Stefano Fugazzi (ABC Economics) – As Tories and Labour seem to have reached an agreement on the UK Referendum, let us assume for a moment that British people vote in favour of leaving the European Union. What are the political options in the aftermath of the vote? How could the UK-EU relations unfold?
Five options exist.
Option 1 – A Norwegian European Economic Area (EEA) model.
Option 2 – A Swiss semi-EEA/bilateral trade deal.
Option 3 – A limited customs union, similar to that held with Turkey.
Option 4 – A standard WTO-style relationship with the EU would be the most economically damaging scenario for the UK not only because the UK runs a trade deficit with the EU worth around €35 billion a year, but also because of potential knock-on effects to the much larger UK-EU trade relationship worth around €340 billion a year.
Option 5 – An entirely different type of relationship which could set a new model for relations with the EU.
‘Dura lex sed lex’ (The law is harsh, but it is the law)
Whichever relationship is adopted, the UK would still have to subject itself to most EU regulations and policies in order to gain access to the EU market. For instance, it is no secret that Britain has always been at the forefront of banking regulation, hence we are very unlikely to see a swift change of direction here.
Can EU and UK still be friends?
Whichever option is agreed upon, the EU should be prepared to face a UK expecting special treatment, behaving as if the UK and EU were equals (and viceversa) although the UK’s role will change from decision maker to decision taker, but one can expect the UK will put considerable effort into being the most effective decision maker of any non-EU state.