UK Impact

Might Britain vote to leave the EU only to find out that there’s no real exit?

If Britain were to vote to leave the EU, we’d promptly set about agreeing our own trade deals as a sovereign nation. But what about our new trade deal with the EU itself? What conditions would this wounded beast set, and might we end up accepting the diktats and red tape that drove us mad in the first place? I look at this in my Daily Telegraph column yesterday.

Take Norway: in 1994 it voted to stay out of the EU yet has ended up with plenty of the problems that drive Britain up the wall now. If anything, things are worse there: it has ended up paying almost as much, per capita, to the EU. It had to accept free movement of people as part of its deal with the EU. It’s refugee intake trebled last year; if you adjust for population and its refugee count is ten times the size of UK.

Norway’s refugee population is expected to double this year. It’s doing its best to cope,  offering courses on how to respect women after sexual assaults were reported in Stranger. And offering themfree flights home.

Norway does have extra freedoms, whose merits are advocated in this paper (pdf) by Civitas and there are other models. The Swiss model offers free trade on goods, but not services: a major problem to Britain because of our service-based economy. The option that makes the most sense to me is that advocated in “Change, or go,” the essential guide to all of this from Business for Britain.  But would we pursue the Norwegian option, the Swiss option, the Turkish option – or another one? That would depend on who led the negotiation, which depends on who’d succeed David Cameron (who’s be certain to quit after a ‘no’ result). So uncertainty is piled upon uncertainty: not a good way to win a referendum that we could see this summer.

You can, of course, say: don’t be daft, we’re the world’s 5th-largest economy, they’d have to agree a deal with us. In fact, a letter in today’s Daily Telegraph responding to my column makes this very point:-

We are an important market for the EU, and the EU is an important market for us. We are in a position to dictate our own terms. Does the pro-EU campaign believe that the major manufacturers in Europe will relinquish their sales to Britain?

But this is the EU we’re talking about: it doesn’t behave rationally. As the Americans have found out to their amazement, negotiating a free trade deal means negotiating with 27 member states each with their own paranoia (and power of veto). For example, in the current EU-US free trade negotiations, the French are worrying that a free trade deal would mean Hollywood taking over their television sets: they want some regulation assuring them that Netflix will offer protection to French-language films.

No one’s talking about relinquishing sales: we’re talking about the conditions that the EU would impose on the UK – it has a vested interest in survival, and cannot afford to let a member state walk away and enjoy a pretty good deal. Yes, Britain could – in theory – enjoy a new trade relationship with the EU that worked. But when the Prime Minister of Iceland was interviewed in the Spectator, he put it well:-

‘[The EU] would try their best to make sure it would not work, because if a country left, and it did work, it would be a humiliating example for them.’

So we’d end up with the regulations, the red tape, and perhaps have to swallow free movement of people too. You can call this the Hotel California scenario: whereby Britain can can check out anytime it wants, but not really leave.

I’m not saying all of this as a fan of the EU. Like Dan Hannan, I love Europe but think the EU is an awful institution that makes people poorer and less free. But when the debate kicks off, then the big question will be what, exactly, ‘out’ looks like.

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