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BReakout?

January 26th, 2013

A crosspost from Crooked Timber, speculating (from a non-expert perspective) on the possible consequences of a referendum vote in favor of a British exit (BReakout?) from the EU. I’ll start by thinking about two polar cases.

One is the Norway/Switzerland model. Initially, the only thing that changes is that Britain gives up its political membership of the EU and institutions like the European Parliament, Council and so on. Otherwise things go on as before – Britain pays into the EU Budget, is bound by current EU regulations and subsequent changes, keeps its optouts on things like Schengen, at least initially, and maintains its current access to EU markets, free movement and so on. This seems to work well enough for Norway and Switzerland, but doesn’t seem likely to satisfy UKIP or Tory Eurosceptics. And, of course, it depends heavily on the goodwill of the EU. Britain could seek to negotiate further exemptions from EU rules, but, the EU could scale back the existing British optouts over time.

At the other extreme, Britain could unilaterally abrogate all the existing arrangements and start over from the position of, say, Russia – a major EU trading partner without any special rights or obligations other than those agreed on a case by case basis. Prima facie, that would include applicability of the standard third-country tariffs in each direction, non-tariff restrictions applicable to goods not compliant with EU (or, in the opposite direction, UK) regulations, standard visa requirements for travel, residence and work, controls on capital flows and so on. It seems clear that this would be damaging for the EU, and disastrous for the UK. Still, it also seems clear that this is what the Eurosceptics have in mind, though typically with a liberal dose of wishful thinking about how easy it will be to negotiate FTAs, visa-free travel etc.

Is there an intermediate path? I can’t immediately see one. Presumably, there is a notion that Britain would stay in while the terms of exit were negotiated. But that could last many years, and would effectively amount to the Norway/Switzerland situation in the interim.

Any other thoughts on this?

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  1. moz does nothing
    January 26th, 2013 at 10:46 | #1

    My cynical side says they will find something that is worse than either of those alternatives.

    Perhaps some kind of border-blocking attempted repudiation if Schengen that isn’t accepted by the EU, leading to a cycle of retributive closings of go-slows. Even funnier from the outside would be if the French abruptly decided that chunnel anti-refugee measures were the UK’s problem. Suddenly Poles would probably seem like a problem from the good old days.

    The other nasty would be a tax haven clampdown, again with the possibility of retribution – I think the EU has its havens, the UK has its havens, and if one side withdrew recognition of the relevant loopholes from the other side’s havens it could all get very messy very quickly.

  2. Ikonoclast
    January 26th, 2013 at 11:24 | #2

    I rather feel that the UK’s problems will remain serious whether or not it belongs to the EU. It is in the grip of severe neoliberalism or “zombie economics”. It has high unemployment and the wrong policies to deal with that (which follows from the neoliberal orientation). It has a high exposure to the global financial economy and when that tanks again, little Britain will be “Big Iceland”.

    The EU itself is highly dysfunctional and “zombified” by neoliberalism so leaving it would be a good thing for any country. Leaving it would be a sign of departure from neoliberal policies and of a return to currency sovereignty (for most members). However, in Britain’s case, even though they retain currency sovereignty, there is so much else that is wrong in the UK that merely leaving the EU won’t help them much.

  3. January 26th, 2013 at 17:03 | #3

    From my far distant and possibly horribly ill informed viewpoint, it seems that the only real current problem with the EU is the Euro, and the UK doesn’t have the Euro so it shouldn’t have a major problem with being in the EU. But, for for some strange reason, the UK has decided to inflict upon itself all the problems of having the Euro for no good reason. So now it appears that the UK Euroskeptics seem to think that leaving the EU will solve their like being on the Euro problems, which they never needed to have in the first place because they’re not on the Euro.

    Or to put it another way, the UK went to their friend’s house and saw them smashing themselves on the heads with hammers, and so decided to pick up a hammer and start smashing itself on the head with it. And now the UK has decided that the cure for their headache to to leave the house rather than to stop smashing themsleves on the head with a hammer.

  4. alfred venison
    January 26th, 2013 at 17:23 | #4

    maybe not an intermediate path as you mean, but how about england votes to leave the eu, while scotland votes to leave the uk & remain in the eu.

    how unpopular is the eu in scotland versus england? what’s the position of the scottish national party on eu membership for scotland versus the position of the unionist parties? presumably the positions of the unionist parties in scotland would be the same as their counterparts in england. is there scope in scotland for nationalists to differentiate their cause in the independence referendum, by arguing that a vote for independence is a vote (among other things) for scotland to make its own choice on eu membership? whether or not england votes first or whether or not england votes to withdraw.

    all bets depend on the timing of the two votes, which goes first. scotland’s referendum on uk membership is slated for autumn 2014, while the date of england’s referendum on eu membership is uncertain at this time.
    a.v.

