LONDON – The U.S. Chamber of Commerce has spoken, the Japanese government has spoken, and so have many distinguished commentators. Looking at the United Kingdom, they see a country seemingly caught in an agonizing dilemma between a so-called hard Brexit and a soft Brexit, and it worries them deeply.
Put more crudely, they fear that a choice has to be made between, on the one hand, tighter control of the U.K.’s borders against immigrants from the rest of Europe, and on the other, staying in the European Union’s single market. They have been told that if the U.K. does not accept free movement of people it will not be allowed to stay in the market. They have further been told that even if there are small changes in immigration laws they will cut the U.K. out of the single market and economic growth will be heavily damaged.
There is just one snag with this whole grim scenario of choice and dilemma — it does not exist. In reality and in practice, there is no absolute and polarized choice between tighter border controls and remaining in the single market, and no impossibly polarized choice between cutting immigration and economic growth.
This is firstly because the issue of free movement, said to be a basic principle of the single market, has long since been compromised. In the face of both the huge income disparities within the EU growing larger and now the mass influx into the European mainland from the Middle East, Africa north and south of the Sahara, and Central Asia, no such “principle” could ever be maintained.
The supposed fundamental condition of complete freedom of movement between every single member of the EU turns out not to be fundamental after all. It may have made sense when there were 15 of them, mostly from Western Europe. It makes not the slightest sense when there are 28, with coasts and borders alongside troubled areas. The old and noble rules about accepting genuine refugees who are crowding into EU countries cannot possible cope with the new millions of migrants now fleeing war, deprivation and a future without hope for their families, or simply in search of a decent job and a better life in European countries.
All Europe, including the U.K., will need new and sensitive policies to cope with a new situation.
As for the proposition that tighter immigration control will somehow reduce prosperity and growth, this again is a grotesque and unreal binary simplification. Some immigration is highly beneficial to growth, higher quality services and improved skills, while some creates severe pressure on social facilities, especially housing, has already done so and needs to be slowed right down. To distinguish between the two types of migrant flow is difficult, but not impossible, and it is a task all Europe, and the wider world, is having to face.
The other leg of the so-called dilemma — that the single market is the key to prosperity and trade for the U.K., is just as misleading. This is because the very concept of a single market within a defined European zone has been diluted by the new nature of trade and international exchange in the digital age.
The single market was once, many years ago in the 20th century, a heavily protected zone with its own tariffs and elaborate nontariff barriers. Goods and services originating from within the EU could be carefully checked and allowed to move without tariffs, so long as they complied with single market regulations.
But that simple world has ceased to be. When the majority of manufactured products nowadays may originate from a dozen different sources and supply chains, and when actual production processes are being globalized, protecting a tight zone against external sources becomes almost impossible. Most products anyway contain a large knowledge or service element that may have come from anywhere or everywhere.
But more important still is the fact that trade in physical goods is being overtaken by trade in data, information and every kind of service. The U.K. happens to earn 80 percent of its income from services and half its export income as well. This is not an area where the single market works well, and never has.
Specific and highly technical arrangements will certainly be needed in some sectors to maintain swift trade and exchange flows, and these will have to be worked out on the basis of mutual advantage and equivalence of standards and procedures. Banking, car components and agricultural export products are some of the obvious examples.
But none of these activities now require an overall, all-embracing, single market protective regime, let alone a string of treaties. Nor do many of the other ongoing issues that a country like the U.K. has to handle with its near neighbors — as it has done in the past, long before anyone had dreamed of a single market. For example, the status and rights of all EU citizens in the U.K., and all U.K. citizens in the rest of Europe, will have to be guaranteed. Such items as policing, air pollution, transport standards, regional defense and security — these and many other everyday matters can all be resolved in a normal, beneficial and open way.
This is the new European policy taking shape that Prime Minister Theresa May has called for. It will change the way the U.K. does business, and since the U.K. constitutes a large portion of the total European economic entity, it will change the way much of Europe does business.
But that, of course, is coming anyway, with or without Brexit. The supposed hard-and-fast, either-or, dilemmas of yesterday may look alarming and make a good news story. But as the digital age spreads its revolutionary impact on modern trade and commerce, they are melting fast away.
David Howell is a Conservative politician, journalist and economic consultant.
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