The consequences of a British exit from the - AEGEE

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The consequences of a British exit
from the European Union
Given that the main arguments in favour of leaving the EU centre on economic interdependence, sovereignty and security, and immigration, this paper takes a closer look at what a Brexit would mean in those areas. It also examines
whether the UK would be able to extract a better deal from the EU if it chose to leave the Union.
1. Economic Consequences
A. EU-UK Trade Relationship
Facts and Figures
The UK is more dependent on the EU
labour market with barrier-free access
EU. According to the Centre for Euro-
than vice versa given that 12.6% of
to the EU Single Market. Market size
pean Reform “half of the EU’s trade
UK GDP is linked to exports to the EU
is a major determinant of the size of
surplus with the UK is accounted for
wheareas only 3.1% of GDP among the
FDI flows, and membership of the EU
by just two Member States: Germany
other 27 Member States is linked to ex-
expands the UK market.4 The barriers
and the Netherlands. Most EU Mem-
ports to the UK. The EU is the destina-
that matter to investors in a competi-
ber States do not run substantial trade
tion of 44% of UK exports and 60% of
tive modern economy are not tariffs
surpluses with the UK, and some run
total UK trade is covered by EU mem-
but non-tariff barriers such as diver-
deficits with it. Any agreement would
bership and the preferential access it
gent national standards and regula-
require the assent of the remain-
grants to 53 markets outside the EU.
tions. The EU Single Market provides
ing 27 members, some of whom buy
If TTIP and other current negotiations
a level playing field, replacing 28 sets
more from Britain than they sell to it”.5
succeed this could increase to 85%.1
of regulations with a single rule book
Furthermore, the EU only has a trade
and free access to 500 million custom-
surplus based on goods exports but
The UK is a service-based economy
ers to the companies operating with
a trade deficit of 10.3 billion pounds
with the service sector making up
it. Outside of the EU the UK will most
in services. Therefore there is far less
Fur-
likely lose full access to the Single Mar-
of a rationale for the EU to conclude a
thermore, although the UK has a net
ket, making it a less attractive destina-
liberal agreement on services access
trade deficit with the EU, it had a net
tion for companies that would like to
than on goods, which would severely
trade surplus in services of 10.3 billion
use it as a base for their investment in
hurt the UK’s service-based econo-
pounds in 2013. The EU is one of its
the EU market.
my.6 Moreover, many more interna-
almost 80% of its economy.
2
3
biggest partners with 36% of total UK
service exports going to the EU.
tional trade treaties already regulate
The UK negotiation position vis-à-vis the
and help reduce barriers to trade in
EU
goods, yet very few, if any cover, non-
The UK is also the leading EU desti-
Brexit campaigners have so far ar-
tariff barriers to trade in services. The
nation for Foreign Direct Investment
gued that the EU’s trade surplus with
EU’s access to goods will thus not be as
(FDI) because it combines an English-
the UK is its trump card in negotia-
heavily affected as the UK’s access to
speaking and relatively flexible
tions. However, this ignores the fact
services on an already much smaller
that, whereas UK exports to the EU
share of the EU’s overall trade.
1 The recent EU-Canada agreement is estimated to deliver a
long-term positive annual impact of 1.3 billion pounds to UK GDP.
https://www.gov.uk/government/news/government-welcomeshistoric-eu-canada-free-trade-agreement
2 The Office for National Statistics UK GDP, low level aggregates;
Second Estimate of 2015 GDP. The ONS defines services as everything that is not agriculture, fisheries, fishing, mining, quarrying,
manufacturing, electricity, gas, steam and air conditioning supply,
water supply activities, and construction.
