Lord Beaverbrook: His Empire Free Trade Crusade party campaigned for the British Empire to become a free trade bloc (Anefo CC BY-SA 3.0)
Brexit means Brexit, but what does Brexit mean? The weeks of public debate since June 23 may not have provided a simple answer to the question, but they have reduced the number of sensible courses of action. Almost no one wants to pull up the drawbridge and to end Britain’s friendly relationships with its European neighbours. The challenge is to recover independence, including the ability to make our own laws and the control of immigration, while securing a close approximation to borderless trade in the continent of Europe to which Britain belongs.
Two main options are emerging. In the first Britain leaves the European Union, but remains inside the European Economic Area (“the single market”). Much the same position on trade as at present would continue, but the UK’s highest court would not be the European Court of Justice and it could to a large extent, although not entirely, adopt its own laws and regulations. The downsides are at least twofold. Unless it could negotiate a special provision, Britain would have to comply with the free movement of labour and hence would not have full control of its borders; and, again unless it could obtain a dispensation of some sort, it could not conduct separate trade deals with non-EU nations. As the EU is to some degree protectionist, this inability to do deals (with China, India and so on) might be seen as a missed opportunity.
The second approach is more radical. Britain leaves the EU and does not seek membership of the EEA. Its relationship with EU member states resembles that of — for example — the US or Australia. It makes its own laws, controls its borders, has its highest court on its own territory and so on. Both it and the EU belong to the World Trade Organization, and life goes on.
But we want as close an approximation as possible to borderless trade with the rest of Europe, don’t we? How can that be attained when we are so definitely outside the EU? The reply now being widely urged is that Britain adopts free trade (that is, zero tariffs and no other import restrictions) with all the world’s countries, including EU member states, on a unilateral basis. So we import as freely from the EU as before. Admittedly, unless something changes, our companies would face the common external tariff when exporting to the EU, just as American and Australian companies do at present. Importing from the EU is barely altered from the current position, but exporting to the EU is not so easy.
The labels for the two options are obvious: “the single market option” and “the free trade option”. The areas of negotiation are also obvious: the extent of control over immigration from the EU, and the degree of market access for UK exporters. Some sort of compromise may well be struck. For example, once we are outside the EU, its citizens might still be allowed to work in the UK on a better basis (in some sense) than citizens of non-EU countries, while zero tariffs and no customs arrangements apply in trade between Britain and the EU in motor and aerospace components, including exports from Britain.