The politicians in favour of Brexit are out in force again, continuing to trumpet the benefits of being able to leave the EU: being able to control immigration, to control tariffs, regulations and laws without the oversight of a third party.  Is any of this really true?  Well in theory, it is entirely possible that the United Kingdom could set its own laws, and its own regulations: however the idea of being able to have direct and total control over the rules and regulations which govern the production and sale of goods and services within an environment is predicated on the concept that the market can either a) produce everything needed to survive in that market without help, or b) the market is sufficiently attractive that others will fall over themselves to enter the marketplace.  The United Kingdom is not a self-sufficient nation however, and is therefore reliant on both imports and exports in order to maintain its current industrial and financial activities.  In order to survive post-Brexit therefore, logically the United Kingdom would need to either drastically increase the production of home-grown goods, or would have to improve the attractiveness of its market.  Setting aside the possibility that the United Kingdom could become self-sufficient – the remaining option is that of beautifying the marketplace.

One of the easiest ways to do this (and incidentally one of the approaches recommended by the right-wing pressure groups…) is to lower regulations, and thus reduce the barriers to entry into the market.  With lower barriers, it is cheaper for companies to produce the goods necessary to be certified in the market and thus the market represents a greater opportunity for profit for importers.  What is often not mentioned however, is the opposite effect of this… When the standards of production are lowered, the import restrictions are indeed lowered; and at the same time the barriers to exporting goods are increased!  Companies can only sell into markets where they meet the regulatory requirements, and if the requirements are lower in the UK than they are in another market, the UK producers will not be able to sell to that market.  The domestic producers could elect to maintain high standards in order to keep the door to export markets open, however this then risks affecting their place in their home market – since their production costs will in all likelihood be higher than those domestic producers who only meet the lower standards – and thus they will price themselves out of the domestic market.  Some 40% of exports from the UK and 50% of imports to the UK are trade with the EU – and any changes to the UK standards are likely to have an impact on at trade.

If the UK does decide to lower its standards, it could indeed open its market up to new producers – the EU would still be able to sell in the UK and so too would for example, US producers.  Yet this is a move which in all probability would only be beneficial to importers.  Were the UK to lower its standards to meet those of the US for example, US producers could sell their products in the UK; the UK could in return sell its goods to the US – but as goods in the UK currently meet higher standards than the US this export is already possible!  Even were such a move to seek to benefit exports through an agreed removal of trade tariffs between the US and the UK – enabling an increase of exports to the US – the influx of cheaper US goods would have an adverse effect on the domestic manufacturers who are used to producing goods to a higher standard (and thus more expensively).  The natural reaction to which would be for UK manufacturers to lower their standards (and costs) which would result in them no longer being able to export to the EU.

To puts things in perspective, the EU had a GDP of €14,800 billion in 2016 and is the EU is the single largest market in the world.

The UK currently benefits from being inside this single largest market and represents 16% of the GDP.  Once it leaves however, the EU will remain the single largest market, and the UK will be a mere fifth of its size.  Under such circumstances, is having a chance of increased trade with the US worth losing 40% of your export market?

Other than lowering standards then what other options are there?  The UK could elect to increase its standards beyond those currently agreed with the EU – in an attempt to ensure that is can export its goods to a maximum number of markets.  By setting regulatory standards at the highest possible level, a market can at once ensure that all imports must meet those high standards (which puts home-based producers at an advantage since they have less transport costs to pay to access the market) and at the same time ensure that goods produced for export can fulfill the requirements of all other markets.  In doing this however it stands to lose 50% of imports – since the EU regulations may be insufficient to allow for those goods to be imported to the UK.

So if the UK cannot lower standards without devastating the domestic and export industries, and it cannot raise standards without damaging imports what can it do?  Perhaps the UK could adopt standards that are already in place – standards that are already known and accepted.  But which ones?  I’d start with the largest possible market, so as to maximise your export opportunities…  now which market is that again?

“Taking Back Control” can have value, by empowering the government to determine the future.  Yet if, as it appears to me, that any attempt to exercise that empowerment results in disaster – it is nothing more than a White Elephant.

(Thank goodness the UK government are not stupid enough to cut off their nose to spite their face.)

(Oops!)