(Rachael Fitzgerald-Finch is the winner of the TCW Brexit competition. We invited our readers to spell out the best trade and economic arrangements for Britain independent of the EU. We have had some splendid entries rebutting the pessimism of David Cameron’s Project Fear. Congratulations to Rachael Fitzgerald-Finch. A bottle of TCW champagne is on its way to her.)
Wise investors diversify their portfolios to manage volatility and reduce risk. So why does the UK sell 44 per cent of its output to one single market place – the European Union? In a globalised world, economic downturns are contagious: trade diversification is a must. Unfortunately, the Common Commercial Policy (CCP) is an exclusive competence of the EU; we cannot pursue our own trade agenda. However, trading arrangements that suit EU as a whole – with its bloated agricultural sector – do not suit a services-focused UK. The case for Brexit is clear.
So what options do we have outside the EU?
Unilateral free trade will be politically difficult due to the power of producers. So, the obvious way forward is to retain as many of the existing arrangements as possible. E.g., a customs union for highly integrated sectors and financial passport access for the City of London. However, Brexit potentially enables us to avoid present and future mechanisms that may harm UK interests – such as EU regulation of the City.
Many assume that as the EU’s economy is much larger than ours, we have no negotiating clout: we are actually rather well placed. The EU is a political union; we are able to deploy political levers. Consider our large contribution to the Common Agricultural Policy (approximately 14 per cent of its budget) and to the EU’s fish stocks (up to 80 per cent), our place as a ‘soft power superpower’, our relatively large military and our net imports from the EU (to an £85.3 billion trade deficit in 2015).
Existing agreement precedents, e.g. with Norway and Switzerland, are not appealing: the relationship is biased towards the EU. It should be remembered that Mexico – a country with a much smaller economy than the UK – managed to achieve a Free Trade Agreement with the EU, covering many preferential areas – including services – without being subject to European Court of Justice rulings. If Mexico can do this from a weaker negotiating position, we should at least be able to achieve the same.
Facilitation of trade by joining other free trade areas, such as the North American Free Trade Agreement and the European Free Trade Association, is also desirable once we can negotiate for ourselves. Far from this being difficult to achieve, the UK is not a threat to foreign domestic producers, unlike the EU, as we do not have any industries that are large enough – or protected enough – to distort pricing.
International trade though is only possible with labour mobility: immigration is economically beneficial. However, realistically, this must this be balanced with the need to apprehend terrorists, criminals and bogus asylum seekers; it must also allow us to direct labour to the gaps in our employment market where it can be utilised effectively.
Margaret Thatcher once stated: “We will never be taken seriously in any serious renegotiation if our EU partners are allowed to believe that we will settle for what we are offered.” Consequently, we must not rule out any option for the UK; and we must be resolute.
Rachael is a former Army officer and now a full-time mother, part-time MBA student and director of a small consultancy business.