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There is a lot of optimism that leaving EU's Single Market, will be an opportunity for UK to create new trade deals with other countries outside the EU. I have seen articles and people using this argument, but I never got to understand it.

Is the EU's Single Market, in any way, restricting UK from creating more deals with other countries? Or is UK going to be a more attractive market, if they left the EU market?

Leaving the 'immigration control' factor aside, how would UK be in a better trading position by leaving the EU free trade deal?

  • For the trade deals, it's the EU Customs Union, not the EU Single Market, that is relevant, isn't it? – gerrit Sep 26 '17 at 11:50
  • It's the single market membership that conflicts with the free people movement. Not the Customs union, or a Free trade area Nobody is arguing about the later, and I don't think these option are on the table anyway. From what I understand, and what I hear and read, all the fuss is about the Single Market. If I didn't get your point, please explain.. – yannicuLar Sep 26 '17 at 16:46
  • You write, will be an opportunity for the UK to create new trade deals. That requires leaving the EU Customs Union in additional to leaving the Single Market. In other words: to get rid of freedom of movement UK needs to leave the Single Market. To negotiate their own trade deals they need to leave the EU Customs Union. They can leave the Single Market without leaving the Customs Union (but I suppose not the reverse). – gerrit Sep 26 '17 at 22:23
  • I'm not too sure that SM and CU are totally independent, so you can't remove your SM membership like removing a plug-in :) Being in the CU but not in the SM (like e.g Turkey) might not be an option for UK, or it would require a new deal and process. – yannicuLar Sep 27 '17 at 12:44
  • Just to give you an example, when Greece wanted to leave the Eurozone (just the currency), but keep being a member of EU, The EU leaders said that this not possible. Leaving the Eurozone, without leaving the EU too, was not an option. In the meantime, there are countries that belong to EU, but keeping their own currency (Sweden). – yannicuLar Sep 27 '17 at 12:51
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More than "an opportunity", it should read "will be forced to", as it will begin with no trade deals with other countries and will default to the WTO rules.

For the answerable part:

A country within the EU cannot sign its own, separated trade deals, because the single market would mean that once the goods are in that country they can travel everywhere in the EU. For example, if there is a 10% tariff in bananas and Spain signed a trade deal agreeing to a 0% tariff, everybody would import bananas to any country of the EU through Spain.

And getting the EU to sign a trade deal is not easy. The fact that the EU is formed by many countries mean that getting a trade agreement that is acceptable to all of them is considerably more difficult1.

The UK will have an advantage of being a more "coherent" market, which means some trade deals may be easier to reach. If there are no banana producers in the UK, there would be little opposition to a trade deal that eases the import of bananas in the country. This should lead to more agility for creating trade deals.

Of course, there is a downside to this: the UK will be a considerably smaller market than the EU. This means that the other part will benefit less from probable trade deals (selling their bananas to 65 million people instead of 430 million), so they may be less interested in making deals that help UK business to sell to them.

And the above leads to the fact that, as of now, we cannot predict if the situation will end as a net advantage for the UK or not; we cannot even predict if we will be able to tell that in the future (what if it helps industry but hurts financial services?)


1That is already is an issue within a country (business that feel threatened by foreign competition opposing the trade deal, business that think that they can increase they market are in favor), with all of the countries of the EU it is considerably more complicated.

