‘All Or Nothing’ Is The Glue That Holds The Single Market Together – The UK Can't Cherry-pick Its Rules

06 September 2018

Michel Barnier has reticently dismissed Theresa May’s Chequers plan as yet another bout of ‘cakeism’, describing it this week as incoherent and unpractical.

Giving Britain what no other country has got, is and always has been a non-starter for Brussels. For the European Union, trade integration must be commensurate with economic integration, and this implies continual regulatory convergence. This is the reason why no country in the world enjoys access to the single market without having to comply with single market rules. Britain isn’t going to be the first.

The novelty in May’s approach is to suggest separating goods and services. Under the Chequers plan, Britain would remain part of the EU single markets for goods, while it would exit the single market for services. Regulatory convergence would be ensured through a ‘common rulebook for goods’. As for services rules, Britain would be free to diverge. Crucially, this would allow free movement of people - one of the four indivisible freedoms guaranteed by the EU single market - to be abolished.

But as Barnier pointed out this week, there is no such thing as a single market for goods and another for services. The clue is in the name: there is only one single market. The depth of economic and political integration within Europe has resulted in a large body of regulation which simply cannot be disentangled.

There is another reason why the Commission will not waiver on this ‘all or nothing’ line. It would be massively detrimental to Europe if it were to make an exception for Britain, as it would result in the EU being challenged both from within and without.

‘All or nothing’ as a principle is the glue that holds the single market together. No EU member states can choose to deviate from some of the rules, as this would be a clear path to the complete unravelling of the whole project.

‘All or nothing’ is also key to the EU retaining credibility and influence on the global stage. In the World Trade Organisation, the rule is that you must give to all what you give to one. This is known as the Most-Favoured Nation rule, or MFN for short in trade policy lingo. There are only a few exceptions to this principle - for instance, setting up a single market like the EU or entering into a Free Trade Agreement (FTA), provided the agreement covers substantially all trade between the parties.

The EU, as one the driving forces in the world for free trade, has gone further and included MFN rules in its own free trade agreements: signatories of such agreements, like Japan or Canada, have therefore gained the right to extend their access to the EU market up to the treatment granted to the nation most favoured by the EU in other free trade agreements. Complicated? Yes but this is crucial to understand the EU’s opposition to UK ‘cherry-picking’.

This means that should the EU give the UK better treatment than it currently gives to Canada and Japan, the EU would effectively have to adjust its treatment for Canada and Japan so that they would not be discriminated. In other words, opening up to the UK means the EU would potentially have to open up to many other trade partners.

The only option to avoid this knock-on effect would be to keep the UK within the entire single market - or agree a trade deal equivalent to the EU-Japan or the EU-Canada FTAs – which would mean reducing not improving trade relations with all of the economic ramifications, and would leave the Irish border unresolved.

Realistically these have always been the only two options on the table since the start of the Brexit negotiations – and remain the choice that must be made by Britain. Everything else is white noise.

This blog was originally published on Huffington Post: https://www.huffingtonpost.co.uk/entry/brexit-single-market-chequers-agreement_uk_5b8fd435e4b013f66bd56adb

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