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ANALYSIS
THE INVESTOR
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BREXIT
WHAT MIGHT AN EXIT AGREEMENT LOOK LIKE?
Both David Cameron and his successor, Theresa May, have insisted
that the UK needs to maintain strong ties to our continental
neighbours, even after we have left the Union. Until the negotiations
start in earnest, however, it will not be clear what the new relationship
will be. There are a number of models which the UK could follow,
described in a government information document before the vote,
which can loosely be classified as the Norwegian, Swiss, Canadian
and Turkish models, as well as one based solely on membership of
the World Trade Organization (WTO).
1
Norway is a member of the European Economic Area (EEA),
although not the EU, which means it has the ‘four freedoms’ of EU
membership – covering goods, services, capital and people – on the
same basis as full EU members, although its agriculture and fisheries
industries are excluded.
2
This has been described as ‘EU-lite’ but
would mean that the UK could retain many of the advantages of
EU membership. But, as the government report points out, it does
not give access to the EU’s trade deals with countries outside the
EU and still requires Customs checks on goods crossing into the EU.
It also involves making a significant contribution to EU spending,
accepting free movement of people and taking on EU rules without
being able to a vote on them.
Turkey, Canada and Switzerland all have bilateral agreements with the
EU, which vary on the subjects they cover. Switzerland, for example, allows
free movement of people across its borders with the EU, and its non-life
insurers are free to establish operations in other countries;
3
the agreement
with Canada allows access to the Single Market in areas like services and
agriculture. None of these treaties, however, covers access to services that
account for almost 80% of the UK economy. With financial services
representing a significant part of the UK economy, securing a ‘passport’
to allow the industry to continue doing business across European borders
is seen as a key part of the negotiation.
If no agreement can be reached, WTO rules would apply. It would
represent the biggest departure from the system as it does not require the
acceptance of free movement across our border, nor any contribution to
the EU budget. It would, however, mean that countries we deal with would
have no alternative but to apply the WTO tariffs on UK exports.
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1, 3
www.gov.uk, March 2016
2,4
www.openeurope.org.uk, March 2015
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