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Brexit: the UK’s different options

The UK’s vote to leave the EU has resulted in a tremendous amount of uncertainty regarding the UK’s future relationship with the EU. Yet, predicting what type of new relationship the UK will have with the EU and its 27 other Member States post-‘Brexit’ is very difficult, mainly because it is the first time an EU member state prepares to leave. Although much will depend on the upcoming UK-EU negotiations, we can expect either one, or a mixture, of the following options.

  1. European Economic Area (EEA – ‘the Norway model’)

Put simply, being a member of the EEA is almost the same as being a member of the EU; the country has full access to almost all areas of the single market both in goods and in services. One of the main differences is that even though the country needs to comply with the rules of the single market, it does not have any influence over the setting of these rules. EEA countries also need to contribute to the EU budget and have to accept the free movement of people.

  1. European Free Trade Association (EFTA)

Members of EFTA have access to the EU’s single market for goods. They do not need to contribute to the EU budget nor respect the free movement of people. However, EFTA members do not have access to the single market in services. This is a particular disadvantage for the UK due to its economy being heavily dependent on the services sector.

Although much will depend on the upcoming UK-EU negotiations, we can expect either one, or a mixture, of the following options.

  1. Bilateral agreements: the à la carte approach

This option entails negotiating a series of bilateral treaties with the EU, thus choosing which EU initiatives the UK wishes to participate in. The strengths and weaknesses of this option are probably one of the most difficult to predict, since the rules around bilateral agreements with the EU are decided on a case-by-case basis. Whether the UK could have full access to the single market and under what conditions is therefore almost impossible to guess prior to the negotiation. The size of the contribution to the EU budget would also depend on what parts of the EU the UK would want to opt into, for example, the arrangement which Switzerland managed to achieve with the EU after many years of negotiations ( see table below).

  1. A UK-specific deal

Securing a completely new UK-EU trade deal is also possible. Although the options outlined above try to sketch out possible scenarios based on current agreements with non-EU countries, the lack of a precedent could result in the UK (and the EU) being given carte blanche regarding the rules of this new relationship.

A UK-specific deal certainly seems to be what UK Prime Minister Theresa May is seeking since taking office mid-July. Whether or not her 27 counterparts agree with her vision remains to be seen.

  1. No deal: staying a member of the EU

Although unlikely, it remains a possibility that the UK could stay in the EU. Even if May’s government triggers Article 50 in January 2017, the result of the subsequent negotiations (i.e. whatever ‘new deal’ is reached) will need to be legitimised in the UK by another vote of some kind – either by Parliament, a general election, or another referendum. If this new deal is rejected, then the UK would stay a member of the EU. UK public opinion, therefore, has an important role to play in the Brexit vote’s aftermath.

table
The UK’s options: a simplified summary by Léo Wilkinson. Used with permission.

One of the core areas of contention in the Brexit negotiations is the trade-off between limiting immigration to the UK and keeping free trade with the EU single market. Over the summer, May stated, both in the UK and abroad, that limiting immigration was at the heart of the referendum’s result. Yet the UK has always been a strong supporter of the EU’s single market and retaining access to it is very important for most Conservatives.

However, according to the current EU treaties, the free movement of people goes hand-in-hand with access to the single market since it is one of the EU’s four freedoms: the free movement of goods, services, capital and persons. Shortly after the referendum result, the Presidents of the European Commission, the European Parliament, and the European Council – as well as French President Hollande and German Chancellor Merkel – all stressed that the four freedoms go together and that “cherry-picking” was out of the question.

Moreover, retaining access to the single market for services is very important for the UK; it is a dominant sector of the UK economy contributing around 77% of UK GDP, and the UK is particularly strong in this area compared to other EU countries. Although access to the single market for goods is possible without free movement of people, there is no precedent for the same to apply to services: in previous deals between the EU and non-EU countries, access to the services single market has also required free movement of people. If the EU 27 decide not to make a bespoke deal to the UK due to fears of setting an – attractive – precedent for others, then reaching a compromise on this thorny issue may prove to be very difficult.

This range of different options is likely to make it extremely difficult for the UK Government to prepare its negotiating position while also satisfying the broad-church of ‘Brexiteers.’ Once that is complete and Article 50 is triggered, this ‘divorce’, being a first in the EU’s history, means not only that the negotiations themselves are going to be crucial, but also that their outcome is likely to be unpredictable. As such, Theresa May’s government clearly has a lot of thinking to do this autumn in order for it to “make a success of Brexit.”

Featured image credit: Europe England by Alexas_Fotos. Public domain via Pixabay.

Recent Comments

  1. Mark E. Herlihy

    This generally useful post seems to be in error on one major point: If Article 50 is triggered, by its terms the U.K. Will be out of the EU in two years, deal or no deal. Thus, contra the post, if Parliament rejects a deal concluded between the EU and the UK government, the result will be that the U.K. leaves and reverts to a WTO-based relationship with the EU. Rejecting a deal will not result in a “Remain” outcome.

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