THE BLOG

Let's Remove Barriers to Trade Outside the EU

08/01/2014 09:43 GMT | Updated 09/03/2014 09:59 GMT

Most of us like the idea of a Single European Market. For some it is the best reason and, for others, the only reason for the UK to remain a member of the European Union. But in recent years we have ended up with reams of legislation, introduced in the name of the Single Market, but which run totally counter to the purpose of British membership.

Almost every week in Brussels, I find myself arguing against new encroachments against British interests or on free enterprise. In financial services alone, we have seen the introduction of dozens of new directives and regulations which have little to do with tackling the problem of banks being bailed out by taxpayers. They have far more to do with being seen to do something to exact revenge on the financial services industry for the crisis which disproportionately affected London, home to Europe's two largest financial services districts. The European project appears to run counter to the British economic orthodoxy of free markets and proportionate regulation, as well as our long tradition of individual liberty and the limited state.

The reality is clear: the status quo is no longer acceptable to most people in the UK. That is why there will have to be a referendum on the UK's membership, ideally after a comprehensive renegotiation of the Treaties. This process will involve getting some powers back and making sure that we get the right deal for Britain.

One of the core objectives of the renegotiation process should be to improve Britain's terms of trade, both with EU countries and with countries across the world.

The European Union may be a single market in which trade is free but it is also a protectionist customs union. One of the consequences of EU membership is that under the EU common trade policy, the United Kingdom is not free to choose its own terms of trade with other countries in the same way that Canada, the US, Singapore, Japan, Brazil or China can.

Negotiating as part of a bloc of 28 countries may add some leverage to our negotiating position in trade talks. For example, it has been claimed that Britain would be better off negotiating an agreement with China via the EU. It is argued that the Chinese would be more likely to open their potentially lucrative services market to EU companies in return for Chinese companies being able to gain access to the markets of 28 EU countries in return. Supporters of this view concede that Britain could still negotiate a trade agreement with China on its own, but say it would not be as comprehensive or advantageous.

However the downside to the UK of being part of the EU is that we can only go as far or as fast as the most protectionist country in the EU will allow us to go in trade negotiations with other countries. For example, France is currently throwing a spanner in the works for negotiations with the US due to concerns about its film industry being undermined by Hollywood. It is also trying to set pre-conditions on a trade deal with Japan. For this reason, many say we should not hamper ourselves with the EU's trade barriers any more: they only put us at a competitive disadvantage to the rest of the world.

The Prime Minister may wish to include trade policy in his renegotiation with the EU. One solution might be to follow a European Free Trade Area (EFTA) type model which allows individual countries as well as the whole bloc to negotiate trade agreements with third countries. One variation may be to allow individual EU countries to negotiate with countries with which the EU has no trade agreement.

If the British people were to vote to leave the EU, there may be certain areas in which we will still want to share best practice in regulation with the EU. Much is said about the UK adopting the Norwegian or Swiss model of interaction with the EU. But we are a bigger player than both these countries and we would need to consider if we could negotiate a settlement that leaves us genuinely free to trade, not hidebound by rules which we can no longer influence. There are hundreds of non-EU countries that could strike bilateral trade agreements with the UK as soon as we are no longer a part of EU structures of governance.

If the British people voted to remain in the EU and that meant we had to remain part of the common trade policy, should still try to push for more flexible arrangements for trade in third countries. We should remember that it is not countries that trade with each other, it is people and businesses in one country who trade with people and businesses in other countries for mutual benefit.

We now have a more muscular Foreign Office that encourages its consular teams to push for better trading opportunities for British companies. They need to be backed up by Treaties which guarantee access to markets for British firms, and that can only happen if we are prepared to tackle trade barriers faced by British companies in overseas markets. If the EU won't or can't liberalise trade fast enough, we must be given the chance to change the rules ourselves. In the twenty-first century, we should be making many friends in new places. If we can pursue ever more trading relationships, renewed prosperity will follow.