Brexit – what next?

So far in the debate, or shouting match should that be, over the EU, there has been little or no examination about what might happen if there were to be an out vote.  Lots of claims and counter-claims, but not much light. There is no doubt that the UK would survive and could indeed prosper outwith the EU. The real question rather is what kind of country and economy would the UK have to become?

Various academic studies have looked at the options that might be available to the UK after a Brexit vote. Some overlap a bit, so I reckon that there are in reality only four options for life after a no vote. I have excluded the Swiss model, which involves a series of bilateral agreements with the EU. This model has proved somewhat unsatisfactory for both parties and the EU has made it clear that it would not repeat this kind of arrangement. The four remaining options are therefore as follows:

  1. The Norwegian model – joining the EEA (European Economic Area). This involves full membership of the Single Market with all that implies, including the free movement of people. The UK would have no say in the rules governing the Single Market and would still have to contribute to the EU budget. On the other hand the UK would no longer be part of the common agricultural or fisheries policies.
  2. The Turkish model – joining the EU’s custom union. This gives continued access to the Single Market, but only for goods, not for services. The UK would also be subject to all the EU rules governing that part of the Single Market.
  3. The WTO model – effectively no special arrangement with the EU. Trade would be bound by WTO(World Trade Organisation) rules on tariffs. Again would only cover goods and not services.
  4. A special UK agreement with the EU. This is the option that most Brexit supporters want, at least on the right. The UK would get continued access to the Single Market on its own terms and would be able to opt out of the bits it didn’t like – free movement of labour etc.

As regards the Norwegian model, this would seem to be the most easily achieved, yet the worst outcome for the UK, especially those who want out of the EU. Getting out of the common agricultural and fisheries policies would be a very high price to pay for giving up all influence and votes in the key decision making bodies. This model would also mean that the UK would remain subject to all the rules that the Eurosceptics most dislike about the EU.

The fourth option, a special UK deal with the EU is difficult to envisage. It relies on the rest of the EU regarding the UK as so important that they would do almost anything to keep the UK in. Not sure if there is any evidence this is how the rest of the EU sees the UK. Sure, they would like us to stay, but not at any price. This option effectively abolishes the Single Market and would seem more of a pipe dream that a realistic possibility.

This leaves the second and third options as the ones most realistically available. There is probably not a great deal of difference between the two models. Both models would however require quite significant changes within the UK. As a paper from OpenEurope puts it: “Britain will only prosper outside the EU if it is prepared to use its new found freedom to undertake active steps towards trade liberalisation and deregulation.”  It is not difficult to see why the right wing in Britain is so keen on leaving the EU!

In practical terms this trade liberalisation and deregulation would mean some rather unwelcome developments. Much of what remains of health and safety regulations and protections for workers would be open to further attack from our nasty Tory government. In addition, UK firms and workers would find themselves exposed to whole new levels of competition from low-cost countries. Finally, OpenEurope conclude that in order to be competitive outside the EU, Britain would need to keep a liberal policy for labour migration. As the paper notes with some understatement, these developments would be politically very sensitive.

So far most of the campaigning for an out vote has been by those on the right. It is relatively easy to see why. They by and large favour a deregulated economy with as much trade liberalisation as possible. This is not a view shared by all on the right of course. UKIP’s opposition seems to be more a combination of political – sovereignty, and opposition to immigration. As the above shows, it may not be possible to achieve all that those opposed to the EU want.

On the other hand there is a growing number of people on the left who also support leaving the EU. I do find this a bit perplexing. Leaving the EU and in particular leaving the Single Market is not going to do anything for the (already) precarious rights of workers. Claims that the EU is an undemocratic, neoliberal club are also a bit far fetched in my view. Furthermore it is not at all clear how the UK leaving is going to make any positive difference to this state of affairs. As I pointed out in my previous post, to the extent that the EU is neoliberal and pro-austerity, that is because the voters in almost all EU states have voted for neoliberal and pro-austerity parties. Just how the UK leaving is going to persuade voters in Germany, Finland, Slovakia etc to become more left wing is a bit of a mystery to me.

In short it seems to me that none of the likely post Brexit options offer the UK much, at  least from a left, progressive perspective. I can understand why some on the right would welcome leaving the EU. And for this reason we need to examine much more closely the implications of a No vote and what that might mean for the economy and society.

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