Brexit: What are Theresa May’s Options?
When it comes to the UK’s future trade relationship with the EU, Theresa May has already said that she hopes to secure a deal that’s good for both sides. Despite warnings from members of the cabinet, she hasn’t ruled out the idea of a “hard brexit” – or leaving with no deal at all. Leaving with no deal in place would mean leaving the single market and trading with the EU based on WTO rules. This would mean no compromising on the free movement of people; however, it would mean both sides would probably apply tariffs and restrictions on each other.
Although the economic implications of this aren’t fully known, it’s likely that it would be damaging for the UK economy and for jobs. On the other hand, there is the idea of a “soft brexit”, which would mean the UK keeping its close ties with the EU and some kind of membership to the single market. However, there would most likely to be some degree of free movement in this type of deal. So, if Theresa May were to opt for a soft brexit, what would the options be? Some of the possible future models are:
- Norway Option: Leaving the customs union, but staying in the EU single market. This would mean the UK would remain in the single market, but would also need to continue allowing freedom of movement.. The UK would also be subject to the EFTA and would need to follow EU regulations, although they would be free to pursue their own independent trade policies.
- Turkey Option: Leaving the single market and customs unions, while starting a new customs union with the EU. Goods would be covered by this customs union, and the UK would need to follow the EU’s common external tariff for trading goods from countries outside the bloc. The UK would therefore find it difficult to strike new trade deals as it would need to comply with EU product regulations. This option would not require free movement of people.
- Switzerland Option: This would be a bilateral agreement, whereby the UK would have tariff free trade with the EU and limited access to the single market for services. This would mean accepting free movement and complying to EU regulations for the parts of the single market that are relevant. It would also mean the UK would be able to pursue and independent trade policy.
- Canada Option: The EU’s agreement with Canada is fairly recent, and allows tariff free trade with the single market on some goods, as well as limited access for services. It doesn’t require them to comply with EU regulations or to accept any freedom of movement.
- WTO Option/No Deal Brexit: This would mean the UK leaving the EU, the single market and the customs union with no deal and no future trade agreement. The UK and EU would both apply tariffs on goods and services and there would be no agreements that would ease the flow of trade between the two.
Some British politicians have argued that the Norway option could be the most beneficial for both sides. However, Theresa May has already said that she wants to avoid free movement and wants to “seek a new customs arrangement with the EU” which “may contain elements of the single market”. However, she is under increasing pressure from her part to accept EEA membership. Michel Barnier, the EU’s chief negotiator warned that trade barriers would be “unavoidable” if the UK leaves the single market and customs union, and an official from Brussels said in a recent interview that the idea of a new “customs partnership” is unrealistic.