Brian Monteith: Recognise EU single market for what it is

First Minister Nicola Sturgeon is threatening to move for Indyref2 if Scotland if taken outside the single market. Picture: PA
First Minister Nicola Sturgeon is threatening to move for Indyref2 if Scotland if taken outside the single market. Picture: PA
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There is a lot of nonsense talked about who the EU’s trading tariffs actually benefit, says Brian Monteith

There are few things worse for businesses than uncertainty. High taxes can be ameliorated and planned for, investments rerouted to less burdensome jurisdictions, and regulations accommodated and allowed for. A Plan B can be ready and waiting for any standard deviation from the business norm – but not knowing what the norm will be due to the possibility of political upheaval is never good for an economy.

When our First Minister looks at how the Scottish economic indicators consistently look worse than those of the UK she must, if she is honest with herself, recognise that the constitutional uncertainty she is spreading can only be making an already difficult job harder for our businesses up and down the country.

It need not be like that. When David Cameron, George Osborne and Mark Carney warned of recessions, mass unemployment and huge economic dislocation if the public dared to vote to leave the European Union they set up a market reaction that was self-fulfilling.

Fortunately the quick exit of Cameron and Osborne and the steady hand of Theresa May saying that she will craft an orderly Brexit has calmed the nerves of markets and investors.

The worst outcome could have been the prospect of a second EU referendum and all the divisiveness that would mean without any certainty of a settled outcome. Instead, businesses can now see that Brexit offers new opportunities and are continuing to invest in the future; the fall in the pound has brought its own upsides and the equity markets have bounced back, while retail and manufacturing indicators have reported positive trends.

Although there remain many unknowns about leaving the EU our insurance policy of simply reverting to do business under World Trade Organisation (WTO) rules helps to alleviate the uncertainty.

It is against this background that our First Minister Nicola Sturgeon shows a determination to sow uncertainty wherever she goes and whenever she speaks. Since the British public’s rejection of the EU she has been blowing hot and cold on the possibility of her demanding a second independence referendum to the extent she is piling uncertainty about Brexit, upon uncertainty about Scottish independence, upon uncertainty about her political risk taking.

Having said the Brexit vote must mean a second independence referendum is “highly likely” she has discovered on current polling she would not win and has since back-tracked to only allow for a draft Bill to set up the legislative process, without saying she will definitely call one. Now she is saying that if Scotland is taken outside the EU’s “single market” the referendum is more likely.

There is a great deal of nonsense talked about the so-called single market, mostly by politicians who have never made anything, never sold anything and never achieved anything in business. For instance there is no single market in financial services despite some 30 years of attempts to procure one.

In manufacturing, while there are no internal tariffs there are many other obstacles to trading provided by agencies of the 28 member governments that have ensured the EU has been the slowest growing economic region in the world for a generation.

Free trade should mean just that, free from tariffs – but the single market is the antithesis to world free trade. For the developing world the single market is little more than a post-colonial extortion racket. It is an exporter of poverty by making it difficult if not impossible for poorer nations to sell into it anything other than raw materials.

The single market does this by placing low tariffs on commodities and high tariffs on processed goods. Just ask yourself why diamonds and chocolate continue to be processed in Belgium and not from their poorer countries of origin.

Few progressive politicians that defend the single market realise that Germany – without growing a single bean – makes more profits from processing coffee than the whole of Africa does from exporting it. Likewise the rigging of the single market in sugar to the benefit of European farmers growing subsidised sugar beet comes at the expense of peasant farmers growing sugar cane. The degree to which ignorance surrounds the single market is demonstrated by the use of language by our politicians when they intentionally confuse “access” to the single market with being “inside” it.

Countries such as the US, Japan and China have “access” to the single market – all countries do – subject to the tariff wall, whereas those countries “inside” the single market must accept loss of sovereignty to the EU institutions, its courts and its undemocratic decision making. Bizarrely, governments pay for the privilege of being “inside” a sum greater than if their businesses paid the tariffs. Being inside means countries cannot make their own trading arrangements with, say, Australia, India or New Zealand which is why those three in particular are queuing up to strike deals with the UK post Brexit. As Professor Michael Keating pointed out last week in evidence to Westminster’s Scottish Affairs Committee, if the UK leaves the EU’s single market then for Scotland to become independent would require a hard border with England, putting at risk our UK trade worth four times as much as we have with the EU. With growing evidence that the future of Scottish and UK business is from growing trade with the rest of the world outside the EU’s single market a “Robust Brexit” relying on WTO rules and its predictable tariffs can give businesses more certainty than the games politicians play.