3 http://openeurope.org.uk/intelligence/britain-and-the-eu/whatif-there-were-a-brexit/
are 44% of total UK exports, on average the other 27 Member States only
export 7% of their total exports to the
4 https://www.cer.org.uk/sites/default/files/smc_final_report_
june2014.pdf
5 https://www.cer.org.uk/sites/default/files/smc_final_report_
june2014.pdf
6 In the above CEP model, the optimistic scenario assumes that
the UK would face one quarter of the reducible non-tariff costs that
the US currently faces, while the pessimistic scenario assumes that
the UK would face as much as two thirds. http://cep.lse.ac.uk/pubs/
download/pa016.pdf
The UK is more dependent on the EU than vice versa given that 12.6% of UK GDP is linked to
exports to the EU wheareas only 3.1% of GDP among the other 27 Member States is linked
to exports to the UK. The EU is the destination of 44% of UK exports and 60% of total UK trade
is covered by EU membership and the preferential access it grants to 53 markets outside the EU. If
TTIP and other current negotiations succeed this could increase to 85%.”
B. Future Scenarios
Predictions on how a Brexit would
tions, where the UK would have a sim-
customs union.10 If the UK decided to
affect economic growth depend on
ple WTO managed relationship with
have an EEA-type relationship where it
four factors: 1) Whether the EU itself
the EU, show that the UK could face
pays for full access to the Single Mar-
will embrace reforms; 2) the outcome
an income loss of between 3.1% (50
ket, most EU regulation would con-
of TTIP and other trade agreements
billion pounds) and 9.5% of GDP.9 As a
tinue to apply to the UK, including the
the EU negotiates; 3) To what extent
baseline for comparison: following the
five pieces of EU derived legislation
the UK is willing to turn Britain into a
2007/2008 global financial crisis UK
considered to be the most “costly”.11
dramatically deregulated free trading
GDP fell by around 7%.
Growth Predictions (by 2030):
The only plausible model for a relation-
economy; 4) What type of relationship
the UK decides to have towards the EU
Different plausible relationships to the Sin-
ship where the UK could gain substan-
Single Market.
gle Market
tial access to the Single Market with-
The UK could decide to have a Nor-
out requiring freedom of movement
Due to the unpredictability of all of
wegian/EEA-style
a
is the bilateral EU-Canada Compre-
these factors growth predictions vary
Swiss-style bilateral trade agreement,
hensive Economic and Trade Agree-
greatly. According to the most optimis-
a Canada-style bilateral trade agree-
ment (CETA). However, according to
tic scenarios, where the UK maintains
ment a WTO-style managed relation-
the UK Treasury, such an agreement
a high level of access to the Single
ship or a uniquely negotiated relation-
would result in a 6.2% smaller UK GDP
Market, the effects range from a loss
ship with the Single Market. Under the
in 2031, a £4,300 decrease in house-
of 2.2% of GDP7 and the absolute best
first two models the UK would have to
hold income and an annual £36 billion
case scenario, which foresees that the
pay for Single Market access and ac-
“black hole” in tax receipts, equivalent
UK would benefit from leaving Europe
cept almost all EU regulation without
to a little more than one third of the
with a 1.6% higher GDP in 2030. The
having a voice at the table. The WTO-
NHS budget.
assumptions and the plausibility of
style relationship, absent of significant
migration is one of the main goals of
this very positive best case scenario
domestic reforms, is the “worst case
the Leave campaign, it is significant to
will be evaluated further down in the
scenario” and would bring substantial
paper. The most pessimistic predic-
economic costs. Overall, no free trade
8
7 http://openeurope.org.uk/intelligence/britain-and-the-eu/whatif-there-were-a-brexit/
8 The UK manages to enter into liberal trade arrangements with the
EU whilst pursuing large-scale deregulation at home on immigration, environmental protection and social policies
relationship,
deal with the EU will offset the loss of
access to the Single Market and EU
9 http://cep.lse.ac.uk/pubs/download/pa016.pdf
12
Given that reducing
10 http://openeurope.org.uk/intelligence/britain-and-the-eu/whatif-there-were-a-brexit/
11 These include the UK Renewable Energy Strategy, the CRD IV
package, Working Time Directive, EU Climate and Energy Package,
and Temporary Agency Workers Directive. http://openeurope.org.
