Brexit: what the UK government hasn’t explained
by Nicola Sturgeon has said that she’ll be exploring all available options to protect Scotland’s place in Europe. Democracy, economic prosperity, social protection, solidarity and influence – these are the vital interests that the Scottish Government will seek to safeguard by keeping Scotland in Europe.
The importance of protecting our economic interest is underlined by new Scottish Government analysis on the impact of Brexit. This shows that leaving the EU could reduce Scottish tax revenues by between £1.7 billion and £3.7 billion a year by 2030. For the Scottish economy as a whole, it could cost up to £11.2 billion a year in the long term.
For Scotland to continue to benefit from all of the economic and social gains we currently enjoy, it is clear that full membership of the EU’s Single Market – not just access – must be protected. Get more information on why membership of the single market is important here.
By contrast, while Theresa May has said that “Brexit means Brexit”, it’s not at all clear what that means. In truth, it’s little more than a soundbite that lacks any clear sense of direction.
To make things clearer, here’s a summary of the approaches taken by different countries outside of the EU.
EU membership
Until the UK leaves the EU, it is an EU Member State.
That means businesses can buy and sell goods and services in the EU Single Market free from tariffs or other regulatory barriers.
People in Scotland can travel, work or study anywhere within the EU visa free.
While the UK contributes financially to the EU, Scotland receives significant funding from the EU to support economic growth and jobs, tackle poverty, support farmers, support our fishing industry, and support university research.
As well as implementing all EU laws, the UK is represented at all levels and has a say in the laws the EU enacts and the decisions the EU makes.
European Economic Area (EEA)
Norway is in the EEA but not the EU. EEA countries are not part of the EU Customs Union.
That means Norway can trade tariff-free with EU countries on most goods and services, with the exception of agriculture and fisheries. However, by not being a member of the customs union, businesses face extra administrative costs in trading with the EU.
Norway also has no access to the EU’s foreign trade agreements with the rest of the world.
Norway is obliged to adhere to all the rules of the EU Single Market, including freedom of movement of people, competition policy, financial services rules and environmental law, and makes a significant financial contribution to the EU budget too.
In the period 2007-2014 it contributed around 96% of the EEA-EFTA contribution to EU programmes – approximately €1.6 billion.
COST:
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A reduction in Scottish tax revenues of £1.7 billion (Scottish Government, 2016)
- A reduction in the employment level of 30,000 jobs (Fraser of Allander Institute, 2016)
European Free Trade Association (EFTA)
Switzerland is in EFTA, but not the EU and is not part of the EU customs union.
Swiss relations with the EU are governed not by an overarching Treaty, but by a large number of bilateral agreements.
Switzerland can trade tariff free with EU countries on most goods and services, with the exception of agriculture. However, like Norway, by not being a member of the customs union, businesses face extra administrative costs when it comes to EU trade.
As in the case of Norway, access to the EU Single Market requires Switzerland to adhere to EU Single Market rules, including the free movement of people. With no representation in the EU, Switzerland has no say in deciding EU law.
Switzerland is obliged to accept freedom of movement and has made a financial contribution to the EU of CHF 1.302 billion (around €1.2 billion) since 2008.
Switzerland has no access to the financial services passport, so firms cannot operate across the Single Market under a single licence. That means additional administration costs.
Membership of EFTA requires the agreement of all four current member states, including Norway. Norway’s European affairs minister, Elisabeth Vik Aspaker has said: “It’s not certain that it would be a good idea to let a big country into this organisation. It would shift the balance, which is not necessarily in Norway’s interests.”
Without membership of EFTA, the UK could not be a member of the EEA.
COST:
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A reduction in Scottish tax revenues of £3 billion (Scottish Government, 2016)
- A reduction in the employment level of 1-2 per cent (Fraser of Allander Institute, 2016)
Bilateral agreement/Customs Union
Turkey, Monaco, San Marino and Andorra are all in a “Customs Union” with the EU, but not part of the EEA.
That means that no tariffs or quotas are applied to most – but not all – exports to EU countries. There is also a requirement, however, that these countries apply EU external trade policy (tariffs)on imports from non-EU countries.
Firms exporting into the EU must meet EU rules and standards in the areas that are covered by their agreement with the EU.
With no representation in the EU, countries following this model have no say in deciding EU law or in the external trade deals they must abide by.
Outside the EU with no trade agreement
With no specific agreement with the EU, only “World Trade Organisation” (WTO) rules will apply.
This means that the UK would be outside the EU’s customs union and Single Market. Businesses would be required to pay WTO-level tariffs on goods and services exported to EU countries.
While the UK is already a member of the WTO, it would need all other WTO members to agree on how it will take on the rights and obligations which it has formally taken as part of the EU.
This process would need to be completed before the UK is assured of its rights to access other WTO members’ markets. However, these negotiations cannot begin until the EU “exit” negotiations are concluded.
COST: