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What happens if Britain leaves the EU?

Following David Cameron’s famous veto to a treaty change for dealing with the crisis of the Eurozone two years ago, I posted a blog here that wondered comically what a post-exit UK would be like. Now that exit looks more probable, it is time that UKIP and the pro-exit Tories are held to account since leaving the EU is not cost-free and is full of uncertainty. The safest course of action is to stay part of the EU, which is the largest economic space in the World exceeding the GDP of North America. Britain’s net contribution to the EU budget is only 1% of total public spending, a small price for access to that most successful market and the chance to shape its rules.

Hard Eurosceptics tell us that the UK could have a status like Norway or Switzerland, with access to the single market. It could, but this would have to be granted unanimously by the rest of the EU and could be vetoed by just one member state – and the year of a new EU treaty and David Cameron’s referendum, 2017, happens to be election year in France. De Gaulle said “no” to Britain twice, in 1962 and 1967, and Hollande or a Gaullist successor may feel pressured to do so again – or a French President could hold a referendum on a trade deal for the UK whose result would be unpredictable.  Further, to get access to the single market, Norway and Switzerland have to allow full freedom of movement to EU citizens as part of the deal and yet free migration is one of the issues most unpopular with British Eurosceptics. For Norway and Switzerland, without free migration there is no access to free trade. To be part of the single market, Norway and Switzerland also have to obey its other rules without getting a vote to shape those rules.

The Eurosceptics also like to tell us that by breaking free, Britain will be able to trade freely with the rest of the World. But there is nothing to stop Britain trading already with the rest of the World. The EU certainly doesn’t stop Germany from being one of the World’s largest exporters. Cutting Britain out of the EU would weaken its trade position since the EU negotiates as a single bloc at World Trade talks and negotiates powerfully as the World’s largest economy. When the big deals are done between the EU, NAFTA and China, how much weight would Britain carry on its own?

Do not under-estimate the offence that leaving the EU would cause to France and Germany. A deal to grant trade access to the UK would not go as far as the existing single market and would damage Britain. Just one example is the City’s ability to trade the euro against currencies other than Sterling on the money markets. Although the euro is not the currency of the UK, the City can do this because of the single market. A lesser version of the single market for Britain would probably have this feature withdrawn.

Finally, Eurosceptics assure us that given Britain’s big trade deficit, there is no way that France would bloc a trade deal for Britain. Are they sure? Is this what François Hollande told them? Why take the risk of leaving the EU? Sure, Britain has a big trade deficit but is this something to be proud of? If ever that deficit were turning towards surplus with British goods competing well against goods from France for example, with a post-exit trade deal there is nothing to stop the EU reneging or imposing new conditions if circumstances change. The EU-Switzerland deal allows either the EU or Switzerland to abandon the agreement – or aspects of it - at any time. An EU-UK trade deal could also be unilaterally curtailed by the EU at a later date.

Posted on Friday, November 15, 2013 at 03:16PM by Registered CommenterDr Giacomo Benedetto | Comments1 Comment

Reader Comments (1)

As Britannia is an important country so it is an interesting article in this context.
Political Discussion

November 25, 2013 | Unregistered CommenterJohnson

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