Following the June 23rd referendum which sealed the UK’s future outside of the European Union, much attention has been turned to the subject of trade between the UK and the rest of the world. Without the comfort blanket of free trade with Europe, the UK will soon be adrift in the global market.
For crucial sectors of the economy like manufacturing, which accounts for 10% of GDP, the issue of trade is a huge one. So, how might Britain trade with the rest of the world outside of the EU? In this two part guide, we’ll be surveying the options, so let’s dig in.
- The Norwegian Model
The so-called ‘Norway model’ was a much touted alternative to Britain’s existing relationship to the UK, but does it make any sense?
Norway are a full member of the European Economic Area, which means that have access to the single market, are obliged to make a financial contribution to the EU, accept the majority of their laws and the free movement of people.
As such, people from across the EU are free to live and work in Norway, but Norway are exempt from EU rules on agriculture, fisheries, justice and home affairs. The downside for Norway is that although they are in the single market, they have absolutely no say in how the rules of it are created.
Boris Johnson implied that the UK would continue to have access to the single market without immigration, and that’s a stance that new PM Theresa May has taken too. However, she has been told by EU heavyweights France that there will be no free trade without free movement, which could mean the Norway model is essential.
- The Turkish Model
Another alternative is the model which the Turkish government operate. Turkey are not part of the European Economic Area nor the European Free Trade Association, but it does have a customs union with the EU (along with nations like Andorra and San Marino).
That means that it faces no tariffs, taxes or duties on imports, exports or quotas on industrial goods to sends to EU countries, however, this doesn’t apply to agricultural goods, or services – two areas that the UK is a leader in. With that being said, we certainly wouldn’t mind being able to ship our hydraulic pipe fittings to the EU without a tariff.
Turkey also have no say on the tariffs that they have to impose on goods that they import from non-EU countries, which would put the UK at a significant disadvantage in our quest to open up our free trade to the whole world.
- The Swiss Model
Switzerland are a member of the European Free Trade Association, but no the European Economic Area. That means that they have a free trade agreement with the EU, which has been forged through over 120 bilateral agreements with Brussels, which also guarantee the free movement of people within Switzerland – something we’ve suggested we do not want.
Switzerland does not have full access to the common market for their banking and services sector, which make up almost 80% of the UK’s economy, which means tariffs would apply. Switzerland also give billions of dollars to EU projects to ensure their access to the market.
Join us in part two as we examine 3 more possible models for the UK’s trade in a post-Brexit world.