Growing public frustration with the costs of EU membership is making the UK’s EU membership unsustainable and cannot be ignored. Moves in the eurozone towards fiscal union also mean the status quo EU membership terms we have may not be an option even if we wished it. Given this, Open Europe has published a study of the UK’s trading interests and the most likely options for the UK if it were to choose to leave. We conclude that there is no clear-cut or easy option for the UK outside the EU making leaving the EU as complicated as staying in and renegotiating.
We found that the EU continues, on a purely trade basis, to be the most beneficial arrangement for Britain. If we left the EU we would have to negotiate a new trade agreement with the EU and probably one that would not, at least for now, serve the UK’s trading interests as well as the present one.
But, plainly, trade is only one part of the equation when it comes to assessing the costs and benefits of EU membership. Although, at present, all the alternative options come with major drawbacks in terms of trade, the price of membership remains far too high. Many of these costs are not directly related to trade, such as the UK’s contribution to the EU budget, the loss of national control over key political decisions that affect the British economy and society, and an increasing regulatory burden. These are the alternative options:
- The ‘Norwegian option’ or EEA membership: This would free the UK from the Common Agricultural Policy (CAP), EU fishing rules, EU-wide regional policy, and reduce our budget contribution. However, while guaranteeing access to the Single Market in services and goods, outside the customs union, access for goods would be subject to complex rules of origin and Britain would still be subject to EU regulations on employment and financial services but with no formal ability to shape them.
• The ‘Swiss option’ or free trade agreement: If we had the same Swiss-EU bilateral deal, we would also be without the CAP, EU fishing rules, EU-wide regional policy, and have a reduced financial contribution. This would offer more sovereignty and less EU regulation. However, the UK’s access to the Single Market would be dependent on the deal we could negotiate with the EU – the Swiss deal currently excludes the vast majority of services, including financial services.
• The ‘Turkey option’: The UK would continue to benefit from full access to the EU’s Single Market in goods by remaining in customs union with the EU but Britain would be bound by any external deals that the EU strikes in trade in goods without any formal way of shaping them. A separate deal on services would be required to maintain UK access to the Single Market in these sectors. It would be free from EU social and employment regulation, the CAP, CFP and EU-wide regional policy.
• The full break ‘WTO option’: If the UK left the EU without securing a version of the options above, the UK could fall back on its World Trade Organisation membership. This would see some exports facing relatively high tariffs (i.e. 10% on car exports) and market access for services would be limited.
Well, 53.5% of UK goods exports currently go to the EU but only 39% of services exports. This makes the EU important - but the EU is likely to be an area of slow growth, while fast growing areas such as China and India together account for only 3.75% of UK exports, this proportion needs to grow. The UK is currently the second largest global services exporter but the single market in services has stalled. Services account for 71% of total EU GDP but only 3.2% of this is a result of intra-EU trade.
Given the proportion of goods trade we do with the EU the UK’s trading interests are currently best served by remaining within the EU’s customs union to allow goods to flow free without complex ‘rules of origin’. Our interests also demonstrate the need to push the EU to back services liberalisation at home and in EU trade talks abroad. However, the EU could retreat into protectionism and so thwart UK trade in the internal market or globally thus reducing its relevance to the UK. This makes it all the more important for the UK working with our allies to speak up for free trade: for instance, regaining an economic commissioner in 2014.
The Coalition should also conduct a full in-depth analysis of the options open to us, to move the debate onto a higher level and help us figure out the genuine reason why we were in the EU in the first place - as well as the areas we would do better on our own. With this the Coalition could then set out a vision for EU reform, and “examine the balance of the EU’s existing competences” and as it is pledged to do. The UK should also continue to concentrate on growing its trade in the wider world where growth will be faster, and if at some point in the future the proportion of UK trade with the EU has shrunk our options will have grown.
