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Adam Smith Inst - Why the only way is EEA for a post Brexit Britain

EEA option only viable route out of EU in two year time frame

Government is irresponsible not to think about realistic exit strategy should UK vote to Leave. 

EEA position offers political freedom with participation in the Single Market.

EU will make tailored deal for Britain impossible to discourage other members from leaving.

EEA members stay in the single market, but are outside of the EU’s tariffs, common agricultural & fisheries policy, foreign policy, and justice & home affairs.

This week a new report released by the Adam Smith Institute lays out its prediction for what a post-Brexit Britain would look like should voters choose to Leave the EU on June 23rd. 

The report argues that, despite claims of tailor-made trade agreements coming from the Leave campaign, in practice all this would be dropped following a vote to withdraw from the EU. In the immediate aftermath, the entire government and civil service will need to strike a speedy and pragmatic Brexit deal for the benefit of Britain, whatever their stance before the referendum was.

The two years granted by Article 50 is an implausibly short time frame in which to negotiate a tailor-made free trade agreement. This process would only be lengthened by the EU’s desire to discourage other members from leaving, making a turn to the ready-made alternative – joining the European Economic Area (the EEA) – the most likely and practical outcome. 

The EU is an organisation that needed over a year to agree a trivial change on migrant benefits, and seven years to agree a deal with Canada significantly more limited than a British deal would need to be. Other models of engagement with the EU could take ten years or more to negotiate, so the Leave campaign needs to turn its attentions to a quicker, and above all less risky, exit strategy. 

The EEA position is one currently held by Iceland, Liechtenstein and Norway. It involves participation in the Single Market but from a position outside the EU. EEA countries have a market-based relationship with the EU but are free of the EU’s political ambitions, and are outside the ‘Common’ policies: Common Agricultural Policy, Common Fisheries Policy, Common Foreign and Defence Policy, and Justice & Home Affairs measures, yet maintain so-called passporting rights for financial services companies along with continued participation in some useful science and education programmes. 

The EEA position opens up the ability to make trade agreements with third countries, providing the UK with the freedom to set its own levels of VAT and to step away from its joint liability of EU debts. The EEA option maintains the free movement of goods, capital, services and people with the rest of the EU, all of which are in Britain’s long-term interests, but would also give the UK an ‘emergency brake’ on free movement, something David Cameron attempted to win during his renegotiation but failed to do. 

Table 1: The below table is a summary of the pros and cons of EEA:

 

Author of the report, and Adam Smith Institute fellow, Roland Smith said:

“The EEA option starts from a very liberal, cooperative agenda that is practical and realistic, and evolves the UK away from EU membership. This will be the first step of an ongoing evolutionary process that ultimately promises the start of a reinvigoration and re-maturing of Britain’s wilting democracy that is increasingly and worryingly held in contempt by many voters. And all the while, maintaining the very open trade and free exchange we have with our nearest neighbours and friends.”

Sam Bowman, Executive Director of the Adam Smith Institute, said:

“The EEA Option gives Britain the best of both worlds if we leave the EU: economic integration without political union. Under this arrangement, the free movement of goods, capital, services and people would be protected, but the UK would be freed from the EU’s mad, corporatist agricultural policies and tariffs, which drive up the price of imported food and subsidise unproductive farmers. Britain’s contributions to the EU could be cut in half.

“Recent anti-Brexit warnings from the OECD focused on a scenario where Britain’s trade relationship with the EU is severely curtailed, which would indeed hurt the British economy. The EEA Option de-risks the vote and would remove much of the economic uncertainty around the referendum.”

Notes to editors:

For further comments or to arrange an interview, contact Flora Laven-Morris, Head of Communications, at flora@adamsmith.org | 07584 778207.

The report ‘Evolution not Revolution: The case for the EEA Option’ can be viewed here

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.    

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