WHY THE SINGLE MARKET MATTERS FOR BUSINESSES
George and I worked for five years together in coalition government — a government that was formed in the national interest, to deal with an economic emergency.
It’s no secret we disagreed on things even while we sat around the Cabinet table together, and my party paid a heavy price for its part in that government at the general election. We worked together on bank reform and to reinforce spending discipline. But we publicly disagreed, for example, on housing and Help to Buy, bankers’ bonuses and government borrowing for investment. But in the interests of the country we worked together for five years — and that is also why I am here today.
Ed Balls and I, too, often clashed about economic strategy before and during the Coalition but we agree that the case for remaining in the European Union is compelling and that the case for a decision to leave will have serious, negative, economic consequences.
My own view is informed by five years of cabinet responsibility for business and trade. My judgment is shared by my Conservative successor and Labour predecessor and many others in a similar role in government, from Michael Heseltine to Alan Johnson.
The economic case is clear and settled: British business and British workers benefit, overall, from EU membership and stand to lose from leaving. That is the unambiguous conclusion, not just of the British government’s economists but my new academic colleagues at the LSE and the international institutions, like the IMF, which have no national axe to grind.
The crux of the argument is the Single Market. Let us recall its origins. It was negotiated in the 1980s at the behest of a British government led by Mrs Thatcher. I mention Lady Thatcher not because I want to take political cross-dressing that far but because the Single Market was her, and a British, achievement. It represented a British vision of an Open Europe: free trade in goods and services, free movement of capital, free movement of labour. Not just clearing away tariffs but establishing common, recognised standards.
The juvenile caricatures flowing from the pens of Nigel Farage, Boris Johnson and others — the straight bananas, square strawberries and smaller condoms — aren’t just silly and fabricated; they miss the essential point that the Single Market reduces administrative barriers to trade.
The economics of the Single Market operates through the stimulus it gives to our manufacturers and traded services. It encourages inward investment and makes British firms raise their game. In that way we get a boost to productivity and improved living standards. And after the loss of productivity during and after the financial crisis, we now need this more than ever.
I saw the process at work as Secretary of State. When I went to Detroit to persuade the CEO of General Motors to invest in Ellesmere Port and Luton rather than Germany, a clinching argument was that they could continue to use the UK as a base for exporting to the rest of Europe. When we encouraged Nissan to make their latest model at their world-class plant in Sunderland, rather than in France, a continued Single Market was key.
This important industry, which was central to the Coalition’s Industrial Strategy, depends on the Single Market and its common standards and freedom from 10% tariffs. A quarter — only a quarter — of cars made in Britain are bought by British consumers. A third are sold beyond Europe. The rest — almost half — are sold in the EU Single Market. And this is a high productivity industry, employing 147,000 people directly and 300,000 others in the wider manufacturing supply chain.
Outside auto, Fujitsu, which has made massive investment here in electronics and IT, and Hitachi, whose new train manufacturing factory I opened in Durham, have made it clear that their presence here depends on the Single Market.
Our aerospace industry is thriving. It’s the second biggest in the world after the US. It relies heavily on European supply chains, and the Single Market. Airbus, a key part of the sector, has made it clear that they would see no future here if the UK left the Single Market.
One of Britain’s real achievements has been to attract the world’s best companies to produce here on the back of access to the Single Market. The Brexiteers want to break that link: divorce. Divorce can work out but usually it is messy, nasty and costly. The same here.
Now you might say, those are the big guys. What about small business? But many small companies are in the supply chains of big companies. And those small companies which want to expand overseas — as we need them to, to balance our trade — are helped by the Single Market.
A few weeks ago, I went with George’s colleague Anna Soubry and Labour’s Chuka Ummuna, to an ambitious young company making porridge and oatmeal products. They started exporting to Australia but ran into a wall of non-tariff barriers — packaging, labelling, food standards, Certificate of Origin and the like. Then they tried Holland and found that, thanks to the Single Market, there are no such barriers. They are now doing good business and moving into other countries within the European home market of 500 million people. My only surprise is that the Farage-Johnson Euro-joke factory hasn’t yet come up with a story about how workers in the porridge-making industry have to wear kilts.