Renegotiate our membership
In order to continue to justify its membership, the UK needs to achieve a new model for EU cooperation based on different – and equally legitimate – circles of EU membership. In this structure, the UK should remain a full member of the single market in goods and services and of the EU’s customs union, but take a ‘pick and mix’ approach in other areas of EU policy. This would achieve a vital reduction in the non-trade costs of EU membership, such as the EU budget and the burden of regulation, while allowing the UK to remain at the heart of the EU’s cross-border trade.
What a new UK membership of the EU could look like:
There will be those who say that such a model is not possible - that there can only be one form of EU membership. That is plainly wrong as it ignores current fact as well as moves, by others, towards further integration. The status quo is not an option, we now need to decide for ourselves what we want.
The UK agreed to 'ever closer union' when it joined in 1973, this is something which a lot of Brits seem to forget.
ReplyDeleteIn a time where the Commission is rethinking the 'special position' of Switzerland it is quite arrogant for the British to think they should have a right to a special position. The opt-outs the UK has gathered so far are already quite surreal, so please just leave the EU all together so that we can get on with our business and you guys can pretend to still rule the waves. Europe thanks you.
It is not only a question of cost of EU membership that is the concern but the fact that the EU is a socialist place which is ant-capitalist and anti-competition despite what the EU says from time to time. The EU is also in decline. It has too much regulation and suffocates originality, enterprise and ambition. We are being smothered out of existence. Witness the plan to do away with England and replace it with regions. The Continent still follows a dirigiste method of government which is anathema to the British. If we have to be part of a block better an anglosphere one.
ReplyDeleteThe WTO option is OUT, which is what every honest Britain wants. We can trade with the commonwealth and with our friends overseas and with the whole of Asia and Africa and with anyone who has money. Just let's not focus on Europe, because like befriending a junkie, every conversation starts with "can you lend me some money, I need a fix".
ReplyDeleteGreat post.
ReplyDeleteAt the end of the day this is simply about power. Cameron should only play his card at the right moment.
As the UK is one of the 3 major powers in the EU it has imho another position than Turkey or Norway or Switzerland. It also has likely the possibility to become the (natural) leader of the rest of the EU. I would not be surprised if adjustment to the TNS scenarios would be possible for the UK.
The EU can most likely not afford an EU split. It is almost as worse as the Euro circus we see now. It simply would be setting back the clock. And likely markets would see it pretty negative in the light of the crisis. With EZ-politicians going for the certain way in the crisis, even paying a lot of money for that, it is very unlikely if they would go for a hard confrontation with the UK. As the alternative might be a permanent veto as well.
An option could be if a hard alternative would be choosen to make it an exit in say 5 year.
Effectively we already have a multi speed Europe, it would simply mean creating another one for the UK is of the present one which is also rather unique.
Fully agree that a full exit in any form will be very difficult to achieve. It is not only origin but eg as well the paperwork that has to be rearranged (health, safety, enviroment, sanctions etc)an incredible amount of work also for the companies involved. You simply donot want all sorts of extra problems with exports while the competition has a considerable overcapacity.
@Belgian
ReplyDeletePerhaps you should rephrase "Europe thanks you" as "the euro-fanatic claque in the Benelux thanks you". If you think the only opposition to your grotesque political construct comes from the United Kingdom, wake up -- it's 2012, and the southern nations are waking up to the realities of EU tyranny.
Chopping the hands off Congolese workers for rubber and ivory or driving Greeks to suicide through the creation of a cruel colonial government (the Troika) isn't all that different -- it seems old habits die hard.
Great post.
ReplyDeleteAt the end of the day this is simply about power. Cameron should only play his card at the right moment.
@J.E.
ReplyDeleteSorry but I fail to see the analogy. The greeks elected the politicians which have cooked the books and which set up a huge system of social fraud and tax evasion, which has resulted in an uncompetitive greek economy. The congolese never got to vote for the people who cut of their hands.
The EU is a political project based on voluntary will from the constituent members (which, since the Lisbon Treaty, can even chose to leave the EU in an orderly fashion). Colonisation was a process imposed on people in Africa and elsewhere.