uk/intelligence/britain-and-the-eu/what-if-there-were-a-brexit/
12 https://www.gov.uk/government/uploads/system/uploads/
attachment_data/file/517415/treasury_analysis_economic_impact_of_eu_membership_web.pdf
To see this and other European Movement International policies, please take a look at our website:
www.europeanmovement.eu/policies
Better and faster trade deals outside the
note that any possible future relation-
this option to produce the biggest in-
EU?
ship that restricts or removes freedom
come losses for the UK economy and
The EFTA (of which Norway is a mem-
of movement results in substantial
it therefore represents a high risk op-
ber) currently has 25 free trade agree-
economic costs and growth loss for
tion.15
ments covering 35 countries. These
the UK.
include Canada and Singapore where
It is highly unlikely that all or any of
both FTAs were concluded ten years
To conclude, none of these existing
these models will be acceptable from
ahead of the EU. The EU also currently
models would carry much appeal for
a political viewpoint. Introducing un-
does not have plans to negotiate with
the UK. If the UK were to negotiate a
precedented levels of competition in
China. However, the quality of these
unique agreement, it would probably
manufacturing and other industries
deals should be questioned. To give an
13
take more than two years to do so.
by opening up to China, India, etc. is
example, the Switzerland-China free
One Eurosceptic think-tank concludes
a politically sensitive topic and would
trade agreement opens up the entire
that their most favourable alterna-
not be popular with working class pop-
Swiss market to China immediately
tive relationship model “would be
ulations. Furthermore, given that anti-
while maintaining tariffs on exports of
the hardest option to negotiate, and
immigration sentiments are helping to
Swiss watches to China in perpetuity.
it may actually be easier to achieve a
drive a Brexit sentiment, the govern-
Were it to negotiate from outside the
model along these lines by renegotiat-
ment would probably not introduce
EU, the UK, a medium-sized country,
ing from inside the EU.”14
a more liberal policy on immigration.
would have to strike less favourable
Also, if the UK decides to sign up to the
trade deals than it would do as part of
UK economically stronger outside the EU: A
Single Market it will need to agree to
a 500 million-strong market.
“pie in the sky”
the free movement of people.
For the UK to benefit by 1.6% of GDP
rently the UK has opt-out agreements
Furthermore, no matter how attrac-
gains by 2030, as the best case sce-
on Schengen in place so this would
tive alternatives to trade with the
nario implies, it would have to sub-
most likely cause an increase in im-
EU might appear, the fact is that, as
stantially reform its economy on three
migration to the UK, neutralising one
the Centre for European reform ar-
broad fronts: 1) open up to China, USA,
of the main pro-Leave arguments.
gues, “Europe has become a regional
India and Indonesia; 2) pursue a liberal
To compare, in 2013 Norway was the
trading hub. Over three-fifths of EU
policy for labour migration; 3) slash
destination of over twice as many
Member States’ trade in goods is
regulation on climate change, social
EU migrants per head than the UK.
17
conducted among themselves. Intra-
and employment protections and fi-
Also, Britain is likely to keep many EU
EU trade expanded less rapidly than
nancial services rules. The last two re-
rules in place, for example on climate
extra-EU trade over the last decade,
form packages would only be possible
change and banking regulation where
but it still managed growth of 5.4 per
if the UK decided to choose a WTO-
it has gone further in some areas than
cent a year, suggesting that European
style relationship with the EU, given
the EU standard.18
regional trade integration is far from
that EU rules would apply in the other
cases. However, most models show
13 Both the official UK government report on “Alternatives to
membership: possible models for the United Kingdom outside the
European Union” and Open Europe’s comprehensive study judge
any existing model as less desirable than the current status quo.
Both also predict an extended period of negotiation of up to ten
years.