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    +1 for your first line especially. Indeed, describing this as an opportunity is like saying quitting your job is a great opportunity to start looking for a new one. – oerkelens Jun 16 '17 at 13:15
  • A country within the EU cannot sign its own, separated trade deals, because the single market would mean that once the goods are in that country they can travel everywhere in the EU. No, it's because the EU treaties forbid them from doing it. International trade is an exclusive competency of the EU. – user5097 Jun 17 '17 at 8:42
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    @NajibIdrissi: The EU treaties forbid it because the single market would mean etc. etc. – gnasher729 Jun 17 '17 at 11:17
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    Note that a recent ECJ ruling means that trade agreements do not have to be acceptable to all EU members for the EU to sign up to them, only to a qualified majority. – Mike Scott Jun 20 '17 at 13:44
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    @MikeScott I did not knew, thank you. Still, a qualified majority is still a lot of countries, so it does not invalidate the point. – SJuan76 Jun 20 '17 at 13:47
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Being in the EU does not merely restrict but completely precludes separate trade deals with other nations. The EU functions as a customs union that transferred trade negotiations to the EU level. There is a single external tariff and the EU negotiates as a block (with the consent of national government and parliaments, as applicable, but always as a block). That much is not debatable.

Whether the new trade deals the UK will have to negotiate are going to be hugely beneficial or at least help soften the blow from reduced trade with the EU is another question.

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The EU negotiated its trade deals with the intent of benefiting the EU as a whole. One thing that the EU had been accused of doing prior to Brexit, is favoring the continental countries when negotiating trade deals, sometimes at the expense of UK interests. This is despite the UK having significant increases in exports under the EU Agreements.

So any given trade deal item that the UK does on its own is likely to be more favorable to the UK than it would have been as a member of the EU. It is also arguable that as a member of a large trade bloc (the EU) that UK would have benefited on the whole far more than they will being on their own. Again that is taking as a whole. It is easy to look at specific trade deals and find places where it appears that the UK was being harmed. But when you look at the whole picture it appears that the EU was doing well at building on the strengths of its member nations. But that is little solace if you are an English fisherman that is being greatly harmed.

So while the UK's trade deals will likely be less beneficial on the whole than if they had been a part of the EU, they will be more popular as they can avoid causing harm to the industries that allow the UK to be more self reliant than they would need to be if they were a member of the EU. It has never been the intent, nor has the EU ever claimed it was, of EU trade deals to maintain the self reliability of its member nations in its trade deals. Instead it has focused on strengthening the EU as a whole. Much like in the US certain states benefit more from some trade deals than other. But as a whole the intent is to strengthen the entire nation.

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Leaving the 'immigration control' factor aside, how would UK be in a better trading position by leaving the EU free trade deal?

Maybe by living in an alternative reality? The grim truth, as The Economist sketches it, probably looks more like this:

enter image description here

The trading position is also weakened by the fact that trade deals take years to negotiate and can fail completely at the last hurdle. Data points:

  1. TTIP, USA <-> EU, first proposed in the 1990s, expected not to complete before 2019. This one has drawn lots of protests and may still fail.
  2. CETA, CDN <-> EU, negotiated from 2009 to 2017.

If you analyze the image carefully, note how there's only one table and trade partners line up in a queue (instead of many tables, one arm-wr^Wtrade partner each). This illustrates that the UK likely does not even have enough trade negotiation talent to conduct the negotiations. How could they? The last 40 years, all trade negotiation was out-sourced to the EU.

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    -1 Im not saying this is wrong but... it doesnt really answer the question directly. There are 2 sides of every coin and this just looks at the side of the coin that the question did not ask about. It is also really nothing more than opinion. – SoylentGray Jun 21 '17 at 15:08
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    @SoylentGray I'd say it's a direct answer to a question making the assumption that there could be a better position by stating that it makes things entirely worse. Of course it's opinion; this is politics, after all :-) At least it's an opinion shared by more people than only Yours Truly. – Jens Jun 23 '17 at 14:04
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    Of what benefit would it be to other nations to 'get tough' on the UK on trade deals? Either they make a deal, or they don't. If they don't make a deal, then they, as well as the UK, lose out on the benefits of a good trade deal. I question the narrative that the UK by itself can't do as well for itself in the trade area, as it could with the divided interest EU government doing the negotiating. – tj1000 Jun 23 '17 at 15:53
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    @tj1000 Because the UK will need those trade deals much more than the other nations do. This is what's called a "strong negotiating position" and it means that the side that needs the deal the least has significant leverage to make sure the finalized deal benefits them much more than it benefits the other. – Shadur Sep 20 '17 at 13:27
  • @tj1000 I imagine that the UK needs things manufactured in the US and China more than the US and China need things manufactured in the UK. – David Rice Sep 6 '18 at 15:30
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There's a story that the UK government needed to tell to population about how everything will be fine. We have found in the latest election that this story isn't believed by many.