  5. Jordan
    January 26th, 2013 at 18:31 | #5

    As Ronald Bark aptly described situation with UK, it shows the forces of unity that SOros described 6 months ago swithced to forces of disunity and protectionism at the time Merkel decided to put burden of saving banks on sovereign’s back. The forces that are pulling EU appart are now stroger and that shows on UK attitude. At the same time EU became blame everything on object.

    But if you listen to what younger generations compalin about is about EU not being enough united. They complain about administrative obstacles for interstate cooperation and entrepenuership, even administrative problems for marriages between differing nationals. They take EU as a single country now. Young generations swallowed all propaganda about that shiny object EU and invested in it, while older generations of leaders do not want to give away percieved sovereignity as national protection of their national signature. But it is a power play to step into unity with better starting point.

    EU can not survive financial crisis without united bank insurance under one central bank which they got agreed upon but implementing it would be another matter. National leaders want their percieved sovereignity back even tough it is gone by now.
    EU can not last without united financial insurance like other federations have and UK sees that and does not want to give its own central bank independence up. They want to make sure that CB they are under can issue bonds and print money.

    EU also can not survive without united retirement scheme which will somewhat equalize living standards and provide for constant capital flow into les developed areas just as every country has. EU can not survive united currency area while attempting to behave as it is not under such constraint or advantage, depends how who sees it. Change always make loosers who fight the change while beneficiaries of change go forward.

    EU also needs standardised education which they go wrong way about implementing it, they are doing it by privatization of educational systems that will enforce in commoditisation mentality of everything. Croatia is strugling with that change right now.

    EU also needs united medical system with universal insurance coverage but that can wait. Also traffic laws will have to be standardised. NATO is allready covering millitary aspect of a united state. Judiciary is united allready too.
    I think i counted almost every aspect of state that have to be present in a united con/federation in order to survive long term

  6. January 26th, 2013 at 21:58 | #6

    Who cares?

    The Corporation Of The City Of London will screw everyone else (except of course their friends on Wall Street and elsewhere) and if that means destroying lots of people or being a dog in a manger, then tough! (In the neo-con/fascist view).

    The genuine people of Egypt have decided to get active again in Tahrir (8 dead so far). We, in the flabby and weak-minded “West” will just sit back and let our countries be destroyed by this zombie system for how long? Indefinitely, apparently.

    Oi, Oi, Oi!!!

  7. Jim Rose
    January 27th, 2013 at 08:20 | #7

    he EU is a free trade club, which is
    1. Members cannot impose tariffs and other restrictions on the imports from other member states, and
    2. members have a considerable degree of economic sovereignty

    Prior to forming the EEC, the original members had labor productivity that was only half that of the United States for over 60 years with no catch-up.

    In the 36 years after forming what became the common market, those 6 countries caught up with the US in labor productivity. The factor leading this catching up was an increase in the efficiency with which resources were used, not changes in capital/output ratios.

    The UK and other EU countries that joined the common market in 1973 also caught up significantly in terms of productivity subsequent to joining.

    The UK will never join the Euro. Cameron is strutting to stop bailing out Greece and Spain and other gambling for redemption, and a German-led bailouts.

    the same thing that will sink Scottish independence will sink a UK exit from the EU, which is the reintroduction of border controls.

    HT: Stephen Parente

  8. alfred venison
    January 27th, 2013 at 13:06 | #8

    establishing & maintaining international borders is the sine qua non of a national independence movement – scottish independence will not fail because the scots are antsy about border control. an independent scotland’s membership in the eu may become problematic, but not because scotland won’t want eu membership, but because spain is antsy about catalonian secession.

    if england withdraws from the eu and assumes whatever stance, swiss/norway or russian, english speaking corporations, wanting an english speaking base with easy access to europe, may well find an independent scotland within the eu a good fit. -a.v.

  9. Jim Rose
    January 28th, 2013 at 18:13 | #9

    The Scottish first minister also just says Scotland will have automatic membership of the EU. The EU commission says they will have to apply to be a new member.

    Likewise, the Scottish nationalists deny the requirements of the Schengen Agreement.

    A separate Scotland would need to negotiate its own opt-out from the Schengen Agreement. Schengen bans passport controls free European travel between those members who are part of the Agreement, and those who are not such as the UK.

    Several other EU countries will want to make it hard for Scotland to join to discourage independence movements in their own countries.

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