“Ah” some would say, “ trade in cars and aerospace-or porridge- is all well and good, but our economy is 80% services”. And that’s true, services do form the largest part of our economy and the term ‘services’ encompasses a hugely diverse range of industries.
Everyone here works in the services sector as you all work in air travel. Other big services sectors for Britain are professional services — things like accountancy and law — and our creative industries: architecture, the TV and film industry, fashion, music and the advertising sector.
The EU helps these industries by eliminating non-tariff barriers. So it means an engineer or an architect can get off the plane in Munich or Madrid and start doing business immediately without people questioning their qualifications.
Or an insurance firm can offer travel insurance, or life insurance to customers anywhere in the EU without having to comply with different prudential regulation in every single country it needs to sell into.
I now supplement my pension by writing books. When my publisher recently invited me to address the publishing industry they reminded me that 40% of their business is exported: much of it to the EU.
The Brexiteers inhabit a bygone age when trade was just about goods, rather than services, and negotiations were just about tariffs. I believe in the World Trade Organisation and was heavily involved, professionally, in an earlier round of negotiations. But sadly, unlike the EU Single Market, it is making very slow progress on services and non-tariff barriers.
Yet analysis of EU and US trade has suggested non-tariff barriers increase trade costs by around 10%, making them nearly 3 times larger than US tariffs. Other estimates suggest they are roughly 2 and a half times larger than EU tariff rates.
If we stay in the EU, there is much more on the horizon. The next stage of development of the Single Market, has a focus on bringing down the remaining barriers to trade in services, energy and digital.
I will highlight just one. One of my last major tasks as Secretary of State was to go to Brussels to set out the British agenda for a digital single market. If we can secure our aims — and we can only do that within the EU — it will greatly benefit consumers and open markets for Britain’s creative industries and the clusters of high tech firms not just in London but in Bristol, Brighton, Dundee, Glasgow, Gateshead, Belfast, Birmingham and elsewhere.
There is, of course, no guarantee that British firms will take advantage of these opportunities. Much is down to us: what we do here to make the UK competitive. There have been deep problems — lack of skills; slow business uptake of scientific innovation — which we have been trying to tackle under the Industrial Strategy.
These problems don’t magically disappear if we leave the EU. One of the major initiatives we launched in the Coalition years, led by David Cameron and George, was a concerted push into the big emerging markets, like China and India. We often found we were well behind the Germans and even the French and Italians. Being a member of the EU did not inhibit the Germans when it came to exporting to the wider world; nor should it us.
We are sometimes told by the Brexiteers that if we left the EU we could have a bonfire of EU red tape. Having been in charge of the red tape, deregulatory, bonfire for five years, along with some very Thatcherite Tory colleagues, I can assure you that there isn’t much left to burn. The evidence suggests that Britain has some of the least regulated product and labour markets in the world.
And, of course, some regulation is essential to protect the environment, to protect consumers and to protect workers from exploitation. And in the Coalition years we exercised our rights as a sovereign country within the EU to regulate as we thought fit in the national interest: to make banks safer; to provide shred parental leave and flexible working; auto-enrolment for pensions; stronger laws against overseas corruption and to register beneficial ownership; legislative action against excessive pay and abuses of zero hours contracts; stronger consumer rights.
Brussels was often a useful scapegoat for business frustrations and inconvenient regulation but working with a like-minded group of other European governments we were able greatly to improve the way Brussels regulation works — much of it opening up the Single Market.
And if we left but wanted to sell into the Single Market, we would be forced to abide by the rules of the Single Market while having no say over those rules.
Before I became an MP my job was to help business plan ahead: to think about the future. Just think about the enormous 21st century problems that affect business.
One is the changing nature of cyber security threats and what that means for data protection: the point emphasised by the most recent heads of our external and internal security services in supporting Remain.
Another is the way that big multinationals are able to exploit the international tax rules to shift profits and avoid tax. The European Commission can call the likes of Apple and Amazon to account under its competition policy in a way that national governments find more difficult.
These problems won’t be solved from standing on the side-lines looking in — We need to be in the room when they’re discussed — fighting for British interests, taking our seat at the table and influencing and shaping the rules.
Instead of taking a one way ticket to a poorer country.