Is the single market expanding?

With Mrs May having decided to leave the Single Market (and wider European Economic Area, EEA), it could be critical to know if it poses a long term existential threat to our future as a global trading nation.  Whilst in a formal sense the EEA will contract after Brexit, it actually wields considerable informal influence over much global trade. Ignore its ramifications at your peril.  Could then Mrs May’s government, having decided to leave on somewhat disingenuous grounds, that the four freedoms are indivisible, be unaware of this less obvious consequence?

What is the Single Market (or wider EEA)?

The Single Market provides a common mandatory regulatory framework of European Union (EU) directives (laws), standards, compliance or conformity assessment and market surveillance for many products under a centralised legalistic bureaucratic framework. Thus the quality, safety, environmental impact, energy consumption, and integration with other products can meet common (harmonised) criteria; commonly known as Essential Requirements in directives based on the New or Global Approach.  Failure to demonstrate compliance with the Essential Requirements or acceptable (harmonised) standards can prevent a product being placed on the market (in the Single Market or wider EEA) or cause it to be withdrawn.   Demonstrating compliance may require independent conformity assessment and certification; typically carried out by independent test houses and qualified notified bodies (Nobos) which in turn are regulated ultimately by the European Commission (or designated agency).  (Further information on the EEA see here, here and associated links)

What is a product or service?

Unsurprisingly any product and service is much more than just a collection of parts with some kind of functionality. Those parts, materials comprising those parts, associated services, design, production, testing and inspection processes all have to comply with recognisable and authoritative standards.  Whether it is an automobile or safety shoes, there will be standards and reliable means to ensure their compliance, often with some form of mandatory regulation or control.  The alternative to these arrangements is very much the Caveat Emptor principle and an inability to benefit from the accumulated experience of producers, regulators and users.  Costs can also be higher because of a lack of standardisation.

Not all export markets are the same

Some export markets and customers for certain products and services can be very sophisticated, featuring well-developed regulatory frameworks, facilities and knowledgeable, competent, in-house resources. Then it is a matter of complying with their requirements, their specified standards and their regulatory framework.  To offer non-compliant alternatives in the hope that they will be acceptable is to court losing the work to fully-compliant competitors.   However, some exports markets and customers need to rely on external resources and guidance from larger and well-refined markets.  This reliance can be very subtle and render otherwise generally acceptable suppliers and products uncompetitive, or exclude them completely from the market.

The March of Global Standards and the Single Market

Globally accepted standards are great facilitators of international trade.  Where a product is quite complex it certainly helps to know that is complies with standards that you (or the local regulatory authorities) are already familiar with and can trust.   In reality many standards are produced by international bodies and are the same in the UK, Japan or Germany, with perhaps minor national variations. There is also considerable interchange between European Standards (Euronorms) and International Standards.  Hence the expansion of International Standards effectively to supersede national standards and fill obvious needs.

Somewhat less obvious, mandatory regulation is also expanding and effectively following the lead of the more advanced practices.  The Single Market (and wider EEA) is the home of many businesses which are well versed in working to International and European Standards and which follow well-refined conformity and regulatory practices, thus making it somewhat of a low risk trend-setter.  The European Commission is also happy if others (particularly individual non-EU countries) follow its lead (The Brussels Effect), while for those planning to join the EU, it is necessary to do so.  Also, there can be formal agreements which effectively extend the EU’s mandatory regulatory practices into particular products and markets outside the EEA. In summary, it is a complex, ever evolving subject.

World-leading product but still  excluded from an export market

It is not surprising, therefore, to be confronted in an export market with a plethora of well-known European and/or International Standards, along with conformity assessment or regulation modelled on EU/EEA practices.  Such imitation can extend as far as using documentation that in part has clearly been re-badged from previous use inside the EEA; it keeps the costs and risks of preparation down.  It can also be advantageous to reputable organisations to point out that they vigorously follow these often high and demanding, standards and practices, while at the same time being  ‘outside the loop’ can be detrimental to other companies.

