Myth and Paradox of the Single Market
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CIVITAS CIVITAS Institute for the Study of Civil Society 55 Tufton Street, London, SW1P 3QL Tel: 020 7799 6677 Email: [email protected] Web: www.civitas.org.uk Myth and Paradox of the Single Market How the trade benefits of EU membership have been mis-sold or many, the economic benefits accruing from the UK’s membership of the EU are self-evident and unanswerable: access to the European Single Market is of enormous benefit to British exporters and a major attraction F Myth and Paradox of the Single Market for global investors looking to expand into the region. Or so the argument goes. But where is the evidence for this? What do the trade and investment figures actually tell us? When a government minister told parliament that EU members traded twice as much with each other as they would do in the absence of the Single Market, Michael Burrage set out to test the veracity of the assertion. Here he relates his painstaking quest for the facts, studying first the documents on which the minister’s claim was based and then, finding scant evidence there, conducting his own analysis of the data. This timely study looks behind the claims that are frequently made in support of the EU and finds a very different reality. Examining the research used by not only ministers but big business and many other pro-EU lobbyists to support their stance, Burrage finds that there is no empirical basis for the supposed advantages that the Single Market confers on the British economy. It is a devastating conclusion that should fundamentally shift the terms of the debate surrounding Britain’s relationship with the EU. ‘The main aim of governments has been to ensure that membership of the EU is seen as a prized asset, which the UK must not let slip from its grasp. This has resulted in a mis-selling of the trade benefits of the Single Market comparable in some respects to the mis-selling of payment protection insurance, though on a larger scale, over a longer period, and with far more serious consequences. PPI offered borrowers protection that on closer inspection proved to be illusory, and at disproportionate cost. The evidence shows that the same might well be said of the Single Market.’ Michael Burrage Michael Burrage £12.00 CIVITAS ISBN 978-1-906837-75-4 Cover design: lukejefford.com Myth and Paradox of the Single Market Myth and Paradox of the Single Market How the trade benefits of EU membership have been mis-sold Michael Burrage CIVITAS First Published January 2016 © Civitas 2016 55 Tufton Street London SW1P 3QL email: [email protected] All rights reserved ISBN 978-1-906837-75-4 Independence: Civitas: Institute for the Study of Civil Society is a registered educational charity (No. 1085494) and a company limited by guarantee (No. 04023541). Civitas is financed from a variety of private sources to avoid over-reliance on any single or small group of donors. All publications are independently refereed. All the Institute’s publications seek to further its objective of promoting the advancement of learning. The views expressed are those of the authors, not of the Institute, as is responsibility for data and content. Designed and typeset by lukejefford.com Printed in Great Britain by Berforts Group Ltd Stevenage, SG1 2BH Contents Author viii Acknowledgements x Summary 1 Part One: The Myth of the Single Market’s Trade Benefits 1. A doubling of trade? A minister’s claim to parliament 8 2. Reviewing the evidence 15 3. What business told, and didn’t tell, the Foreign Office 34 Part Two: The Paradox of Who Benefits from the Single Market 4. What would have happened in the absence of the Single Market? 64 5. Is there a single market in services? 89 6. Does ‘helping to make the rules’ in Brussels help UK exports? 103 Part Three: Conclusions 7. Image without substance 114 8. The case for an EU research agency in the UK 125 Appendices A: BIS reply to the author’s FOI request 134 B: A 2007 report by EC staff on the impact of the Internal Market 138 vi C: On Scotch, bourbon and other unconvincing business arguments for UK membership of the EU 144 D: The sluggish growth of GDP and of productivity in the Single Market 1993-2013 148 E: The FTA histories of the EU, Korea, Chile, Singapore and Switzerland 152 F: A second preliminary scorecard of the effectiveness of the trade agreements of five countries 154 G: The fanciful CER model of the trade benefits of EU membership 161 H: The EU’s TTIP negotiating team 168 I: Costs and benefits of EU membership on a common scale with alternative expenditures 170 J: The legacy of deceit and misinformation about the UK’s relationship with the European Community 183 and Union 1957-2014 Notes 188 vii Author Michael Burrage is a director of Cimigo, which is based in Ho Chi Minh City, Vietnam, and