The reality is that they are just burning up trade deals with their nearest and closest trading partners, with all the EU countries, including the UK's largest trading partner, which isn't the USA as Mrs. May tries to tell us, but Germany.

The UK may be able to get better trading deals with non-EU partners. However, any such deal that is at the expense of the EU will cause a reaction by the EU, which will be costly for the UK, or for the country striking the deal, or both.

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    Overlooked is the fact that the UK is an integral part of the EU economy, especially it's powerful financial institutions. Also, a number of EU companies have extensive manufacturing plants in the UK. Restrict those plants with a tough trade stance, and not only are the UK employees hurt, the parent company is seriously hurt as well. The EU can't lock the UK out of its economy with harsh trade conditions, without also damaging the EU economy in the process. This is a situation that would benefit from a pragmatic view of all the consequences... for all involved. – tj1000 Jun 21 '17 at 16:19
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    @tj1000 it's easier to relocate a factory to a new country within the EU than it is to create jobs within the UK. – David Rice Sep 6 '18 at 15:31
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  1. The UK will have to create new trade deals as the UK will not be allowed to keep the trade deals for the EU.

  2. Then depending on the trade partner the UK will be or not attractive to this partner and the partner will likely or not make a good trade deal with the UK.

So in summary it depends on how the UK will "sell itself" to the possible trade deal partners.

Population: The UK has of course only 80 millions vs. several hundreds of millions in the EU. "buying power": the UK has a lower buying power than Germany, Netherland etc... but higher than Portugal and Greece.

It will really depends on the skills of negotiation of the UK.

AND it will take time to have such trade deals (see for example Mexico with the EU now etc...)

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I think that the optimism you describe stems from a perception that the EU is an impediment to trade deals, that we lack sufficient deals through access to the single market.

As an example both the US and China are practically poised to sign a free trade deal with Britain, but this can not happen until Britain leaves the EU.

Whatever kind of Brexit we have, this outcome becomes more likely, and many others like it of smaller consequence...

Don't get me wrong, I think there is a problem with many of them. At what price does it come other than economic gains? What are the reasons that the EU prevents these kinds of deals? Those are, sadly, other questions...

... but I can certainly see plenty of reasons to be optimistic that Britain will be better poised to engage in free trade at some cost, including the potential loss of free trade with the EU.

  • What are the reasons that the EU prevents these kinds of deals? I believe this is covered by @SJuan76 answer – yannicuLar Jun 21 '17 at 11:02
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    I had the impression that this optimism was not based on hard evidence or objective arguments, and your answer is not really suggesting otherwise – yannicuLar Jun 21 '17 at 11:07
  • Some of the benefit of the customs union would be lost even if the UK does have a free trade agreement with the EU. For example, goods passing between the UK and the EU would have to be subjected to customs checks to prevent smugglers from illegally exploiting differential tariff rates. As an example of that, suppose the UK and the US have free trade olives, and the UK and the EU have free trade on olives, but the EU has a high tariff on US olives. – phoog Jul 13 '18 at 14:00
  • While Germany sells roughly six times as much as Britain does, outside of Europe, it is difficult to see how Britain is inhibited by the EU from exporting, as Brexiteers maintain. It is utterly fanciful in my estimation to believe that Britain can increase its external sales by creating its own trade agreements. On the day we leave the EU we shall lose the 61 trade agreements that the EU holds with non-EU countries. – WS2 Jul 13 '18 at 23:49

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