Vendors/Suppliers don’t argue with potential customers in export markets

Being ‘unfairly’ excluded from profitable business rarely leads to robust or legal challenges against the potential customer by the unsuccessful vendor; as a minimum, very deep pockets are needed which  small enterprises obviously do not possess.  It is even rarer for unsuccessful vendors eventually to win the work after having caused delays, bad feeling and extra costs.  Once excluded because of non-conformity it is difficult and costly for a company to get back into its given export market again. This is especially the case with capital goods or complex products; re-design, re-testing and conformity re-assessment don’t come cheap.

The Invisible Competitor

The subtle influence of the Single Market (and wider EEA) extends far beyond the borders of its Member States.  This extent of that influence is impossible to determine. Even knowing it is there usually requires considerable perception, industry knowledge and exposure to the export markets involved.  Yet this influence can make it more difficult or even impossible for organisations (especially smaller enterprises) that don’t follow the EEA’s standards, conformity assessment and regulatory practices to do business in some export markets.

In future, unless there is a re-think of the Government’s Brexit policy,  the UK may face problems in accessing some highly attractive export markets outside mainland Europe because of the reach of the Single Market and EEA.

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16 comments

    • StevenReply

      Indeed she is, Adam. She is utterly useless and always has been as her disastrous liberal-left globalist open borders tenue at the Home Office proved beyond all doubt and so totally out of her depth it would be funny if her office wasn’t a serious one. Everytime she goes abroad and represents us I just cringe. She is so bad that a chocolate fireguard would be of more utility. I don’t blame the EU for walking all over us when they have to face.. It’s time Jacob Rees-Mogg stopped talking the talk and put himself forward as leader of his party.

    • StevenReply

      Indeed she is, Adam. She is utterly useless and always has been as her disastrous liberal-left globalist open borders tenue at the Home Office proved beyond all doubt and so totally out of her depth it would be funny if her office wasn’t a serious one. Everytime she goes abroad and represents us I just cringe. She is so bad that a chocolate fireguard would be of more utility. I don’t blame the EU for walking all over us when they have to face.. It’s time Jacob Rees-Mogg stopped talking the talk and put himself forward as leader of his party.

  1. ThomasReply

    Very true. You may have noticed a story run by the Express recently that claimed that plans for a future leadership bid are quite advanced. Apparently, the Rees-Mogg strategy, designed by a pro-Brexit MP and a UKiP member (probably Boris Johnson and Nigel Farage, who have both shown their support for Rees-Mogg on a number of occasions), is intended to be directed at pro-Brexit, socially conservative, and UKiP members. On top of that, the Telegraph reports that Sajid Javid, Michael Gove, Jeremy Hunt, and Gavin Williamson are preparing for their own respective campaigns, and Theresa May has dared them and potential rebels to force a no confidence vote. The only real problem would be Rees-Mogg winning the vote in a Remain-majority parliamentary party. If he did, I have no doubt the rest of the party would vote for him. I would love to see a real Thatcherite PM take us fully out of the protectionist EU.

  2. StevenReply

    Far too many Tories have an obsession with free trade to the point it has become a complete fetish and think it can’t have any possible downsides. This is really an ideological notion from the 19th Century Liberal Party and should have stayed with that party. Indeed when the Conservative Party was genuinely Tory eg the 1930’s some Tory leaders were not averse to moderate levels of protectionism ie Stanley Baldwin. Free trade taken to excess can damage a country significantly whereas a limited and carefully-targeted protectionism combined with other sensible policies can help it ie Japan post WW2. The worst thing about the EU is NOT that it restricts free trade to European countries. To be frank, there is no possibility of Britain being able to complete successfully on the same free trade terms as ultra-cheap labour countries like Vietnam. If Tories think there is and they get us out of the EU with this sort of thinking on their minds and follow it through then it may well be the case that Brexit will represent jumping out of the fire pan and into the fire.

    https://www.thebusp.org/single-post/2018/06/06/We-Must-Restore-our-Traditional-Values-Liberties

  3. ThomasReply

    I cannot think of any examples of free trade damaging a country’s economy, but I can think of plenty of failed protectionist policies. Restriction of trade coming to Britain outside Europe is a major problem. Protectionism is Europe is great if we want to bail out inefficient French and Spanish farmers, but I think that is unfair for the British taxpayer and is a waste of money that could be spent on defence and the NHS, and it certainly isn’t putting British interests first. A few factories in the North do not represent the majority of Britain. As for Vietnam, outside of the EU, I don’t think there will be much trouble for Britain to compete with smaller Asian economies, as we are the fifth largest economy in the world, and especially as our market will be more in goods than labour.

