There is a phrase that pops up occasionally when talking about free trade, economics and ― increasingly ― Brexit. And it’s a phrase I don’t like: a level playing field.
It refers to the idea that different economic entities should trade fairly with each other, where if one country pays its workers fairly, its produce should only have to compete against other countries where the same happens. And that concept, I like. But I don’t like the phrase: level playing field. It suggests that the actual ‘level’ is fungible; any set of rules would do, so long as everyone agrees to them. But that’s not what it is.
When it comes to the EU at least, it’s more like an ethical playing field. It wouldn’t live up to our expectations of a level playing field if all labour was slave labour; a fair salary is the ‘ethical’ part of the ethical playing field. And the same happens with ‘externalised costs’, which is a fancy way of saying ‘pollution’; countries that agree to certain environmental standards stop their companies exploiting the environment by fly tipping their pollutants into the air and water, protecting citizens’ health, rights to the environment and environmental rights.
And then there’s safety standards, which protects citizens. Food standards go into this category, because the market isn’t quite strong enough to stop someone chlorinating chicken without regulation being in place first. Then there’s product quality, which I always think of as literal nuts and bolts: if I’m going to buy nut and bolts to hold a car together, I want to know those nuts and bolts are meeting robust standards, and the EU also ensures that.
Where one country falls short of the level playing field, trading blocks and countries put a ‘tariff’ or tax on those goods. (There are other reasons for putting tariffs on goods, like protection of your own produce or sanctions on a country, or even outright political spite.) These taxes stop one country’s products from undercutting another country’s products through cut corners: exploiting workers, polluting the water, annexing forests and harvesting the timber for free etc.
Where this is increasingly coming up in Brexit conversations is in the idea that the UK will somehow manage to negotiate a free trade agreement with the EU, without signing up to its formalised ‘level playing field’ agreement: the single market. You get to export on a free trade basis on the grounds that you receive goods on a free trade basis; you get services on a free trade basis on the same grounds, and assuming the person delivering that service could cross into your country without friction. You also get to trade in currency and capital across borders on the same principle.
As well as being the formalised version of a level playing field in the EU, the single market also rests on these freedoms for philosophical reasons: the EU believes this drives prosperity. And, given that four of the top ten global economies are inside the EU, it seems they may have a point.
The way this gets into Brexit is in the argument we can leave the single market and have an informal ‘free trade’ agreement. But, for UK goods to enter the EU, the EU is going to have to have some assurances that the products meet the standards of the level playing field, and this costs money. And that money has to be generated; the EU isn’t going to stand at a loss to have the UK as a free trade partner.
This money can either be raised by a membership pay-in, like we currently have to the single market; or it can be generated in tariffs. This will allow the EU to check the UK’s farming practices, food quality, environmental standards, employment law etc. And this will be overseen by the European Court of Justice, something that seems like a deal breaker to a lot of the harder Brexiteers.
But the ECJ won’t, necessarily, make decisions against the UK, demanding that the UK improves its controls or enforcement. Instead, the ECJ can rule that the EU can not be a tariff-free customer of the UK, because it is undercutting the market. This may not sound like a ‘justice’ topic, but it is: an undercut market means honestly competing companies have to start laying people off or even go under; that is livelihoods and incomes at risk. The alternative is a race to the bottom; a completely free market, instead of one underpinned by an ethical playing field. And that stagnates wages, gets rid of employee protections and destroys the environment.
If the UK accepted a small fee so there could be oversight, and stayed closely aligned to the EU single market rules, the UK would be crossing some Brexiteers’ red lines: it would be tacitly accepting the EU rules, but it wouldn’t be shaping them any more. An irony, since Margaret Thatcher was a major architect of the single market. The UK doesn’t get any additional freedoms, and it does lose authority over the single market, something it wielded very successfully in the past.
But, the UK’s ability to make its own trade deals with other countries would also be weakened. If the UK buys in goods from other countries, without tariffs (or, lower tariffs than the EU puts on) then the UK has products it can sell on from within the EU, which may be undercutting the market again. Imagine the EU puts a 40% tariff on some product from some country, to make up for the fact that country turns a blind eye to pollution. After Brexit, the UK could buy that product with a 5% tariff (don’t turn a complete blind eye to pollution ― just a partial one), put a 10% mark up on it, and then sell it from within the single market at a total of a 15% increase, not a 40% one. And that undercuts the market.
To stop this, the EU will be watching the UK’s other trade deals. And, the ECJ could rule, at any time, that the UK’s current trade deals outside the EU are undermining its ethical playing field, and then withdraw the EU from the EU-UK free trade agreement.
And so, the UK would be technically free to make those deals, but there would be serious economic repercussions for deals that are vastly different from what the EU arranged on the UK’s behalf. It’s not a punishment, it is playing out the machinations of EU policy and principles fairly and blindly.
I was born an EU citizen. Now some narrow majority is taking that citizenship away from me. Reminds me of a saying about 2 wolves, a lamb, a vote on what to have for dinner, and an ability to contest a vote #liberaldemocracy #peoplesvote
“We should not ask people to vote on a blank sheet of paper, and tell them to trust us to fill in the details afterwards.” David Davis, 2002. #peoplesvote
“You could have two referendums. And as it happens it might make more sense to have the second referendum after the renegotiation is completed.” Jacob Rees Mogg, 2011. #peoplesvote