The Day after the Referendum Before: Possible Alternatives to EU Membership

Looking for the (Br)exit. To where?

Looking for the (Br)exit. To where?

Let’s assume for a minute that on June 23, the voters decide that the UK should leave the EU. The immediate consequence of that would be that the Prime Minister would notify the European Council of the UK’s intention to withdraw from the EU in accordance with Article 50 of the Treaty of European Union. Following that, the EU and the UK will start negotiating in good faith an agreement ‘setting out the arrangements for [the UK’s] withdrawal, taking account of the framework for its future relationship with the Union’. According to that provision, those negotiations will last for two years unless the UK and the EU Member States unanimously decide to extend this period.

What is less known, however, is what could be the end result of those negotiations and in particular how the future UK-EU relationship might look. It is less known not only because that would be the first time that a Member State withdraws as a whole from the EU but also because it is less than clear how Vote Leave (the winning side in our scenario) envisages such a future relationship.

Although it is very difficult to understand what is the common vision of the likes of Michael Gove, Boris Johnson and Ian Duncan-Smith for the day after the referendum, there are two goals that have been highlighted by all of them.

First, the Leave Campaign aims at ‘repatriating’ UK sovereignty. According to them, a UK that has decided to leave the EU would be more autonomous and more independent without the onerous obligation to follow the laws coming from Brussels.

However - and this is the second aspect - none of the lead figures of Vote Leave has quite advocated for a ‘Robinsonian’ existence of the UK in the European landscape. Instead, they seem to favour a ‘free trade relationship’ with the EU. Such a relationship would minimise the free movement of people, which they consider to be a toxic dimension of the Single Market.

If that is the case, one has to point out that the kind of relationship they seem to favour is not unprecedented. Indeed, the EU has built similar relationships with a number of States that exist in its periphery or in different parts of the world. Crudely, those differentiated relationships could be grouped in three categories.

First, the UK could participate in the European Economic Area (EEA). The EEA was established in 1992 between the EU and Iceland, Liechtenstein and Norway. It is a parallel to the EU legal order. It is parallel in the sense that any EEA provision that is similar/identical to an EU provision is interpreted in conformity with the rulings of the EU Court of Justice. More importantly, the EEA agreement evolves. Its members have to adopt the new or reformed regulations that the EU institutions produce. They are also required to comply with the full regulatory framework of the Single Market in order to have access to it.

Second, the EU-UK relations could follow the EU-Switzerland model. Switzerland decided not to participate in EEA. As a result more than 120 bilateral sectoral agreements have been signed. They regulate the relations between the EU and Switzerland. 

Those agreements cover among other things the free movement of people, technical barriers to trade, air transport, taxation of savings, combating fraud, and Switzerland’s participation in Schengen and Dublin etc. What is important to note is that although the scope of the institutional framework is to align Swiss policies with the EU policies, this framework is more static than the EEA one given that the synchronisation is more limited. However, this means that Switzerland enjoys a more limited access to the Single Market.

Third, instead of a model of enhanced bilateralism, the EU and the UK might choose to build their new relationship on a bespoke bilateral agreement that would look like an Association Agreement or a Free Trade Agreement. The former ‘includes next to political and economic cooperation, an enhanced institutional framework and innovative norms on regulatory and legislative approximation’.

An example of that is the Ankara Agreement with Turkey that has led to a customs union with the EU since 1995. According to it, Turkey enjoys quota-free trade with the EU on most goods but services are not covered by the agreement. An example of the latter, is the recent Free Trade Agreement with Canada. Although such agreements provide for quota-free trade with the EU in a number of areas, significant non-tariff barriers remain. More importantly for the UK, none of the Free Trade Agreements include financial services passporting provisions.

What is obvious from the analysis above is that the more integrated relationship the UK and the EU opt for, the more the UK would have to adopt EU regulations and directives in order to gain access to the Single Market. More importantly the UK, by not being a Member State, would have no say on drafting those rules.

So, the Leave Campaign faces a trade-off between on the one hand autonomy and sovereignty that are better promoted (according to them) by a more detached relationship with the EU and on the other hand prosperity that a more integrated relationship with the EU offers.

At the same time, they have to convincingly respond to the somewhat paradoxical situation according to which as a Member State the UK can significantly influence the EU decision-making and thus protect her autonomy while as an outsider she would have to adopt the EU rules without being able to contribute to their formulation in order to gain access to the Single Market.

So, it seems that exactly because there is no alternative model that could totally satisfy both their goals for autonomy and prosperity, Vote Leave has offered a rather nebulous vision about the day after the referendum before.

However, much like the Scottish public had a right to know what was the Yes campaign’s plan about the currency and Scotland’s EU membership, the UK electorate also has a right to know what is the alternative the Leave Campaign favours and what are its financial and political consequences. Despite what the Vote Leave’s campaign director believes, accuracy is of utmost importance for such an existential decision.

This article was first published in the UEA website.