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Why a ‘Hard’ Brexit Could Be Inevitable

Submitted by Taps Coogan on the 19th of January 2018 to The Sounding Line.

If there is a novelty in the ‘European Project’ it is in the idea of using the offer of free trade as the means to exert direct governance over other countries.

Until now, the degree of market access that the EU provided European countries has been proportional to the degree of sovereignty that countries surrendered to the EU. In order to get full access to the EU’s 511 million person market, European countries have either had to join the EU or adopt a deal that meant complying with EU rules, regulations, immigration policies, submitting to EU courts, and making financial contributions to the EU’s budget.

Countries not in the EU such as Norway, Iceland, and Lichtenstein have acquiesced to all these demands in order to get access to the EU market. In fact, Norway pays more per capita to the EU than the UK. Effectively, the only difference between Norway and a country in the EU is that Norway doesn’t have any meaningful representation in the EU.  It isn’t much different in Switzerland. The Swiss have accepted all but the ECJ’s jurisdiction. As a result of this modest assertion of judicial independence, their access to the EU’s market has been somewhat curtailed, particularly for their banking sector.

Access to the EU’s market isn’t just the glue that holds the EU together, it is the very essence of the EU. Every European country has its own central government, police force, education system, healthcare system, social system, military, and most are in NATO. The EU only offers access to the common market and in some cases development money. For that, a country must give up its sovereignty. That is the fundamental EU bargain.

This dynamic has made it particularly difficult for the EU to established free trade deals outside Europe and will make a so-called ‘Hard Brexit’ virtually inevitable. Countries like Canada, South Korea, or the US would never accept such terms in return for market access. Yet after a decade of negotiations and under great pressure to prove that it could establish a trade deal, the EU has now granted access to its markets to Canada and South Korea via two new trade deals. In doing so, it raises the question of why European nations have to give up so much to get similar access. While the access Canada and South Korea enjoy is more limited than the access granted to Norway or Switzerland, in the case of Canada it still eliminates 98% of tariffs on Canadian-EU trade. Are Switzerland and Norway really getting that much more in return for all of the concessions that they make to the EU?

Switzerland is asking itself exactly those questions and is now pushing for a referendum on even less integration with the EU. Another effort is underway in Switzerland to end its participation in the EU common immigration area. Norway may follow suit.

Given all of this, non-EU European countries such as Norway and Switzerland are watching the EU’s negotiations with the UK over Brexit very closely. As Statista’s Niall McCarthy recently notes:

“The following infographic is based on that, and it shows how Theresa May’s demands are incompatible with the current relationship Norway enjoys, along with Iceland and Liechtenstein. The UK is demanding to be free of European courts, trade rules, migration, regulation and financial contributions. That would also mean it couldn’t possibly use Switzerland as a future template, along with Ukraine and Turkey. That means it would be forced to seek a deal with the same type of relationship as that agreed upon with Canada and South Korea. If there is no deal, the UK will be forced to turn to the WTO.”

Infographic: Why Hard Brexit Could Be Inevitable | Statista You will find more statistics at Statista

The problem with the UK adopting the Canadian or South Korea trade deal approach is that it wouldn’t grant the UK’s economically important financial industry free access to the EU. On the other hand, the EU simply cannot and won’t strike a deal that grants the UK the level of market access enjoyed by Switzerland and Norway without all of the strings attached.

The only two outcomes that are possible are the UK leaving in name only by adopting a bad deal like Norway or Switzerland, or the UK leaving without a trade deal or with a minimal Canada style trade deal that doesn’t cover its services and financial industries. Neither option is likely to thrill the British but exports to the EU only represent about 10% of the UK’s financial and insurance service industry revenues. The UK exports nearly as much in financial services to the US as the entire EU. When push comes to shove, it is hard to imagine 10% of financial services revenues taking priority over the country’s sovereignty, the opportunity to free itself from anti-competitive EU regulations, and the chance to establish independent trade deals around the world.

It seems unlikely that a Norway style Brexit-in-name-only deal would be politically sustainable in the UK, and thus a Brexit that doesn’t include full market access, a so-called Hard Brexit, is the most likely outcome.

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January 19, 2018 Taps Coogan

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Robert H. Burt
Robert H. Burt
2 years ago

This PC belongs to me, not to you. That’s why it deletes your cookie every time I leave your website. The information contained on my computer belongs to me, not to you. If you want to buy it, send me a check. Otherwise forget it.

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Taps Coogan
Author
Taps Coogan
2 years ago
Reply to  Robert H. Burt

Maybe you should read our privacy policy before posting such a completely inaccurate comment. Unlike most websites, The Sounding Line voluntarily has chosen to disable all targeting advertising and does not serve third party tracking cookies to any visitors out of respect for the privacy of our visitors. Forgoing targeted ads comes out of our pocket, exclusively for your benefit. You clearly don’t know what cookies are or how they work but every website uses at least some cookies to ensure basic security and functionality. There is a difference between these cookies and third party tracking cookies that “take information… Read more »

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RoNe
RoNe
2 years ago
Reply to  Taps Coogan

Hear ya, brother.

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Romford_Dave
Romford_Dave
2 years ago

First refreshingly well written and informative article I’ve read on Brexit in a long long time (well since 2016, but it feels a whole lot longer…) Glad I followed the link from ZH now

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Taps Coogan
Author
Taps Coogan
2 years ago
Reply to  Romford_Dave

Thank you for that kind comment

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Mark Webb
Mark Webb
2 years ago

History will show, that the EU cannot survive with out the UK….

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johan
johan
2 years ago
Reply to  Mark Webb

I’m not even convinced the UK will leave the EU. This is hard, that is non-negotiable, the EU will try to make it very difficult so as to discourage other nations from having similar ideas of leaving. It is a complete disaster.

In the end it is possible that they will ask the UK to vote again.

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Mac
Mac
2 years ago

The only thing guaranteed to happen is that the British will agree to something and then later renege on it. As usual it’ll be the Irish who’ll suffer the most as a consequence of Perfidious Albion.

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protocatholic
protocatholic
2 years ago
Reply to  Mac

Northern Ireland is a pox on the rest of the “united kingdom”. Those on the mainland would happily give it up but the Irish don’t want it either. This is what happens when you give in to terrorists and allow them to form a government. Oh hang on, there isn’t one at the moment and it’s all London’s fault as well.

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Taps Coogan
Author
Taps Coogan
2 years ago
Reply to  protocatholic

Reminder: I have no interest is playing speech police, but please be polite. If you can’t express your point politely, this isn’t the place to share it.

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