    • StevenReply

      Of course, we don’t have many factories in the North (or anywhere else for that matter) and that is due to decades of totally incompetent government by both Tory and Labour. Indeed, radical market LIBERAL Mrs Thatcher even once stated we don’t need manufacturing! I beg to differ with her and with any other economic liberals on that point seeing as Britain is NOT a tiny tax haven like Monaco but a country with an ever-expanding population (thanks also to market liberals and other assorted globalists with their open borders policies) so we NEED manufacturing to provide us with enough income to pay for expensive public services like the NHS. There is NO way in the world Britain can compete ON COST GROUNDS with countries like Vietnam UNLESS workers in this country are prepared to be paid an absolute pittance and live like a coolie. The Tories and their fellow travellers may think that is a price worth paying for their UNWANTED vision of a ‘global’ Britain but you don’t have to be a extreme Marxist trade unionist to think that it isn’t. This ISN’T being ‘unpatriotic’ as no doubt radical market liberals like Priti Patel would accuse me of being but being REALISTIC. Indeed, she and some other barmy Tories wrote a book advocating such lunacy.

      Perhaps, if this is way Brexit is going to end-up then it may be worth cancelling it? This country DOESN’T want globalisation on steroids as we have already suffered enough of this libertarian economic nonsense already.

      P.S. Whilst not everyone is cut out for working in a factory or would want the pollution that some of them create, at least when we had those “few factories in the North” we had some people in well-paid and secure employment much of which HASN’T been replaced with similar quality jobs. Working in a call centre or flipping burgers isn’t the way Japan built its economic prosperity. An underclass moving in an out of poorly-paid and insecure employment and the benefits office isn’t a good replacement for these factory jobs I don’t think.

      There should be no silly ideological objection to using protectionism as a means of nurturing and rebuilding a British industrial base. Protectionism CAN work provided it is carefully-targeted and used on a fairly small scale and combined with other sensible policies.. Indeed, post WW2 Japan is unlikely to have grown to being the economic superpower it is today without using protectionism.

  4. StevenReply

    Extreme market liberals like Daniel Hannan, Priti Patel ect should remove themselves from the Conservative Party (Mr Hannan is so out of touch with ordinary public opinion he believes in no effective restrictions on immigration at all) and go and form their own libertarian party and see how popular at the polls it is. I suspect not only would it fail to attract legions of voters in places like Liverpool (a city which HAD Tory MPs even into the 1960’s) and other Northern cities it would also fail anywhere else apart from the most comfortable and leafy areas of Surrey or Buckinghamshire.

  5. StevenReply

    I have no doubt that the Leave votes in parts of the formerly industrialised North like Barnsley, Sunderland etc were a vote against globalisation and NOT a vote for even more of it as Danniel Hannan etc advocate. Working-class people in places like that may not say this in so many words as not many can explain political concepts very well but those were the sentiments that drove them to vote leave in such high numbers. I really doubt they voted Leave because they had a fetish for abstract ideological economically liberal concepts like free trade.

  6. ThomasReply

    We really don’t need huge maunfacturing industries. There is abolutely no need to triple taxes for the population of Britain just so 2% of the country can continue working in inefficient factories. These factories brought no real benefit to the economy, and the jobs certainly were not well-paid either. If you want to make an omelette, you have to break some eggs. Globalism is a realist, practical approach to the economy and has worked extremely well for the past two centuries. It is not some unworkable ideology; it has changed this nation from the sick man of Europe to a major world power.

    Of course we can compete with Vietnam – We are the fifth largest economy and they are the forty-sixth! A solicitor I met recently with experience in investing invested in the Vietnamese stock market and he lost all of the it almost immediately. They are such a weak economy that they should not even be a factor, especially as our focus will be more on exporting goods. Japan, too, is much weaker than the European nations and America. Prosperity should be judged on the size of the economy; and capitalist, free-trading nations consistently come out on top. We should not aspire to be more like a weaker economy.

    The issue for working class people over Brexit was not the effects of globalism, otherwise great swathes of them would not be turning blue at this present time. The problem is vast amounts of immigration coming and taking the cheap labour here which rightly belongs to the native British.

