What would Britain look like if it leaves the E.U.? Here are four possibilities.
When Britons go to the polls on June 23, they will have the opportunity to jettison their country’s membership in the European Union — an outcome popularly known as Brexit.
But the ballot won’t say anything about what should replace E.U. membership. That will be up to negotiators — representing Britain on one side and the governments of the 27 other E.U. member nations on the other — who will spend the next two years hammering out the terms of divorce if Britain votes to leave.
Pro-Brexit campaigners have said that Britain will continue to swap goods and services with E.U. nations; those imports and exports now make up about half the country’s trade volume. Brexit advocates also say that Britain will be free from stultifying Brussels bureaucracy once it leaves the E.U.
But how will that actually work? And what are the chances that Britain’s post-Brexit reality will match the rhetoric of those advocating for “out”? Those arguing for “in” say Brexit would be a leap in the dark, with leading economists warning of dire consequences.
A post-Brexit Britain would have a number of different models to choose from based on the experiences of other countries that exist outside the E.U. but still do business with the bloc. Here are four options, with the pros and cons for each.
Pros: In many ways, this would be the least disruptive option. Norway, Iceland and Lichtenstein are members of the European Economic Area, a body that gives countries access to the European common market as long as they agree to play by the E.U.’s rules, with certain exceptions for areas such as agriculture and fisheries. The agreement’s rules automatically adapt as the E.U. changes, so there’s no need for constant renegotiation. All three countries have had economic success under the EEA.
Cons: If Britain is opting to leave the E.U. to regain its sovereignty, this is not the way to do it. Countries may be technically outside the E.U but in reality are still beholden to Brussels. And they don’t get a formal say in E.U. decision-making. EEA members must accept basic E.U. principles, including the free movement of workers. That means the primary driver of the Brexit campaign — concerns about immigration — would remain unaddressed.
Pros: The Swiss model is similar to the EEA in that the Swiss get E.U. access in exchange for abiding by E.U. rules. But the Swiss get more flexibility, with bilateral agreements that allow them to pick and choose which areas of the union’s many realms they want to participate in — and which rules they want to follow. In 2014, for instance, Swiss voters opted to impose limits on immigration from within the E.U., something that full E.U. members can’t do without violating the body’s charter.
Cons: Switzerland’s a la carte approach is a recipe for constant negotiation. Even though voters had their say on immigration two years ago, for instance, Swiss and E.U. authorities have still not come to terms on how restrictions on newcomers will translate in practice. The Swiss model is so burdensome for Brussels that E.U. authorities say they will never allow Britain the option, lest the E.U. become a pick-and-choose union. Like those in the EEA, the Swiss get no formal input on the making of most E.U. rules. Their agreements also exclude trade in services — a huge part of the U.K. economy.
Pros: If models within Europe don’t suffice, Britain could look across the Atlantic to Canada. The United States’ neighbor to the north has negotiated a free-trade deal with the E.U. that is due to take effect this year and will eliminate nearly all tariffs on goods. Former London mayor Boris Johnson has championed the Canada model, colorfully exhorting his fellow Brits to “hold our nerve and not be cowed by the gloomadon poppers.” Johnson says Canada proves that it’s possible to trade with Europe while also controlling national borders.
Cons: The Canadian deal took five years to negotiate, and a British deal would doubtless be even more complex because of the country’s web of interconnectedness with continental Europe. Canada’s deal also largely leaves out services; Britain’s financial industry would take a big hit if the same were true for a U.K.-E.U. deal. The British Treasury has estimated that the Canada model would cost every Brit about $2,500 in lost gross domestic product as the U.K. economy contracts. Prime Minister David Cameron has said that Johnson’s depiction of the Canadian model is “too good to be true.”
World Trade Organization
Pros: If all else fails, Britain would default to World Trade Organization rules for trade with E.U. members. The global body, with 162 members, sets a limit on how high the trade barriers can be between any two nations. The WTO option means there would be no requirement that Britain bow to rules written in Brussels. Leading Brexit campaigner Nigel Farage has pointed out that WTO tariffs have fallen substantially in recent years. And as he said Tuesday night while squaring off against Cameron, “No deal is better than the rotten deal we have got at the moment.”
Cons: No deal could actually be quite a bit worse than the status quo. The British Treasury has estimated that the country’s economy would be 7.5 percent smaller by 2030 in the event of the WTO option, because of higher tariffs and restricted market access. And even this, the most straightforward of all options, could require marathon negotiations stretching on for years, according to the WTO’s chief. Britons could also lose their rights to live, work and study in continental Europe without a deal to allow Europeans to do the same in Britain.