Free trade isn’t the same as frictionless trade

Jon Danzig |

The EU and Japan have just signed an unprecedented free trade agreement which will create one of the world’s largest trading blocs.

The EU-Japan Economic Partnership Agreement (EPA) is the largest trade deal ever negotiated by the EU. It will create a trade zone covering 600 million people and nearly a third of global GDP.

It is of course good news for the EU and Japan, but not for Britain if we leave the EU. We won’t benefit from the EU-Japan trade agreement after Brexit.

And the UK is never likely to get a free trade agreement with Japan – or any other country – anywhere near as good as the one achieved by the EU.

But Brexiters have quickly responded:

If Japan can get this, then why can’t we?

Doing the rounds following the signing of the agreement were these comments by  Brexit campaigners:

Does Japan have to sign up to:

– Freedom of movement? NO
– Single Market? NO
– Customs Union? NO
– European Court of Justice? NO
– The EU’s “common rulebook”? NO
– Paying £40 Billion? NO

…so why should we?

But these Brexit comments reveal a serious misunderstanding about the EU and how its Single Market and Customs Union operates.

Free trade is not the same as frictionless trade.

The EU has already told the UK that it can have a trade deal with the EU “along the same lines” as the ones the EU has now concluded with Japan, Canada and South Korea.

So, yes, we can have that.

The problem is that the UK’s economy, to continue to thrive, needs much more than these types of free trade deals can offer us.

We need completely frictionless trade on ALL trade, and on ALL exports and imports with the EU, which is an entirely different matter.

The EU Japan free-trade liberalises the bilateral goods trade, primarily agricultural exports. For instance, tariffs on EU beef and pork will be reduced, and for EU cheese, the tariffs are eliminated altogether.

But the agreement does not cover anywhere near the amount and range of trade that the UK does with the EU – which is by far our biggest, most important trading partner.

And the trade agreement does not cover services, which forms around 80% of Britain’s economy.

The difference between the EU free-trade agreements with Japan, Canada and South Korea and the EU’s Single Market and customs union is immense.

The goods tariffs under these various deals are reduced or sometimes eliminated, but in the EU Single Market and customs union they disappear entirely as a matter of law.

Shipments to the EU from Japan, South Korea and Canada all have to be (and will continue to be) checked by EU customs authorities to ensure they are actually from those countries and that they conform to local safety rules, even if no tariffs are due.

But within the EU customs union, ALL goods cross borders without any checks at all. That’s the fundamental difference.

Single market membership also entails the rights for EU citizens from any country to work in any other country as a right. This freedom of movement does not exist (and will not exist) for EU citizens as regards access to the Canadian, Japanese and South Korean labour markets.

So, in essence, the EU-Japan free trade agreement does not offer frictionless trade, and that’s what the UK needs to ensure that our economy does not crash, that jobs are not lost, and that there is no hard border on the island of Ireland.

Of course, such frictionless EU trade needs to be governed by laws democratically agreed by its members, and those laws overseen by a court, with one judge from each EU member country. (And what’s wrong with that?)

Ironically, frictionless trade is what we have now in the EU. So, why leave? I still cannot find even one valid or validated reason, despite years of searching.

As for paying £40 billion, this is what the UK agreed to pay the EU whilst a member. That’s a different issue. Japan, I am sure, would not renege on paying its bills.

  • Photo: Rotterdam, the EU’s number one port, with a cargo throughput of over 467 million tonnes a year. 



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