Brexit is the easy bit

Opinion piece (Financial Times)
Jean-Claude Piris
12 January 2016

With David Cameron promising British voters a referendum on EU membership as soon as this summer, the practicalities of leaving are every bit as important as the “longstanding and sincerely held” principles that the prime minister attributes to Eurosceptics.

Departure will not be easy. The Lisbon treaty allows for two years of negotiations before withdrawal; Britain would probably need longer as it would face at least four significant legal challenges.

First, it would have to adapt legislation. The UK would be liberated from all EU law, including Europol and the European arrest warrant. National laws adopted to implement EU directives would have to be reviewed and abrogated, modified or retained. EU treaties with third countries would cease to apply to the UK.

Second, the UK would have to decide what to do about the 2m Britons living in EU countries who would lose the advantages of the single market and EU citizenship. Those with permanent residency in EU states could stay, thanks to the European Convention on Human Rights; others may have to leave. Agreements with the EU would be needed to protect citizens and companies but the UK would have to negotiate with the EU as a whole rather than with each of the 27 states. If it imposed restrictions on the rights of EU citizens to live in the UK (east Europeans, say), Britons would face equivalent difficulties across the entire union.

Third, Britain would have to try to preserve its trade with the EU. It would need to adopt new customs laws and tariffs and re-establish controls at borders (including with Ireland). Under World Trade Organisation rules, the UK would have no more access to the single market than would China. Goods and services would be subject to EU tariffs. In some competitive markets, such as car parts, these would damage UK exporters. An agreement with the EU would, therefore, be needed urgently. Access to the single market would come at a cost — financial and political. Norway and Switzerland make significant payments to the EU budget. The union insists, too, that agreements giving access to its internal market ensure a level playing field and are matched by free movement of labour.

Fourth, Britain would have to develop trade with the rest of the world. EU agreements on goods or services (such as financial services) cover about 60 countries and 35 per cent of world trade. These would no longer apply to the UK. Britain would benefit from the WTO’s market access rules — but these are modest, especially on services, which account for a significant chunk of UK exports. Britain would thus need to negotiate agreements from scratch, yet it has employed no trade negotiators since 1973. Reaching deals that are as beneficial for the UK as those that exist for the EU would be hard because the union is the world’s biggest exporter and importer of goods and services and so enjoys huge bargaining power.

In the event of Brexit, therefore, the UK would find itself stuck between a rock and a hard place, struggling to reconcile its political and economic interests. It would have to choose to be bound by EU single market laws or face reduced access to a vital market. Until agreements are reached — which could take up to a decade — it would be beset by economic uncertainty.

The consequences of leaving would reach beyond the UK economy. For Europe’s role in the world, the political costs would be high. Those who decide — the voters — should consider carefully whether the cost of Brexit, in terms of prosperity and security, is one they are prepared to pay.

The writer, a former director-general of the Council of the European Union’s Legal Service, is author of ‘If the UK votes to leave’, published by the Centre for European Reform.