Advocates for a British exit of the European Union suggest that the UK would be able to retain the benefits of EU membership without any of the burdens. This is not realistic.
The EU accounts for roughly half of the UK’s trade. So, if the UK left the EU, it would be faced with a choice either:
- not to follow the EU rules and no longer have access to the single market; or
- to copy EU rules without any real input into how those rules are made.
In addition, EU membership gives the UK automatic access to the EU’s free trade deals with over 50 countries in the rest of the world. The EU is in the process of negotiating additional trade agreements with the US, Canada and Japan. The EU is the world’s biggest exporter and importer of goods and services so enjoys huge bargaining power in these negotiations. The UK would immediately lose access to these trade deals if it left the EU.
At the time of writing, there is no consensus among those campaigning for exit as to what form departure from the EU would take – but a range of alternatives has been suggested. None of the most commonly proposed alternatives would be straightforward to implement; and none presents the utopia of “benefits without burdens” that some suggest.
There are two broad models:
- negotiate a trade agreement with the EU; or
- rely on World Trade Organisation (WTO) rules.
Each of these options has substantial drawbacks and would be a worse alternative to EU membership for the UK. They are described more fully in the Alternatives section of the main report.
- none of these countries has full access to the single market in goods and services;
- none of these countries has a formal say or vote over the EU legislation governing access to the single market;
- countries such as Norway and Switzerland have to make a substantial contribution to the EU budget and accept free movement of persons.
“If you want to run the EU, stay in the EU. If you want to be run by the EU, feel free to join us in the EEA”. Nikolai Astrup, spokesperson on European Affairs for the Norwegian Conservative Party.
The other model is to have no agreement with the EU but to rely on the UK’s WTO rights. However:
- around 90% of the UK’s goods exported to Europe would be subject to EU tariffs ranging from 4.5% to around 15%, including cars (10%), clothing (11%) and food (around 15%).
- there are no provisions under the WTO rules for the UK to grant subsidies to its exporters to compensate for those tariffs (such provisions expired in 1999).
- WTO rules do not cover financial services prudential regulation.
- the UK would no longer have access to the EU’s trade deals with the rest of the world.
In reality if the UK left the EU, it would have to:
- try to renegotiate access back into the single market. These renegotiations would be lengthy and there is no certainty that the UK would get what it wanted. The differences in bargaining power are substantial. The UK would have to negotiate with the EU as a whole rather than with each of the 27 Member States. In addition, the EU represents approximately 40%-50% of the UK’s exports. But the UK represents only about 6% of other EU countries’ total exports.
- agree arrangements for the 1.4 to 2.2 million Britons living in other EU countries.
- decide how to address more than 40 years’ worth of legislation which has been influenced by EU membership. In particular, decisions would need to be made about which legislation should be retained as UK legislation, which should be modified and which should be repealed. The time, bureaucracy and costs involved in this enormous legislative programme would be substantial.
- continue to be subject to EU rules in order to trade in the single market without any real say in the decision or legislation making process and without any automatic right to challenge EU legislation in the CJEU.
- decide what tariffs to apply to imports into the UK.
- adopt new customs laws and re-establish customs controls at borders (including with Ireland).
- try to negotiate trade deals with other countries from scratch. The extent to which the UK would be as successful in negotiating its own trade deals with other countries as those that exist for the EU, and the amount of time these negotiations would take, is unknown.
|The United States Trade Representative’s view
“I think it’s absolutely clear that Britain has a greater voice at the trade table being part of the EU, being part of a larger economic entity”.
“We’re not particularly in the market for FTAs [free trade agreements] with individual countries. We’re building platforms that other countries can join over time. We have no FTA with the UK so they would be subject to the same tariffs – and other trade-related measures – as China, or Brazil or India”. Michael Froman, United States Trade Representative, October 2015.