14 http://openeurope.org.uk/intelligence/britain-and-the-eu/whatif-there-were-a-brexit/
16
15 Professor Nick Crafts of Warwick University http://www.
Cur-
ft.com/intl/cms/s/2/70d0bfd8-d1b3-11e5-831d-09f7778e7377.
html#axzz42ECtfOKi
16 No country has been able to withdraw from this requirement.
17 In fact, all EEA countries and Switzerland had a higher number
of EU migrants per capita. http://openeurope.org.uk/intelligence/
britain-and-the-eu/what-if-there-were-a-brexit/
18 http://openeurope.org.uk/intelligence/britain-and-the-eu/
what-if-there-were-a-brexit/, http://www.cer.org.uk/sites/default/
files/publications/attachments/pdf/2014/pb_city_brexit_js_
pw_8may14-8816.pdf
exhausted”.19
19 https://www.cer.org.uk/sites/default/files/smc_final_report_
june2014.pdf
C. Brexit Effects on Seven Main
Sectors
In total the seven most affected indus-
impose different or additional require-
tries employ 20.79% of the UK labour
ments. Outside the EU, UK firms would
force and generate 53.2% of UK total
no longer enjoy that right. Any inter-
exports.
est in liberalising trade in services, in
which Britain is especially competitive,
Key sector: Financial services and Insur-
would also diminish if the UK were to
ance Sectors
leave. 21
The financial services and insurance
sector employs 3.6% of the UK labour
The other six affected sectors are:22
•
Capital Goods and Machinery
Sector: the capital goods and machin-
force. Financial services represent
a 9.6% share of total UK exports of
•
Automobile Sector: the automo-
ery sector employs 0.61% of the UK
which 41% are destined for the EU. The
tive sector employs 0.42% of the UK
labour force and represents an 8.6%
insurance sector represents a 4.3%
labour force and represents a 4.9%
share of total UK exports of which 31%
share of total UK exports of which 18%
share of total UK exports of which 35%
are destined for the EU. If the EU-UK
are destined for the EU.
by value are destined for the EU. If the
can’t negotiate a deal, then tariffs on
EU-UK can’t negotiate a deal, then tar-
machinery will be between 1.7% and
The insurance industry is more glob-
iffs on cars will be 10%.
4.5%.
ally oriented so it is less at risk. How-
•
•
ever, financial services are the most
Sector: the chemicals and pharma-
tor: the food, beverage, and tobacco
exposed sector and a deal will be
ceuticals sector employs 0.52% of the
sector employs 3.7% of the UK labour
hardest to negotiate here. Britain
UK labour force and represents a 9.9%
force and represents a 3.7% share
would be forced to choose between
share of total UK exports of which 57%
of total UK exports of which 61% are
a “third country” WTO-style status or
are destined for the EU. If the EU-UK
destined for the EU. If the EU-UK can’t
somehow remain a member of the
can’t negotiate a deal, then tariffs on
negotiate a deal, then tariffs on pro-
Single Market like Norway. The EU is
chemicals will be 4.6%.
cessed food will be 15% and for other
also currently in the process of tight-
•
products tariffs could increase by up
ening rules on third country access to
sector employs 0.34% of the UK labour
to 30%.
financial services through the Markets
force and represents a 2.3% share of
•
in Financial Instruments Directive (MI-
total UK exports of which 45% are
professional services sector employs
FID III).
destined for the EU. If the EU-UK can’t
11.6% of the UK labour force and rep-
20
Chemicals and Pharmaceuticals
Aerospace Sector: the aerospace
Food, Beverage and Tobacco Sec-
Professional Services Sector: the
negotiate a deal, there is a high risk
resents a 9.9% share of total UK ex-
Another UK consideration is the “fi-
of market disruption. The UK’s Aero-
ports of which 29.8% are destined for
nancial passport” whereby UK finan-
space, Defence, Security and Space
the EU. If the EU-UK can’t negotiate a
cial firms, including banks, insurers,
sector estimates the aerospace sector
deal, the potential barriers to the EU
and asset managers generally have
could be subject to up to 7.7% tariffs.
