Roundup: UK's options outside EU look limited: expert

The European Parliament (EP) debated the recent EU-UK deal Wednesday in Brussels with Donald Tusk, President of the European Council and Jean-Claude Juncker, President of the European Commission.

But while most of the main EP party leaders welcomed the agreement, the tenor of that debate, and previous ones, was notable by an absence of serious discussion of what the UK's relationship with the EU would be should Britain vote to leave the union in the upcoming referendum on June 23.

Extravagant claims are bound to be made on both sides of the argument in the run up to the referendum. However, rather lost in the bluster is a recent assessment of Britain's options outside the EU written by Jean-Claude Piris, published by the Centre for European Reform, a London-based think-tank.

Piris' opinion counts. As the former head of the Legal Service of the Council of the European Union, which represents EU member state governments, he has spent a large part of his career at the heart of the club.

How individual states - inside and outside the EU - work with Brussels is his metier. In short, Piris says none of the options available to the UK look particularly attractive.

A common argument among many British eurosceptics is that Britain could negotiate a special status of "half-membership," whereby the UK would remain a full, voting member of the single market, but ditch other EU policies. However, this would require the union's existing treaties - which allow no such special status - to be revised, which Piris says is not viable at the moment, probably even less so in a toxic post-Brexit atmosphere.

So what options would be available to the UK outside the EU? One simple answer would be for Britain to join the European Economic Area (EEA) - the so-called "Norwegian" option. Britain would then be outside the common agricultural and fisheries policies.

"Vote Leave," one of the main campaign groups in favor Brexit argues on its website that Britain will "negotiate a new UK-EU deal based on free trade and friendly cooperation, adding "there is a European free trade zone from Iceland to the Russian border and we will be part of it."

However, Piris argues that outside the EU Britain's economic relationship would not change significantly. Moreover, the UK would still pay nearly as much into the EU budget as it does today.

Per head of population Norwegians pay roughly 90 percent of Britain's existing net contribution each year, so the much-discussed financial savings that Britain would make by cancelling its membership would be a chimera.

Free movement of labor would continue, and the UK would still have to apply the single market's rules and regulations without having a say in how they are written. Officials in Oslo have described Norway's relationship with the EU as "government by fax machine."

The alternatives would involve negotiating a withdrawal treaty, something which has never been done before and therefore impossible to predict how it would look.

A customized withdrawal treaty would be a possibility, Piris believes. The best possible outcome for the British, under this option, would be something like the Norwegian option but without EEA membership. In this scenario Britain could gain access to the single market only in those areas where it was prepared to accept EU rules.

However, it seems highly likely that the EU institutions - and many member states through the Council of Ministers - would not accept the UK's right to restrict free movement of labor and would insist on Britain continuing to make payments into the EU budget.

The so-called "Swiss option" is unlikely to be on offer. Switzerland has negotiated a series of bilateral agreements with the EU. The country is part of the single market for goods, but not services, a situation that would be very costly for the City of London's financial hub. The EU is today very unhappy with the relationship struck with the Swiss, says Piris, because it has to negotiate constantly to make sure that Swiss rules are equivalent to the EU's. So the prospect of negotiating a similar arrangement with a country several times larger than Switzerland is almost certainly off the table.

Britain could join the EU's customs union, like Turkey. This would mean accepting the EU's external tariffs, but again with no say on setting those tariffs. The UK would then not face other tariffs in exporting to the EU, and it would have access to the single market in goods.

But, Britain would still have to sign up to all the relevant EU rules, and services, as in the Swiss option, would not have free access. On top of this Britain would not benefit from free trade agreements (FTAs) that the EU negotiates with other parts of the world, and would instead have to negotiate its own FTAs from a much weaker position.

A separate FTA with the EU is one of the more likely options, Piris writes. But the main benefit of most FTAs is merely tariffs that are lower than those set by the World Trade Organisation (WTO). Most FTAs do not cover services or public procurement. So such a deal would also be a step into the unknown as there is no existing template. Piris says it is likely that other member states would insist on the adoption of new EU rules, demand payments into the EU budget and still allow the free movement of labor in exchange.

Britain could simply trade with the EU under WTO rules. Vote Leave argues that Britain would regain an independent voice in world trade negotiations with independent voting rights at the World Trade Organisation.

Piris points out that the WTO sets upper limits on the tariffs that countries can impose, so British exports to the EU would be subject to the EU's common external tariff. But as the WTO has made little progress in freeing up services, the City of London's access to the EU market would still remain uncertain. Endit