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10/12/2016

Alternatives worse than EU membership, says new report

UK & Europe

Alternatives worse than EU membership, says new report

European Council, 2015.

[European Council/Flickr]

None of the proposed alternatives to UK membership of the EU would return the same level of benefits and influence, according to a new report.

Produced by the Senior European Experts (SEE) group and Regent’s University, the report explored the most commonly suggested economic and trade alternatives to EU membership.

The report quotes government figures which put the benefits to the UK economy of EU membership at £90 billion annually.

Any alternative deal would require protracted negotiation and would be unlikely to match the overall benefits of unrestricted access to the single market, the report finds.

The alternatives to EU membership include joining the European Economic Area (EEA), joining the North American Free Trade Agreement or creating a free trade bloc with other Commonwealth Nations.

The report dismisses the idea of a Commonwealth bloc, because the distances involved and varying levels of economic development of the members would leave a smaller market than the EU. It also suggests that if the UK wishes to form a free trade agreement with North American states, the easiest way will be to stay in the EU and continue negotiations over the Trans-Atlantic Trade and Investment Partnership.

According to Charles Grant, Director of the Centre for European Reform and member of the SEE, the most likely outcome of the UK exit would be a UK-EU Free Trade Agreement. But this could take years, and terms might not be favourable to the UK, he warned.

Half of UK exports go to Europe, while only 10% of EU exports go the other way, putting the UK at a strategic disadvantage in any negotiations.

Those in favour of the UK’s membership of the EEA as an alternative to the EU often quote the example of Norway and Switzerland, prosperous European nations who are not members of the EU.

Members of the EEA must accept all single market rules in return for access to the single market. These include the implementation of EU employment, social and environmental law. The report regards it as “highly unlikely” the UK parliament would accept a relationship that gave the EU a major say in UK domestic law without UK representation in the EU.

The report quoted Dr Johanna Jonsdottir of the European Free Trade Association, who said, “For a noisy nation (UK) accustomed to a place at the table and having its voice hear, that could feel like a very un-splendid isolation.”

Grant noted while nothing currently prevents the UK from trading outside the EU, should it join the EEA, the UK would not inherit free trade agreements already negotiated with the European Free Trade Association (EFTA), and so would have to start the process from scratch.

“There are alternatives. But they are all much, much worse,” said Martin Wolf, Chief Economics Commentator at the Financial Times, and member of the SEE.

Wolf also said that calls for a referendum on UK membership of the EU were causing “pervasive and ongoing uncertainty”. He argued the British electorate couldn’t give informed consent on the issue because the terms of any exit wouldn’t be known until long after the vote.

“Overall we are making a staggering mess of the entire relationship,” Wolf added.

Robert Oxley, from Business for Britain, who campaign for fundamental change to the EU said, “It’s not credible to say there are no viable alternatives when you dictate the options assessed and fail to provide a proper counterfactual. The UK needs a British option which provides the best deal for it, whether that is in a competitive, reformed EU or outside with its own deal.” 

Roland Rudd, Chairman of Business for New Europe, said, “There is no clear vision of what ‘out’ would look like. As this report shows, none of the options would be any better for Britain and all would see us losing power and influence. As Norwegian MPs say: if you want to run Europe, you’ve got to be in it; if you want to be run by Europe, feel free to join us outside.”