With globalisation under pressure, the EU single market is an anchor of stability
“I can’t work out what’s stopped the UK up to now from being ‘Global Britain’ except its own lack of competitiveness,” Michel Barnier writes in the book he just published about his more than four years as the EU’s chief negotiator on Brexit. “Germany is ‘Global Germany’ while being solidly inside the EU and the eurozone.”
In reality, there always were two visions of Brexit. One that claims the EU has been a straitjacket for Britain’s global trading ambitions and that wants to see the UK become one of the most open economies in the world, through rolled-back regulation domestically and ambitious free-trade deals negotiated with countries around the globe.
The other vision – arguably much closer to the heart of many “Leavers” – is that of “Britain first” (or actually “England first”) – turning their back to the chilly winds of globalisation and its European cousin in particular, the EU single market with its famous four freedoms and integrationist agenda.
As it turned out, this is not a good time for a middle-sized country to venture out on its own. Whilst the era of globalisation that started in the 1970s is not over, as some doomsayers are claiming, it certainly has hit major roadblocks, some of them exacerbated by the Covid-19 pandemic. Depending on the sector, international trade has either decreased or its growth been curtailed significantly in the last two years. And the trend appears to be gathering speed, irrespective of Donald Trump no longer steering the world’s most powerful nation: geopolitical tensions continue to rise, the pandemic had a dramatic impact on foreign travel which may take a long time to recover, and rather than prompting concerted measures through international organisations, Covid has led to distrust and each country setting its own rules on who and what may cross its borders.
Just as important are some other shifts. The current shortage of computer chips with its dramatic consequences on vehicle production lines is highlighting our dependence on high-tech manufacturing concentrated in a few countries. The recent maritime traffic jam in the Suez Canal brought home how vulnerable to disruption our just-in-time supply chains are. Vaccine hoarding by countries having production sites may offer a glimpse of what could be in store for other vital items in the years ahead. The EU has come to grasp how dependent it is on strategic raw materials – certain types of rare earths, for instance, or metals such as cobalt and platinum – and wants to ensure its autonomy in key technologies of the future like robotics, hydrogen or battery production.
And if this was not enough, Western democracies have begun embracing the ESG agenda, expecting corporations to vouch for environmental, social and governance criteria being respected when sourcing materials from or producing in other countries. The internet is less and less global and in danger of splitting into spheres of influence. Finally, efforts to contain the rise in global temperatures – a truly planetary mission – may lead to new trade barriers.
All in all, whilst the climate of our planet is heating up, the climate for investments abroad and international trade is turning chillier.
In these circumstances the EU’s internal market is becoming even more vital for European businesses. Unimpeded access to customers from Iceland to the Caucasus mountains – thanks to advantageous trade agreements between the 27 and most of their neighbours that enshrine largely similar if not harmonised regulations – is a major asset at a time when the international system appears to be headed for greater fragmentation.
Unfortunately, the UK chose to leave the single market when exiting the EU. Many of the immediate consequences stemming from that fateful choice have so far been eclipsed by the impact of the pandemic, and the more serious structural consequences may take time to sink in. Britain’s choice is, of course, detrimental not just for the UK economy but also hitting companies on this side of the Channel. The difference, though, is that being part of the single market, EU businesses will have more possibilities than British ones in finding alternative suppliers, different outlets, and new partners.
One must hope that decisionmakers in Westminster will realize their mistake before regulatory divergence sees Britain drift away even further. Remaining anchored to the biggest and most open trading area worldwide is in the interest of the wealth and wellbeing of our British neighbours.
Senior Policy Advisor at Portland