28 June 2016
As a massive economy and a net importer of EU goods, the UK is well placed to get what it wants from the EU. Here’s a breakdown of existing options
The UK remains a member of the EEA
The ‘Norway Option’ offers the easiest transition from EU membership. After leaving the EU, Britain would still remain within the European Economic Area (EEA). As a member of the EEA only, the UK would still have near full access to the Single Market, but it would no longer be subject to the jurisdiction of the European Court of Justice. Britain would also be exempt from the common EU agricultural and fishing policies. The UK would also be exempt from EU VAT policy, the common external tariff and would be free to agree its own independent Free Trade Agreements with the rest of the world. In exchange for remaining a part of the Single Market however, the UK would also still adhere to Free Movement and pay budget contributions to the EU, although they would be significantly reduced.
This may not be a popular final destination for the UK electorate, but may be a starting step to ensure a less turbulent Brexit.
The UK seeks membership of EFTA
Whether a member of the EEA or not, the United Kingdom could also join the European Free Trade Association (EFTA). EFTA is essentially what the European Union was supposed to be – free trade between sovereign, independent nations. Members of EFTA currently include Iceland, Norway, Switzerland and Liechtenstein.
EFTA countries have full control over their own agriculture, fisheries, home affairs, and justice amongst other matters. Furthermore, EFTA States currently have 27 free trade agreements, covering 38 countries which, with the permission of the third countries, the UK could adopt relatively quickly.
The UK negotiates its own EEA type deal
Switzerland, the only EFTA member that’s not in the EEA, chose to arrange its own deal with the EU. It has tariff free access to the single market, but whereas Norway and the other EEA countries have chosen to weld all their industries to the EU’s single market, with the sole exception of agriculture and fisheries, Switzerland has opted to be more selective. Switzerland has still had to adhere to free movement of labour, but it has on occasion decided to restrict access to its labour market for non-Swiss nationals.
The UK agrees a Free Trade Agreement (FTA) with the EU
The remaining option, known as the Canada option – where the UK would retain preferential access to the EU Single Market – is by negotiating a UK-EU Free Trade Agreement. This would enable the UK to have either full or partial access to the Single Market and continue to pay zero tariffs in all or some sectors. Nations to have a similar arrangement with the European Union include Canada, South Korea and Mexico. A Free Trade Agreement would likely come without the baggage of Free Movement or the requirement for EU budget contributions.
The UK trades with the EU through World Trade Organisation (WTO) rules
Should negotiations break down with the European Union for whatever reason, the UK would fall back onto World Trade Organisation (WTO) rules on trading. As a member of the WTO, the EU would need to treat the UK equally to any other trading partner, thus negating the concern of a trade war. Tariffs would exist on certain products, however average tariffs have greatly reduced over the last two decades, making this less of a concern. By trading under WTO rules, the UK would have no attachments to the European Union such as Free Movement or budget contributions – it would remain an entirely independent, sovereign nation.