I was following the discussion the last few days and like to add a few things.
First of all it is important to understand the differences between a FTA/PTA (free trade agreement/preferential trade agreement) and the European single market.
FTA: FTAs reduce or abolish trade barriers. The most common trade barriers are tariffs and export subsidies (“tariff barriers”) or quotas, subsidies, special taxes, special regulation, VERs et al. (non-tariff barriers). Most FTAs don’t abolish all trade barriers and are not perfect. Still reducing tariff barriers is fairly easy nowadays and most countries in the world move in this direction.
Unified Single market: A single market includes all the benefits of a free trade area and adds various other things. I won´t list all of them, just the most relevant ones.
1) common external tariff
2) => common trade policy
3) If a good is approved in one country it is automatically approved in all countries.
4) => Freedom of goods, services, capital and labour
Creating a single market is very difficult, because different countries have to accept the harmonization of regulation and standards (or #3 is impossible). Furthermore they have to agree on a common trade policy with other countries (or #1 is impossible) Other attempts to establish common markets (ASEAN, Mercosur, CDME, SICA) are highly imperfect and really nothing like the European single market.
A practical example to illustrate the issue: If you produce a baby toy in the USA, you have to comply with all restrictions and regulations of the USA (e.g. packaging, information, health standards, labour standards) to access their domestic market. If you want to access the European market as well, you have to do the same thing again just with slightly different regulations and standards, that are set by the EU/the national countries. Depending on your good/service, this process can create a lot of additional costs (e.g. medicine).
It is absolutely amazing and extraordinary, that the EU was able to create that single market. I am not big fan of the EU, but this aspect is fantastic.
The free trade policy of the EU:
Many pro-Brexit advocates seem to argue that a common European trade policy is a problem for England. It is true, that the UK can´t negotiate their own FTAs with foreign countries, but I don´t really see the problem.
The EU is actually pretty good at reducing tariff barriers with other countries. It is not perfect, but there are only few countries in the world that are actually better than the EU in this regard. The EU is sometimes seen as fortress towards the rest of the world, but that has little to do with “classic” protectionism. That is almost exclusively down to the very high level of standards and regulation. Now I am a fairly extreme liberal, so I´d agree that the EU is regulating too much stuff. Still, even I acknowledge that any developed country has to set standards and while the EU might overdo it in many ways, it is more of a structural problem and has less to do with the EU. Other developed countries have more or less the same problem.
So if you argue, that leaving the EU allows England to negotiate substantially better trade deals (or substantially different trade deals), you have to hold fairly radical views. Either you are in favor of strong protectionism or you have to fancy the radical reduction of regulation and standards; abolishing most labour standards; abolishing environmental standards; reducing health and risk regulations et.al. Some Tory politicians might fancy such a course (and I personally like at least some of these ideas), but I doubt that most pro-brexit voters would actually support such policy. Just changing tariff barriers will make little to no difference, because they are simply not the biggest barriers anymore (with few exceptions) for imports into the EU.
Furthermore many developing countries close their markets to developed countries. That is actually a big problem, but leaving the EU won´t solve that. To the contrary it will put England in a much weaker position. In comparison: The EU is better in securing access to foreign markets than the USA.
So I´d really like to understand the benefit of leaving the EU in this context. Can anyone explain in detail, what they don´t like about European free trade deals and how that would improve by leaving the EU? You might find a few issues here and there, but they´ll never compensate for all the disadvantages.
Bargaining position between the EU and GB:
It is quite simply. The EU is in a much stronger position and their relative share of trade with the UK is smaller than the other way around). Talking about absolute numbers makes no sense in this context.
Still size isn´t not the only issue. Trading goods between equally developed economies is not a big problem even without specific agreements. It is not a big problem for BMW to sell cars in countries outside the single market, because their standards (due to the high regulations in the EU) will conform to foreign standards anyway. The additional costs will be fairly small compared to the price of their product. That´s why the prospect of trading goods on the basis of WTO rules is not a particularly scary prospect for most industries: Sure they would like to save as much money as possible, but it will only damage very few sectors substantially. One of the few exceptions would be the pharma-industry, but to my knowledge is the UK huge net-exporter in this sector…..
All of that is different when it comes to services. Regulation is more complicated and the WTO rules are far less helpful. That affects especially highly regulated sectors like banking/finance. At the moment the UK is trying to limit the (misguided) regulations of the finance sector in the EU at least to some extend and the benefit is, that it stays globally competitive, while having access to its most important market. Dropping out of the EU will result in stronger regulations in the EU and UK-finance/banking sector will only be able to access this market, if they comply with huge parts of these regulations. That is a pretty scary prospect for the UK and gives the EU much bigger bargaining power.
What is going to happen in trade negotiations, when the UK drops out?
No side will have any interest in introducing high tariffs, because it would be a lose-lose situation. So agreeing on a fairly comprehensive FTA, that abolishes most trade barriers should be fairly easy and the EU will be happy with such an agreement. That said, the EU has absolutely no incentive to agree to give GB access to the single market without the GB accepting its rules – including free movement of people.
In the end the UK has to decide what their priorities are: access to the single market (to help their industry), but with the concession of agreeing to most of the regulations and free movement or dropping out of the single market and sticking to a FTA.
I´d take any bet that the EU won´t make any substantial compromises when it comes to access to the single market.
A few additional thoughts:
Brexit is not the end of the world, but fairly pointless without a vision/plan of what is going to come next. The whole campaign was really a low-point when it comes to democracy. Politicians acted moronic and big parts of the population just confirmed that they are clueless. Brexit voters will have a rude awakening when they realize that their decision won´t cause the political change that they wanted.
The aftermath of the whole referendum is even more embarrassing. Delaying to trigger §50 is incredibly irresponsible. Uncertainty is what hurts any economy. The referendum happened and now British politicians have to “rip of the Band-Aid”. Dragging out the current situation for years will massively hurt the British economy (and to a slightly lesser extend the European one). There are already news all over the place, that companies delay their investment. That should worry people.
On the other side, looking at currency exchange rates or stock markets is fairly pointless. Those things are not good indicators of economic development anymore and can drop/soar regardless of fundamentals.
