Remember 1992?

It was an important year.

A crucial year in fact, for a man named Paolo Cecchini.

It was also a crucial year for Theresa May, Prime Minister of the United Kingdom, although she probably didn’t know it at the time.

Specifically, it was a crucial year for the European Union (then called the European Community).

1992 was the year when the final flourishes to the creation of the single European market were completed. It is worth noting that most people simply call it the single market although some of the original documentation relating to the single markets refers to the internal market (internal to the European Union).

These two words – single market – will be of enormous significance in the coming months. They overshadow the negotiating strategy of the British government on leaving the EU and have wider implications for the United States, Canada and other countries.

The importance of the single market is not limited to the EU. Both  TTIP (Transatlantic Trade and Investment Partnership) and CETA (Comprehensive Economic and Trade Agreement) stem from the need for the European Union to negotiate external access to the single market in return for access to tariff-free / reduced tariff trade with the United States and Canada.

The single market project started in 1985, when Professor Cecchini chaired a study on the cost of non-Europe. This study provided the impetus for member state governments to agree to the creation of the single market, underpinned by the Single European Act.

Across the European Community at the time, which had twelve member states:  – Belgium, Denmark, France, (W) Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and the UK – national governments embarked on expensive advertising campaigns to tell businesses that they had to prepare for the single market.

This market now embraces 550 million consumers and is credited with providing the key stimulus for economic growth across the EU over the last twenty-six years.

The political battle taking place in the UK on its future relationship with the European Union is focused on two issues:

  1. Should the UK try and negotiate continued membership or access to the Single Market?
  2. Can the UK do this without accepting one of the founding principles of the Single Market, namely freedom of movement for people, goods, services and capital?

This political battle has wider implications for the EU.

If the UK secures special arrangements for accessing the single market, while being able to control freedom of movement, it will set a precedent that the EU wants to avoid.

Any deal which allows a former member state to access the single market without accepting one of the key principles of the single market – free movement – has the potential to encourage other member states to consider life outside of the EU. For countries such as Spain and Greece where the social and political instability of the recent bail-outs under the European Stability Mechanism have lessened popular enthusiasm for membership of the EU .

The key question that the British government is currently considering is whether tariff-free access to the single market, though desirable, is paramount.

Politically, controlling freedom of movement may be deemed more important as a starting point for negotiations with the EU.

UK exports to the EU have been on a declining trajectory between 2000 and 2015 (Oxford Economics and Haver Analytics 2016) and disputed figures on the numbers of UK companies exporting to the EU could give rise to the view in government that the single market is not the panacea for economic growth predicted by the original Cost of non-Europe report and its successor reports.

The EU remains one of the largest economies together with the US and China, and despite slow GDP growth since the financial crisis the US, Canada and the UK will use their political capital to gain access to this huge market of consumers.

The nature of free trade within the European Union and access to the single market is bound up with the rules governing the EU customs union. The customs union requires that the EU acts on behalf of all member states in agreeing external trade deals. All member states of the EU enjoy tariff-free trade within the EU on goods and services. The difficult decision for the UK government is whether it pulls out of the customs union, in order to negotiate with other World Trade Organisation (WTO) members outside of the EU, but loses its tariff-free trading status inside the EU by giving up its membership of the customs union.

The Conservative party has faced issues on free trade in its long history which have caused division and political uncertainty. Theresa May will be keen to ensure the support of her parliamentary colleagues and the wider party membership as she addresses these issues, balancing the political pressures and pragmatic choices.

The single European market has influenced British politics in just two periods of time. The first of these was during the build up to the launch of the single market at the end of 1992 (31st December). We are still at the beginning of the second period which began during the EU referendum campaign. Only one thing is certain at this stage. The single market will dominate British politics for the next two years at least.