'EU Tyranny' is perhaps something which you have read in your English tabloids, but I have yet to read of a tyranny which depends on the consent of the ones supposesdly 'tyranised'
A recent ComRes opinion poll found that 61 per cent of voters would vote to leave the EU. A Populus poll for the Times recorded that 80 per cent of respondents would like a referendum on the EU. So, which parliamentary party will win the election by being the first to promise a referendum? Cameron is still wholly committed to EU membership, to opposing any referendum, and to the doomed effort to save the euro.
ReplyDeleteTsipras says he wants Greece to stay in the euro, but will not support more cuts. That is a bit like wanting to stay on the rack, but not wanting the pain. The euro means poverty, it means destruction. Greece should get out of the euro, default, devalue and then rebuild, as Argentina did.
No decent person supports the EU after its contempt for democracy in making the Irish vote again until the had swallowed the Lisbon Treaty (aka EU Constitution).
ReplyDeleteBelgian is right about ever closer union, and that is what the continentals are signed up to, politically and economically. Having used bullying to centralise more power, the EU is not suddenly about to give powers back.
Staying in the EU and asking to take powers back is infeasible legally (a) because of the acquis communataire ratchet in Case Law (b) because EU institutions such as the European Council, European Commission and Court of Justice of the EU would rule it as a breach of the obligation to work to the spirit of the Treaty.
All the post-EU options would be workable if the EU met its Treaty commitment to work for freer trade.
As there is also Treaty provision for EU withdrawal and good neighbourly relationships, the Swiss option might be quite workable, especially as the EU26 would be hit worse than us by a trade war affecting a major export market.
scepticus
Reference 'Belgian's' comment that the UK voted for ever closer integration in 1973. Not so. I was told by UK politicians in the 1970's that I would be voting for a 'Common Market' not ever closer integration with Europe. A common market would have been fine but not the current and ever less democratic EU monster we have now.
ReplyDeleteThis really gets to the heart of the problem in my view; European politicians thought EU integration to be a good idea but they did not think that their electorates would agree so they just lied and lied to move the EU bandwagon on down the road they had chosen. Unfortunately for them, that is not the way democracies work and sooner or later the people of Europe were bound to wake up to what was really happening.
I now accept that my decision in the 1970's was wrong and I want my country back; - all of it and nothing less will do. No more edicts from Brussels about health & safety, procurement, arrest warrants and God knows what else. World Trade Organization status will do me nicely thank you and the sooner the better whilst there are still some fish left in UK waters.
Anything is better than being subjugated to the Brussels version of the USSR that is getting ever nearer to completion.
@AverageEnglishman:
ReplyDeleteIf you had taken the time to read the Treaties which you endorsed through the referendum you would have read our project was always about ever closer union.
If you are really the average englishman and the english were too lazy to actually read the document to which they signed up to, then that is the english their fault.
It's also quite naieve to believe your own politicians on this. It's a bit like the conservatives today, attracting votes with eurosceptic rhetorics, siding with antisemites and homophobes in the european parliament.. all to gain extra votes but in the end even they know the UK would be foolish to leave the eu..
@AverageEnglishman:
ReplyDeleteIf you had taken the time to read the Treaties which you endorsed through the referendum you would have read our project was always about ever closer union.
If you are really the average englishman and the english were too lazy to actually read the document to which they signed up to, then that is the english their fault.
It's also quite naieve to believe your own politicians on this. It's a bit like the conservatives today, attracting votes with eurosceptic rhetorics, siding with antisemites and homophobes in the european parliament.. all to gain extra votes but in the end even they know the UK would be foolish to leave the eu..
Perhaps I was naive to believe my local MP back in 1975, (I was only 21 after all) but us English types tend to be a trusting bunch. Politicians that lie like Edward Heath were an unusual thing then, (alas unlike today); perhaps you are more used to such things in Belgium, surely not?
ReplyDeleteHowever, to expect every English voter to have read every detail of the potential treaties is also naive and just because an agreement was made in 1975 it doesn't mean that changes cannot be made now. That original treaty has been changed many times since 1975 in the direction of a superstate (without anyone bothering to ask my agreement or otherwise) and changes can also be made in reverse too.