market consist primarily of national
the right to sell financial services and
21 http://2ihmoy1d3v7630ar9h2rsglp.wpengine.netdna-cdn.com/
establish branches anywhere in the EU
without other countries being able to
20 http://2ihmoy1d3v7630ar9h2rsglp.wpengine.netdna-cdn.com/
wp-content/uploads/2015/03/150507-Open-Europe-What-IfReport-Final-Digital-Copy.pdf
23
wp-content/uploads/2015/03/150507-Open-Europe-What-IfReport-Final-Fully liberalising the EU’s service market would lead
to an increase of 1.8 percent in EU GDP. A fully functioning single
market in digital services would add an additional 260 billion euros.
22 http://2ihmoy1d3v7630ar9h2rsglp.wpengine.netdna-cdn.com/
wp-content/uploads/2015/03/150507-Open-Europe-What-IfReport-Final-Digital-Copy.pdf
23 https://www.adsgroup.org.uk/brexit-could-mean-7-7-tariffsfor-uk-aerospace-exports-to-eu/
market access regulations, not tariffs.
D. Effect on UK citizens living in
the EU
Another measure of EU-UK interde-
receiving UK state pensions are enti-
right to use public services in other EU
pendency is the 1.4 to 1.8 million UK
tled to healthcare in the other Mem-
countries and the use of the European
nationals that live in the EU on a per-
ber States, which is then reimbursed
Small Claims procedure to reclaim
manent basis who would be most
by the UK, would stop. In addition to
up to 2.000 euros from individuals in
affected by a Brexit. In the case of
losing the right to live, work and own
other EU countries.
Brexit, a lot of pensioners would move
property in the other Member States,
back to the UK to use NHS services,
UK citizens would also lose the ability
further burdening a system already
to vote in local elections in their EU
working at or over its capacity. The
country of residence, the mutual rec-
current scheme whereby individuals
ognition of child custody decisions, the
E. Effect on migration and the
economy
The UK’s Office for Budget Respon-
migrants that arrived in the UK since
means that it has never lifted bor-
sibility (OBR) in its annual Economic
2000 have contributed more than 20
der controls for EU citizens. However,
and Fiscal Outlook report found that
billion pounds to UK public finances
the freedom of movement (as well as
net migration has a positive impact
between 2001 and 2011, with EU mi-
goods, capitals and services) does ap-
on the British economy. According to
grants from the EU-15 contributing
ply, which means that EU citizens can
its calculation, the high migration vari-
64% more in taxes
ant would increase the UK’s budget
than they take out
surplus by about £4.5bn by 2019-20,
in
while the low migration variant would
migrants
reduce it by the same amount. 24 In
the 10 newest EU
other words the “high migration sce-
Members
nario” would add 0.8% to economic
12% more. 27 Non-
growth whereas the “low migration
EU migrants, for
scenario” would cut economic output
comparison, have
and the size of the economy by 0.8%.
contributed around 5 billion pounds
restrict this form of labour migration
Migration is an important factor in
to the UK public finances in the same
from the EU. But it is hard to foresee
calculations of the UK’s economic and
period. Also, there is hardly any statis-
a scenario where the UK will not have
fiscal outlook, where there is a direct
tical evidence to suggest that there is
to apply freedom of labour rules if it
positive relation between migration
a negative link between migration and
wants to maintain access to the EU’s
flows and growth forecasts, because
wages, reqther the contrary appears
Single Market in a post-Brexit agree-
of adult population growth, higher
to be true.
ment. Furthermore, it is worth keep-
25
benefits,
and
from
States
enter the UK to
The UK’s Office for Budget Responsibility (OBR) in its annual
Economic and Fiscal Outlook
report found that net migration has a positive impact on
the British economy.”
