BrexitCentral: The EU single market in services barely exists, and has been slowly disappearing since 2010

Remainers rested their economic argument against Brexit almost entirely on predictions. Leavers made much more of the historical record, which both HMG and the European Commission long declined to analyse in any depth.

Leavers were therefore able to surprise, and even shock, many of those who had come to accept the conventional wisdom, by reproducing evidence from authoritative international databases which showed that membership of the Single Market had been of no particular benefit to the growth of UK goods exports, had not, as was initially hoped, stimulated any improvement in UK productivity, and had been accompanied, across the EU, by previously unimaginable rates of unemployment, double or treble those of other OECD countries. They could also show, with the corroboration of the Commission and of the OECD, that the Single Market has not been a magnet for global investment flows.

Leavers’ arguments about services could, however, never be quite so convincing and compelling due to the nature of the data available. The available data was limited in time, uneven in national coverage, and had to cope with broken data series, as some countries, along with the OECD and other data sources, shifted from the Extended Balance of Payments Services classification (EBOPS) of 2002 and started reporting according to the revised EBOPS 2010.

Civitas comparison (p.155) of the services exports to the EU of 27 members and 27 non-members over the years 2004-2012, (which showed that those of non-members had grown faster than those of members) could not be extended beyond those eight years as much of the OECD data was then reported in EBOPS 2010 or 2012.

UN Comtrade and other sources such as ITC, IMF and Eurostat decided, however, to continue to publish data standardized on EBOPS 2002 classification, and hence provide a continuous historical record, though given the slower rate of reporting and verifying services data, this still only reaches (as of 24th March 2018) to 2016, with data for that year still in the form of provisional estimates. This does, however, allow us to update and check on earlier arguments, and in particular to decide whether or not a single market in services (SMinS) exists, and if so, to see whether it has been of any benefit for the UK or its other members.

The European Commission’s preferred measure of market integration is the difference between intra- and extra-EU exports as a proportion of EU GDP. Hence if the single market in services exists, the intra will be far higher than the extra, just as trade in goods where intra-EU trade has been found (p.168) to be up to 66% larger than extra-EU trade.

The Commission’s own earlier use of this measure, in its 2007 review of the Single Market, admitted that there was ‘ little difference’ between the intra and extra export of services exports, which it illustrated by a rather imprecise histogram from 2004. This suggested that intra-EU exports were then about 6% or 7% of GDP while extra were about 9%, a difference therefore of 2 to 2.5%.

To read Michael Burrage’s piece for BrexitCentral in full, click here.

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