    I do not have much admiration for Hannan, though. He has adopted a ridiculous stance on immigration, and wants us to do away with our national anthem. A friend of mine debated him on the BBC, and found him to be quite a difficult character.

  7. StevenReply

    Britain is NOT a world power anymore least of all in an economic sense. ‘Our’ economy (if it can indeed be characterised as ‘ours’ since most of it is composed of foreign-owned companies even what should be STRATEGIC ones) has been hollowed-out by rampant globalisation instituted by the high princes and princesses of globalisation and economic liberalism like the Lady Thatcher’s, Bliar’s, Boris Johnson’s and the Priti Patels of this world. I am NOT arguing for Britain to withdraw completely from the world economy but for a more measured approach where we recognise that globalisation has its drawbacks with my point being people like I described above think globalisation has only benefits. I am afraid I consider that to be the wrong point-of-view.

    Britain had an effectively closed single market with our former Empire and also the fact we were the ‘top dog’ in manufacturing and business at the turn of the last century enabled this country to appear to benefit from international free trade with no possible downsides. Since we don’t have these advantages anymore we need to recognise that Britain won’t automatically benefit from international free trade in the present era.

    Working in a factory is certainly not paying as good a wage as shuffling some figures around on a computer screen in the City of London I agree but it paid better than moving in and out of low-paid jobs flipping burgers and answering call centre calls as happens nowdays in these formerly industrialised areas. Britain DOES need a manufacturing base albeit it one not of simple ‘metal bashing’ but of a high-tech kind. We can’t go on having an economy excessively dominated by finance and services not least for the fact we have a serious balance of payments problem which can’t be financed for ever at an unsustaniable rate. Needless to say before we entered the Common Market/EU and rabid globalisation and economic liberalism began in earnest we paid our way in the world.

    Whilst it is true to say that Japan has had quite a few economic difficulties over the last twenty years or more I hope I won’t be accused of being ‘unpatriotic’ when I say that your average Jap would laugh in my face if I suggested to him or her that they swap Britain’s economy with their one. Their economy is still larger than ours or that of Germany’s (another country that has a industrial base and a government that doesn’t dismiss manufacturing as not necessary or as an inconvenience)

  8. ThomasReply

    The problem is mass immigration taking cheap labour from British workers. The industries were nothing else but “metal-bashers” and were a waste of time and money. Outside of the EU, we can give jobs like delivery drivers, farm workers, and construction workers back to the British, drastically reducing unemployment. We can, and are, investing in the high-tech sector, and that will be an opportunity.

    We are, however, debating an argument that was won thirty years ago. These days, even if our industries our revived, they would be automated. There would be no miners’ strike because there wouldn’t be any miners. That is why it is worthwhile investing in the tech sector, which could run industries more efficiently, with less danger, and actually benefit the economy.

    There is nothing “silly” about this; it is just common sense. Japan’s economy may be big, but the US is bigger. Japan’s economy, like China’s and Russia’s, only began to grow when they incorparated globalist elements. If you look at any economy, you will always find protectionism hinders it and free trade liberates it.

    You mention that Thatcher was wrong to focus on the benefits of globalism, but not on the downsides. What downsides are there?

  9. ThomasReply

    As the fifth-largest economy in the world, with the most respected and highly-trained armed forces, the best intelligence and police services, as a member of the UN Security Council and closest ally to the the world’s largest economy, the US, wth the most widely-spoken langauge and some of the best entrepreneurs, the best broadcasting service, the second oldest parliament, and Harry Kane, we are undoubtedly a world power.

  10. Adam HileyReply

    I would vote for Rees Mogg over Hunt or that indian Savid Javid if I were a member of the Con trick party never would I vote for Hunt for what He is doing to the NHS and Javid is a right wing version of Sadiq
    khan

  11. ThomasReply

    I think Rees-Mogg would certainly win in any leadership bid or general election, because of his wide appeal, not only to Brexiteers, but to the disillusioned and more socially conservative parts of the population, as well as those further on the right. However, a leadership contest sounds good, but without the prospect of a Mogg premiership, the alternatives to the Theresa May look quite bleak. Hunt is slippery, Gove is deceitful, Gavin Williamson is unexperienced, and Sajid Javid only appeals to the liberal elite.

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