28
employment rates, and increased tax
income.
26
EU migrants in particular
have on average paid more in taxes
than they have received in benefits. EU
24 http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf
25 http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf
26 http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf
(search for) work.
If the UK were
to leave the EU,
and,
on
depending
the
agree-
ment negotiated
with the EU, it
could be able to
ing in mind that, regarding the total
The UK is not a part of Schengen, which
27 https://www.ucl.ac.uk/news/news-articles/1114/051114-economic-impact-EU-immigration
http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf
28 http://www.cer.org.uk/publications/archive/bulletinarticle/2015/britain-immigration-and-brexit ; http://www.niesr.
ac.uk/blog/how-small-small-impact-immigration-uk-wages#.
VxUAKNR94dU
migration flows into the UK between
2005 and 2015, more non-EU migrants
entered the UK than EU migrants. 29
29 http://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigration/bulletins/migrationstatisticsquarterlyreport/february2016
To see this and other European Movement International policies, please take a look at our website:
www.europeanmovement.eu/policies
2. Sovereignty
longer be subject to ECJ jurisdiction,
A. Security
ment it could negotiate with the EU,
defence capacities. A dozen former
EU social and employment policies
the UK would lose access to the 2004
British military chiefs have written a
and theoretically only firms exporting
European
to the EU would need to comply with
Warrant, the Euro-
EU regulation. Furthermore it would
pean criminal re-
be able to negotiate its own trade
cords information
deals. However, it will still be bound
system, the 2005
by other international agreements.
EU Counter-Terror-
In the scenario where it signs up for
ism Strategy, the
the Single Market, the UK will still be
Schengen
affected by a significant array of EU
mation System II
legislation with the important differ-
and the Prum Deci-
ence being that the UK would not be
sions relating to fingerprints and DNA
able to influence the relevant legisla-
databases that will come into effect in
tion. Also, without the UK the more
2017. No alternative type of relation-
B. International standing
“protectionist” bloc within the EU
ship offers co-operation on security
is a member of the G7, G20, NATO and
gains strength, making the likelihood
similar to that available through EU
a permanent member of the UN Secu-
of a more open free trade agreement
membership: neither Norway nor
rity Council. A recent Chatham House
between the UK and the EU unlikely.
Switzerland have equivalent access
report contends that in recent years
Lastly, if the UK remains a member
to the European Arrest Warrant.
30
the UK has three major channels for
it can use the ECJ to defend its Single
Furthermore, the UK is the strongest
international influence: the European
Market rights against what it deems
European military power in NATO, so
Union, its economic and security
to be violations by Eurozone-inspired
a Brexit would hurt the EU-NATO re-
partnerships with the USA, and its
regulations.
lationship, diminish the strength of
other key bilateral and institutional
Outside of the EU, the UK would no
Depending on what type of agree-
NATO31 and European security and
Arrest
Infor-
public letter out-
No alternative type of relationship offers co-operation on security similar to that available
through EU membership: neither Norway nor Switzerland
have equivalent access to the
European Arrest Warrant.”
lining the value
for the UK of security
coopera-
tion through the
EU in an increasingly
world.
unstable
32
The UK also has a history of being a major player in the international arena, it
relationships. However, the UK’s abil30 The EAW has so far led 7,000 people to be extradited from the
UK to face trial and has resulted in just over 1,000 to be returned to
the UK to face justice there. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/503908/54538_EU_Series_No2_Accessible.pdf
31 http://www.newsweek.com/brexit-vote-could-weaken-nato-usgeneral-europe-436843
32 http://www.telegraph.co.uk/news/newstopics/eureferendum/12170890/Britain-must-stay-in-the-EU-to-protect-itself-fromIsil-former-military-chiefs-say.html
The EU allows the UK to leverage the world’s biggest single market to secure the UK’s economic interests, to shape policies towards the EU’s Eastern and Southern neighbourhoods,
to maximise its ability to shape global policies on climate change and to give it more clout
vis-à-vis countries such as the United States. Leaving the EU would accelerate and make more
permanent the UK’s diminished influence in the global order.”