conducts market and corporate strategy research in China, India and 12 countries in the Asia Pacific region. He is also a founder director of a start-up specialist telecom company which provides the free telephone interpreter service for aid workers and others where interpreters are scarce. He is a sociologist by training, was a Fulbright scholar at the University of Pennsylvania, has been a lecturer at the London School of Economics and at the Institute of United States Studies, specialising in the comparative analysis of industrial enterprise and professional institutions. He has been a research fellow at Harvard, at the Swedish Collegium of Advanced Study, Uppsala, at the Free University of Berlin, and at the Center for Higher Education Studies and the Institute of Government of the University of California, Berkeley. He has also been British Council lecturer at the University of Pernambuco, Recife, Brazil, and on several occasions a visiting professor in Japan, at the universities of Kyoto, Hokkaido and Kansai and at Hosei University in Tokyo. He has written articles in American, European and Japanese sociological journals, conducted a comparative study of telephone usage in Tokyo, Manhattan, Paris and London for NTT, and a study of British entrepreneurs for Ernst & Young. His publications include Revolution and the Making of the Contemporary Legal Profession: England, France and the United States (OUP, 2006) and Class Formation, Civil Society and the State: A comparative analysis of Russia, France, the United States and England (Palgrave Macmillan, 2008). He edited Martin Trow: Twentieth-century higher education: from elite to mass to universal (Johns Hopkins, 2010). viii AUTHOR His previous Civitas publications include Where’s the Insider Advantage? A review of the evidence that withdrawal from the EU would not harm the UK’s exports or foreign investment in the UK (July 2014) and ‘A club of high and severe unemployment: the Single Market over the 21 years 1993-2013’ (July 2015) in the Europe Debate series. ix Acknowledgements I have benefited greatly from the statistical savvy of Nigel Williams, from the deep understanding of the EU of Jonathan Lindsell, from the insightful observations of a blind reviewer, and from the editorial forbearance and judgement of Daniel Bentley. They all did their best, and I cannot, alas, blame any of them for any errors that might remain. They are all my own work. x Summary Claims are frequently made about the benefits of the Single Market for UK trade. The investigation that follows was provoked by one of the more astonishing, made to parliament in 2011 by Ed Davey, then minister of state at the Department for Business, Innovation and Skills (BIS), that ‘EU countries trade twice as much with each other as they would do in the absence of the Single Market programme’. It examines the evidence provided by BIS, in response to a freedom of information request, which was supposed to justify his claim. None of it did so. At that time, the government had evidently collected no data to show what the trade benefits of the Single Market might be for the UK, and the minister and his department relied on research provided some years before by three French academics and, more importantly, on a 2007 European Commission report which had listed many failings of the Single Market in an attempt to make the case for further European integration. BIS also referred to two other sources of evidence that post-dated the minister’s claim, as if it might vindicate him retrospectively. One was a volume the department had itself published, but this included no reliable evidence on the benefits of the Single Market. The other was the Review of the Balance of Competences between the UK and the EU, which was conducted by the Foreign Office. This included claims by the CBI, TheCityUK and various trade federations and businesses that UK exporters have benefited by ceding responsibility for trade negotiations to the EC. None of them cited any systematic or reliable evidence to support the minister’s claim. To evaluate it, the free trade agreements concluded by the EU are compared here with those negotiated by Chile, Korea, Singapore and Switzerland, four independent countries which have none of the ‘heft’ or ‘clout’ or ‘negotiating leverage’ which the CBI and many businesses consider essential in trade negotiations. The conclusions are: 1 MYTH AND PARADOx OF THE SINGLE MARKET • Since 1970, the EC has concluded 37 agreements, most of them with small economies, some multi-country. The aggregate GDP in 2015 of the 55 countries with an EU agreement in force in January 2014 is $7.7tn. • By contrast the aggregate GDP of all the countries with which Chile had agreements in force is $58.3tn, Korea’s totalled $40.8tn, Singapore’s $38.7tn and Switzerland’s $39.8tn.