At present, there seems to be no plan for what the UK will do should the result of the referendum see us leaving the European Union — there is no government plan in the event of a leave vote, and the leave campaigns can’t seem to settle on a solution. There seem to be about six options the UK could take in the result of EU withdrawal each of which, like the EU itself, has its perceived advantages and drawbacks.
There would be more than enough time to negotiate any of the following options, as Article 50 of the EU’s Treaty of Lisbon states that EU laws stop applying to a leaving member state either:
- When a new agreement between the EU and the leaving member state is in place
- Two years after the UK tells the European Council that it shall withdraw from the EU whichever is the sooner.
This article outlines the six different realistic options for the UK outside the European Union and what they would mean for the UK and its relationship with the EU, and takes the majority of its information from a report by Jean-Claude Piris for the Centre for European Reform.
If you don't wish to read the entire article, at the bottom there is a table which sets all the conditions out at a glance.
Option One: The UK joins the European Economic Area (EEA)
The three members of the EEA — Iceland, Liechtenstein, and Norway — all enjoy access to the EU’s single market thanks to the legal framework which has existed since 1994, but do not have to participate in more controversial schemes on fishing and agriculture, and are not part of the EU’s common foreign policy agreement.
The three states still have to implement EU rules and regulations on the single market, including the regulations on Freedom of Movement — something with which many eurosceptics disagree, the EEA countries are also not able to take advantage of the EU’s Free Trade Agreements with other countries around the world. Without being members of the EU, these three countries do not get votes on the relevant legislation but are invited to express their views. They have some influence on the rule, but not as much as an EU member state does — and the EEA countries have voiced concerns that the EU doesn’t listen to their views as much as perhaps it should.
EEA countries must also contribute to the EU budget as a “price” for access to the single market, and Norway’s EU Affairs Minister has said in an interview that their contribution is about the same as it would be if Norway were a full EU member. In the same interview, he also said that the EEA agreement has served Norway well since 1994.
It is highly unlikely that there would be any issues with the countries agreeing that the UK joins the EEA.
Option Two: The UK joins the European Free Trade Area (Efta)
The UK was formerly a member of Efta, before joining the EU in 1973. But Efta has gone downhill rather a bit since then, and now only consists of a Free Trade Agreement for fish and agriculture, and would not provide the services industry with any access to the EU’s single market on any preferential terms.
Efta membership would also not give the UK access to the Free Trade Agreements that the EU has concluded with other countries. There is no reason the UK can’t conclude its own Free Trade Agreements with other countries, but this would take time as the UK would start with nothing.
Option Three: The UK follows the model Switzerland uses
Switzerland has over 120 agreements with the European Union, meaning it has access to the EU’s single market. Like EEA countries, Switzerland has to adopt almost all regulations regarding the single market, but unlike them it does not get a proper chance to express its views.
The Swiss model is very unlikely due to the fact that the EU is far from happy with this arrangement, seeing the 120 agreements as too complicated and having led to grey areas within the agreements — the EU have even introduced internal ‘sanctions’ against Switzerland for non-compliance with the agreements, excluding Switzerland from the EU student exchange programme Erasmus, and threatening to limit its access to the single market. French European Law expert Jean-Claude Piris is of the opinion that this system would not be accepted by the EU again, owed to the fact that it is almost fatally flawed, meaning that this isn’t really an option for the UK.
Option Four: The UK negotiates a Free Trade Agreement (FTA) with the EU
This seems the most likely option that the UK would take. Whilst FTAs don’t always result in no trade tariffs between countries (effectively a tax on imports or exports), the UK and the EU would be able to decide in which particular areas tariffs would be either reduced or abolished altogether. The UK is likely to want privileged access to the Common Market after leaving the EU, and ultimately there is no FTA that the EU currently has which would accurately reflect how the relationship would need to look. It also takes several years for a normal FTA to be negotiated, so whilst this may end up being a somewhat satisfactory long-term solution, it poses many short-term problems.
Similar issues have been raised in previous options, the UK would begin with no FTAs at all — potentially causing short to mid-term economic issues. However, the UK would no longer pay into the EU budget at all, and in return would obviously receive nothing from it. It would not be bound by any single market rules, as it would not have access to the single market.
Option Five: The EU joins a Customs Union with the EU, like Turkey
This kind of agreement is an incredibly awkward and ultimately lopsided agreement which greatly favours the EU over Turkey. This would eliminate trade tariffs between the UK and the EU, though would leave the UK unable to set its own external tariffs — having to use those decided on by the EU. UK based manufacturers would also have to adopt certain EU standards and the UK would need to adopt certain areas of EU competition law due to the lack of trade tariffs between the two entities.
One rather bizarre quirk to this system is that Turkey does not benefit from FTAs negotiated by the EU, but the third country does — nor does Turkey have any input whatsoever into these FTAs. In the event of an FTA between the EU and Russia, Turkish exporters would not gain access to Russia’s market, but Russian exporters would have access to Turkey’s.
This would represent a loss of sovereignty on trade which those Leavers who centre more on that issue would be unlikely to accept.
Option Six: The UK trades with the EU through the World Trade Organization
This would be the option taken if the UK had not concluded any other agreement with the EU prior to withdrawal. WTO rules set limits to the tariffs which countries can have on imports and exports. This would mean that the UK would have to set up customs controls on its EU borders — including the land border between the UK and Ireland, something which would be politically problematic, expensive, and not particularly wanted by either side.
The UK would not contribute to the EU budget, and would only be subject to EU regulations when trading with it; as is the case when trading with any country.
What do these options look like at a glance?