ity to influence the external world
is decreasing due to structural and
long-term changes at the same time
as it faces substantial security challenges from “a more assertive Russia,
fallout from disintegration in the Middle East, and global challenges such
as climate change.” 33 Furthermore,
with the United States focusing more
and more on Asia, the UK becomes a
less important partner and therefore
the EU is the principal source of leverage for Britain in the world. The EU
allows the UK to leverage the world’s
biggest single market to secure the
UK’s economic interests, to shape
policies towards the EU’s Eastern and
Southern neighbourhoods, to maximise its ability to shape global policies
on climate change and to give it more
clout vis-à-vis countries such as the
United States. Leaving the EU would
accelerate and make more permanent the UK’s diminished influence in
the global order.
33 As a member of NATO the UK has a duty to protect its
European neighbors from a Russian attack, as a member of the Five
Power Defense Arrangement it will have to react to a flare-up with
China while its defence budget has been slashed by 19% in the last
five years.
https://www.chathamhouse.org/sites/files/chathamhouse/20151019
BritainEuropeWorldNiblettFinal.pdf
3. The Withdrawal Process – Lisbon Treaty Article 50
The Lisbon Treaty Article 50 both out-
With that in mind the below points
Implications
lines how the withdrawal process will
look at the formula espoused by Arti-
Based on completed comprehensive
work and, implicitly, why that process
cle 50, and the implications this might
trade treaty negotiations it is unlikely
is disadvantageous to the leaving
imply:
that two years will suffice for the
negotiation, 37 thus the UK will be at
country.
Article 50
the mercy of EU Member States vot-
Both UK Prime Minister David Cam-
•
Negotiations would involve the
ing to extend the negotiation period.
eron and leaders of the Brexit camp34
27 remaining Member States, the
If the UK does not have a new agree-
have publicly stated that if the UK
Commission and the UK.
ment in place after two years and
votes to leave the EU, then Article 50
•
A withdrawal agreement would
there is no extension of negotiations
of the Lisbon Treaty will immediately
need the consent of the European
the UK will leave the EU with no pref-
be triggered. These statements are
Parliament and unanimous agree-
erential trade agreement. This means
direct replies to the Brexit claim that
ment of the Council.
it reverts to the WTO’s Most Favored
if the UK votes ‘No’, it would be able
•
The UK would need to negotiate
Nation rules and standards, which in
to use that as a tool to renegotiate a
a withdrawal and post-exit arrange-
most models signifies a massive eco-
better deal with the EU while keeping
ment with the EU within two years.
nomic cost to the UK and represents
the option of staying inside the EU
•
the worst-case scenario. 38
alive. High-ranking EU officials have
tion period can be extended only by
all stated that there is no ‘Plan B’ to
unanimous agreement among the 27
As a result of the EU’s ability to veto
the current EU-UK draft deal i.e. if the
Members States - any Member State
any extension in negotiations and the
UK votes no, there will be no renegoti-
can veto the extension.
deal needing unanimous agreement
ated agreement to stay in the EU. 35
•
The EU treaties continue to apply
in the Council - opening up the pos-
to the departing Member State until
sibility that any given Member State
a withdrawal agreement has entered
may try to block the deal in order to
into force or the formal negotiation
extract a higher price for agreeing to
process ends. 36
any element of the agreement - the
After two years the negotia-
This uncertainty, which the UK government has said could
last up to ten years, could have an impact on financial markets, investments, and the value of the pound which will affect employment and the wider economy.”
