Factsheet 4 - No alternative to EU membership offers better balance of pros and cons
Overall, business believes that leaving the EU would be bad for them and bad for Britain
- 67% of CBI members think that exit would damage their access to EU markets
- 65% think that the UK’s ability to influence policies that affect their business would diminish
- 75% think that UK-wide foreign direct investment would fall
- 82% think that the UK’s ability to participate in EU supply chains would decline
- 59% think that the UK’s international competitiveness would decline
‘Going it alone’ via the WTO would reduce market access
- The UK would not automatically retain its current access to the EU market upon exit – this would have to be re-negotiated. Without EU membership or an FTA agreement the UK would face new tariffs on 90% of its exports by value to the remaining European Union under ‘most favoured nation’ status.
- Upon exit, the UK would no longer benefit from any of the EU’s trade deals with the likes of South Africa, Colombia, South Korea, Norway, Mexico – or the possible future deals with the United States and Japan.
- The UK would be negotiating any new trade deals on the basis of having 3½% of world GDP, rather than as part of a bloc with 23% of world GDP.
‘One step removed’ – the Norway option would reduce UK influence on the rules it would have to follow
- If the UK joined Norway in the European Free Trade Association (EFTA) and the European Economic Area (EEA), the UK could gain access to most provisions of the Single Market.
- However, in all the areas where the UK had access, all new EU rules would have to be implemented into UK law (and existing rules such as the Working Time or Agency Workers Directives maintained). The Common Agricultural Policy and Common Fisheries Policy are not included – but market access in these areas would be lost as a result.
- EFTA/EEA states have no formal sway over Brussels decisions – no Commissioners, no MEPs and no Council votes – but must adopt its rules nonetheless.
- EFTA countries contribute to the EU budget. Norway is the 10th highest contributor to the EU.
- EFTA countries have the ability to strike their own trade deals, but the UK would have to start from scratch in negotiating access and with less to offer than the EU.
‘Pick and choose’ – Switzerland has more flexibility but at the cost of market access
- The first round of trade deals between the EU and Switzerland took nine years to negotiate and implement and might take longer for the complex UK economy if Britain sought to emulate Switzerland.
- Switzerland has some flexibility in negotiations with the EU – it has kept out of the Common Agricultural Policy – but it has not been able to secure a deal on free trade in services, and has had to accept free movement of labour in most cases.
- Switzerland has even less formal influence over EU rules than Norway. Although it can choose not to adopt new rules, it does so at the cost of decreasing its market access. In practice, the Swiss government rarely avoids implementing EU rules.
- Switzerland has signed an individual free trade agreement with China– but the deal is thought to have granted more market access for Chinese products being imported into Switzerland than vice versa.
‘Back to 1975’ – the ‘Turkey option’ provides limited market access and no influence over trade deals.
- If the UK joined Turkey in the EU customs union, it would prevent duties being imposed on most goods, but offers no action on non-tariff barriers such as divergent product regulations. Services are not covered by the customs union.
- The UK would have to abide by the EU’s international trade deals with no say in negotiations, as Turkey does today. And countries signing a free trade deal with the EU don’t have to grant access to Turkish exports, even though Turkey must effectively grant access to their exporters.
A bespoke UK-EU free trade agreement would fail to secure vital benefits
- The EU would have substantially greater clout than the UK in any such negotiation. The price of deep market access is likely to be regulatory cooperation, and the UK is likely to be at a relative disadvantage in the negotiation:
- The EU28 (excluding the UK) has a 445m population, compared to the UK’s 63 million, and it economy is almost seven times the size of the UK’s.
- The UK is more dependent on the EU for its trade than the EU is on the UK. Around half of the UK’s total trade is with the EU, while just 11% of EU trade is with the UK. The fact that Britain runs a deficit in exports with the rest of the EU is of much less relevance.