Whatever the history of the matter the fact remains that right now I WANT OUT OF THE EU and an army of bureaucrats from the EU or politicians from the UK will not change my mind on that one. I have experienced the 'joys' of EU membership myself and do not need anyone else to explain them to me now.
The world is my oyster not merely Europe and I will do all that is required to ensure that my children are free of the EU monster; politicians and all. Do not underestimate an Englishman's resolve once his or her mind has been made up; many have made that mistake before and lived to regret it, mostly. I feel a strong wind of change starting to blow and it will not be denied.
To Average Englishman,
ReplyDeleteI also voted in favour in 1975 for the Common Market after assurances from that traitor Ted Heath and other English politicians, who should be ashamed of themselves. I and many, many of my friends & acquatances want to be as far away as possible from this corrupt, unelectected, I use this next word cautiosly, CLUB. For all the supporters of the EU, wHY DO YOU SAY NOTHING OF THE FACT THAT THE FINANCIAL BOOKS HAVE NOT BEEN SIGNED OFF FOR YEARS.Are you so proud of the crooks who spend the money.
Here in the UK we adhere to all the rules and diktats that the EU float, yet, I notice the rest of Europe ignore the parts they do not like. This is another reason I WANT OUT. And none of your insults of being LITTLE ENGLANDERS will alter that, but I will add we weren't called little Englanders in 1918 & 1939. Maybe there will be another mug out there, if this happens again.
I too voted for membership of the Common Market in the seventies, and I too think it a mistake. "Ever closer union" in a trading area is one thing. Political union was not part of the treaty. It was a secret project devised in the early fifties and kept secret until it leaked quite recently. I have no interest in political union at all and do not believe it possible without the major confict and use of force majeure that the European project was intended to prevent. The reason the EU is so undemocratic (not to say antidemocratic) is that the politicians promoting it are aware than NO electorate in Europe would vote to be part of a European superstate. The project is a project managed by beaurocrats, and the only way they see it working is for the government of a united Europe to be a beaurocracy. If it takes the collapse of the Euro - or for that matter the disintegration of the whole of the E.U. - to get us out of this European nightmare, then let it collapse (and preferably as soon as possible).
ReplyDeleteGeorge Eustice, Open Europe, et al are clearly "Reformists" as an article of faith; i.e. their every report, article, or utterance will inevitably lead to the conclusion: "reform" (Britain's relationship with the EU), rather than "leave".
ReplyDeleteEither such "reform" is impossible (as the "Outists" assert), or it can only be brought about by pointing out to the EU that IF it doesn't happen . . . THEN we will have no option but to leave.
So, by putting the "must stay in" cart in front of all possible horses, Open Europe (in echoing Tory-leadership-orthodoxy on this crucial point) ensures that no such "renegotiation" can ever be successful - regardless of how insightful their paradigm of an ideal relationship might be.
\let us not forget that we buy more the EU than they buy than they buy from us. There are plenty of options open to us providing we have the guts to take them. Let us place our energies on trading elsewhere, the Commonwealth, if they will have us, China, India etc. The EU is anti-democratic, corupt, feckless and cares only about peerks for its unelected commissars. unelected
ReplyDeleteWe agreed to ever closer union? Well the words may be in the treat y of Rome but it was not what we understood or were told at at the time we joined ; or the 1974 referendum; the discussion then was all about loss of sovereignty [generally argued to be low and not at threat by supporters ] and the costs of the CAP ad fisheries policy. Since then the EEC has become the EU and is a completely different and much larger animal and is soon ot be a political and fiscal / monetary union.The British people have not been consulted about uncontrolled immigration form a much larger EU especially Eastern Europe,, changes in Social/employment policy , regulatory policy, new constitution , the Euro, banking union, directives on energy and CO2 and just about everything the EU now does [70% of UK law . originates in the EU]. Apart from free trade there is very little else in the EU which is obviously beneficial to the UK. We should be consulted on the EU [and leave] but remain of a customs union or the single market. End of story.
ReplyDelete