34 http://www.theguardian.com/politics/2016/feb/27/boris-johnson-rejects-idea-of-second-eu-referendum-and-says-out-is-out
35 Based on past EU negotiations and breaches of agreements and
use of informal mechanisms such as trilogies, it is not impossible
that withdrawal or remain negotaitions could happen outside
of the Article 50 framework. However, it seems very likely that
negotiations will happen under the Article 50 framework as there is
almost no incentive for the EU to take any other route and such an
agreement would need the support of all Member States.
36 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/503908/54538_EU_Series_No2_Accessible.pdf
UK faces a far weaker negotiation position.
During negotiations the UK’s ability
to negotiate and conclude new trade
37 The EU-South Korea negotiations lasted 3-4 years, the EUMexico deal took over four years and the EU-Canada negotiations
took 5-6 years. http://openeurope.org.uk/intelligence/britain-andthe-eu/what-if-there-were-a-brexit/
38 France and Germany face national elections between AprilOctober 2017 during which time negotiations would likely stall
or be less productive. Furthermore, a new agreement on trade
and wider co-operation would require approval by each of the 27
Member States alongside the EU. This could require ratification by
some national parliaments, further delaying the process and would
give each Member State another opportunity to block the agreement
for any reason. https://www.gov.uk/government/uploads/system/
uploads/attachment_data/file/503908/54538_EU_Series_No2_Accessible.pdf
agreements with countries outside
which will affect employment and the
•
the EU will be constrained due to the
wider economy. 40
budget
uncertainty involved. Also many po-
•
Rebate on payments to the EU
Opt outs from the Euro and
tential trade partners such as the USA
Renewing Membership: no advantages for
Schengen border free area
are already negotiating with the EU
the UK
•
and have already stated that a sepa-
According to the recent UK govern-
and Home Affairs arrangements to
rate trade deal with the UK will not
ment report on the consequences of
join”
be available. 39 This uncertainty, which
Brexit, renewed membership with the
the UK government has said could
EU “would be highly unlikely to repli-
As such, the UK would be facing a
last up to ten years, could have an
cate our [Britain’s] current special
plethora of difficult circumstances
impact on financial markets, invest-
status, affecting the:
and choices were it to vote to leave
ments, and the value of the pound
39 http://www.telegraph.co.uk/news/worldnews/europe/
eu/11962277/Major-blow-for-Brexit-campaign-as-US-rules-outUK-only-trade-deal.html
Right to choose which Justice
the EU on 23 June 2016.
40 An HSBC report estimates that the pound would drop by 20%.
http://www.theguardian.com/business/2016/feb/24/brexit-couldwipe-20-percent-off-the-pound-warns-hsbc
To see this and other European Movement International policies, please take a look at our website:
www.europeanmovement.eu/policies
In addition to losing the right to live, work and own property in the other Member States, UK
citizens would also lose the ability to vote in local elections in their EU country of residence.”
Conclusion
Upon looking at and assessing a va-
have a lasting impact on the UK for
The European Movement
riety of reports and analyses, it is
many years to come.
tive participation of citizens and
seeks to provide a platform to
encourage and facilitate the ac-
clear that a British exit from the EU
stakeholders in the development
will carry with it large economic and
of European solutions to our com-
political costs. It will also reduce the
mon challenges. We offer thought
UK’s standing in the world and its
leadership on the issues that af-
ability to influence the international
fect Europe and we give the op-
events that affect it the most. It is also
portunity to representatives from
evident that none of the alternative
European associations, political
relations with the EU presents itself
parties, enterprises, trade unions,
as more advantageous compared to
NGOs and other stakeholders,
EU membership. For these reasons
through our 39 National Councils
we conclude that leaving the EU will
and 34 International Associations,
be a historical mistake of paramount
to work together, towards improv-
proportions, one whose effects will
ing the way that Europe works.
be felt sharply in the short term and
European Movement International
www.europeanmovement.eu
Rue Marie-Thérèse 21
B-1000 Brussels
T +32 (0)2 508 30-88
[email protected]
@EMInternational

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