UK told to seek bilateral trade agreements in case of Brexit

A new report warns that it could take Britain years to strike bilateral trade deals in the event of a Brexit in the 23 June referendum.

By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

29 Apr 2016

The report, by the UK-based think tank Open Europe, sets out recommendations for possible policies in the fields of trade, immigration and regulation, which it says will be required in the event of a Brexit in order to offset the costs and maximise the economic benefits of leaving the EU.

The findings, it states, have important implications for the type of relationship the UK should seek with the EU post-Brexit. 

"Realising the potential economic gains we've identified - notably via immigration and deregulation - means a relatively high degree of flexibility from the EU," it says.

It goes on, "The confines of a Norwegian or Swiss-style arrangement would not deliver this. As such, the best option would be for the UK to pursue a comprehensive bilateral free trade agreement, aimed at maintaining as much of the current market access as possible while also adopting a broader liberalisation agenda over the longer term."

The report, however, goes on to warn, "Of course, this is easier said than done."

On the thorny and much-discussed issue of trade, it says, "The first step would be to try to strike a free trade agreement with the EU and to maintain the FTAs Britain has with other states via the EU. As we outlined in our previous report, this is not an easy task and could take many years. 

"The emerging consensus is that - taken by itself - there would be a small negative economic impact from leaving the customs union and the single market in the long run.

"The second step would be to build FTAs with other states to try to offset this effect."

On another key issue, immigration, it states, "While there would be political pressure to reduce immigration following Brexit, there are several reasons why we believe headline net immigration is unlikely to reduce much."

Turning to regulation and competitiveness, it states, "There is certainly scope for deregulation outside the EU, though maybe not as large as assumed. We estimate a politically feasible deregulation agenda could lead to permanent gains of 0.7 per cent of GDP - with savings coming mostly from three areas: social employment law, environment and climate change and financial services. 

"But even such a scenario would involve difficult choices such as scrapping renewable energy targets and deregulating social and employment laws."

Open Europe says, "This paper is not an endorsement of Leave or Remain, but an attempt to flesh out some of the policies which we believe the UK may reasonably have to adopt in the event of a Brexit in order to offset the costs and maximise the economic benefits."

Meanwhile, 'economists for Brexit', a group of economists led by Margaret Thatcher's former adviser Patrick Minford, have released a report arguing that leaving the EU's single market could raise output by four per cent in a decade and deliver a 'Brexit dividend'. 

Minford bases his analysis on the UK leaving the EU, relying on the World Trade Organisation's framework and unilaterally dropping all tariffs. 

He argues that, "Over time, if we left the EU, it seems likely that we would mostly eliminate manufacturing, leaving mainly industries such as design, marketing and hi-tech. But this shouldn't scare us."

 

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