
Then there would be the recognition of Regulatory Standards. The single market sets common regulations and standards to ensure product safety, quality, and environmental protection, promoting fair competition and consumer confidence.
How Should we Understand the Inner Workings of the Customs Union? Picture the customs union as a car pooling arrangement among friends. Imagine you and your friends work in different parts of the city, and instead of each person driving their own car, you decide to share a car and take turns driving. This carpooling arrangement helps save money on fuel, reduces traffic congestion, and allows everyone to reach their destinations more efficiently. In the same way, the customs union involves countries sharing a common trade system, eliminating the need for individual customs checks and tariffs, resulting in smoother trade flows, cost savings, and improved efficiency for all member countries.
The customs union is a collaborative trade agreement in which participating countries agree to remove tariffs and establish a common external tariff for goods imported from non-member countries. In the EU’s customs union, member states negotiate and implement trade agreements with non-EU countries as a unified bloc. This arrangement streamlines trade procedures and prevents the imposition of tariffs or quotas on goods traded among member states.
What are the Advantages of the Customs Union? Visualise the customs union as a smoothly synchronised dance performance. Each dancer moves in perfect harmony, seamlessly transitioning from one step to the next. It's like a choreographed routine where all the dancers are in sync, ensuring a seamless and coordinated performance. Similarly, the customs union streamlines trade procedures, making it easier for goods to flow between member countries.
First of all, there is Tariff-Free Trade. By eliminating tariffs on goods traded between member states, the customs union facilitates the smooth flow of products, reducing costs and administrative burdens for businesses.
Next, there are Common External Tariffs. The customs union imposes a unified tariff schedule on goods imported from non-member countries. This creates a level playing field for member states and protects their industries from unfair competition.
We also need to be aware of Simplified Trade Procedures. Customs checks and paperwork requirements are minimized within the customs union, making trade processes more efficient and time-effective.
Finally, and most importantly, Collective Bargaining Power. Negotiating trade agreements collectively as a unified bloc enhances the bargaining power of member states, allowing them to secure favourable terms and concessions.
So What of the Reasons for the UK’s Departure and its National Interests? Consider the UK’s departure from the single market and customs union as a decision to live in a standalone house rather than a shared apartment complex. It’s like moving into a detached house where you have more independence and control over your own space. However, you also have the responsibility of maintaining your property and taking care of all the associated costs, which were previously shared in the apartment complex.
Post-Brexit, the UK chose to leave the EU’s single market and customs union to regain regulatory sovereignty and control over its trade policies. While some argue that this move presents opportunities for the UK to forge its own path, others question why the country would want to be entirely separate from the economic structures adopted by neighbouring Western European nations.
Critics suggest that remaining within the single market and customs union could have preserved the benefits of frictionless trade, free movement, and regulatory harmonisation. They argue that being part of these structures aligns the UK’s economic interests with its closest trading partners, reduces trade barriers, and provides access to a large market. Furthermore, given that all other Western European countries are either in the single market, customs union, or seeking to join, this raises questions about the UK’s unique approach and potential long-term consequences.
What is the Real Impact? The impact of Brexit is being felt by the average British citizen in various aspects of daily life. As we navigate through this transition, the following changes are becoming evident.
In Trade and Economy, British citizens are experiencing shifts in the availability and prices of imported goods. Some products have become more expensive due to trade barriers and increased administrative costs. Certain industries that heavily relied on EU markets are facing challenges, potentially affecting job opportunities and economic growth.
Moving on to Travel and Movement, travelling to EU countries now involves new procedures, including passport controls and, in some cases, visa requirements. The freedom to live and work in EU countries has become more restricted, impacting opportunities for studying, working, and retiring abroad.
Then there are our Consumer Rights and Protections. Changes in regulations and standards have affected consumer protections previously ensured by EU laws. Adjustments have been observed in areas such as product safety, consumer rights, and data protection, requiring the UK to establish its own frameworks.
Services and Business Operations are also impacted. Sectors such as finance, professional services, and creative industries are adapting to new trade arrangements and regulations. Businesses have had to make adjustments, potentially impacting employment, investment decisions, and the availability of certain services.
A vital area to consider is Collaboration and Research. The UK’s participation in EU research programs, collaborations, and academic exchanges has undergone changes. Access to EU funding and partnerships has been altered, impacting scientific advancements, innovation, and academic opportunities.
And finally, our Regional and International Relationships. Brexit has reshaped the relationships between the UK and other countries, including the EU and non-EU nations. Negotiating new trade agreements, defining new geopolitical alignments, and establishing new partnerships are influencing the UK’s position on the global stage.
It’s important to note that the effects of Brexit can vary across individuals and communities, depending on factors such as occupation, location, and personal circumstances. As we continue to navigate through this transition period, the long-term consequences will become clearer as the UK establishes new relationships, trade agreements, and regulatory frameworks in the post-Brexit era.
Here are a few examples of how the impact of Brexit might be experienced by individuals with different backgrounds:
Sarah, the Homeowner (age 35): Sarah, a full-time employed homeowner, has noticed an increase in the prices of certain imported household goods due to trade barriers. The cost of her favourite European wines and cheeses has risen, impacting her monthly budget. Additionally, she has observed changes in the housing market, as uncertainty around trade agreements affects property prices and mortgage rates.
Tom, the Rental Tenant, and Part-time Employee (age 28): Tom, a part-time employed rental tenant, has experienced changes in his ability to travel and work in EU countries. He used to enjoy spontaneous trips to European destinations but now faces additional paperwork and potential visa requirements. As a part-time employee, he also worries about the impact of Brexit on job opportunities and the stability of his income.
Emily, the Self-employed Business Owner (age 42): Emily, a self-employed business owner running a small marketing agency, has seen shifts in her industry due to Brexit. She faces challenges in accessing EU clients and markets, which were previously significant sources of revenue for her business. She must adapt her strategies and explore new markets to mitigate the impact of changing trade arrangements.
Susan, the Single Mother, working Part-time (age 38): Susan, a single mother working part-time, has felt the effects of Brexit through changes in consumer prices and her family’s budget. The increased cost of imported groceries and household items has put pressure on her finances. Additionally, she is concerned about the potential impact of Brexit on her job security and the availability of part-time employment opportunities.
James, the Full-time University Student (age 22): James, a full-time university student, has experienced changes in research opportunities and academic collaborations due to Brexit. Some EU-funded research programs and exchange programs are no longer available to UK students, limiting his international academic experiences. He is also concerned about potential tuition fee changes for EU students studying in the UK.
It’s important to note that these examples are generalised, and the specific impact of Brexit can vary for individuals within these categories. The consequences will continue to unfold as the UK establishes new trade relationships, regulatory frameworks, and policies post-Brexit.
So Where Do We Go From Here?
Ultimately, the single market and customs union play crucial roles in facilitating trade, economic growth, and regulatory alignment among European Union member states. Remaining part of these structures would have preserved the benefits of frictionless trade, free movement, and access to a large market for the UK. However, the decision to leave these economic arrangements was made in pursuit of regulatory sovereignty and control over trade policies.
Nevertheless, the tweet raises valid concerns about the need for politicians to effectively communicate the implications of the single market and customs union to the average British citizen. By providing clearer explanations of these economic structures, their benefits, and the reasons why other Western European countries embrace them, politicians can empower voters with a better understanding of the choices made in the Brexit process.
But to sum up, an informed citizenry is vital for making well-informed decisions, and it is essential that politicians and policymakers recognise the intelligence of voters and undertake efforts to explain complex economic concepts in an accessible manner.