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Ingraphics:BritainsreferendumonEUmembership

AbackgroundguidetoBrexitfromthe
EuropeanUnion
Feb24th2016,13:18byTheDataTeam
ONFEBRUARY20thDavidCameron,Britain'sprimeminister,setJune23rdasthedatefora
referendumonthecountrysmembershipoftheEuropeanUnion.Hisannouncementfolloweda
protractedrenegotiationofthecurrentconditionsofBritainsmembershipatasummitinBrussels.The
moveimmediatelypromptedgovernmentministerstodeclaretheirbackingforeithertheremainor
leavecampaigns.MrCameronstronglybelievesinthebenefitsofcontinuedEUmembership,buta
handfulofhighprofileMPs,includingjusticesecretary,MichaelGove,andLondon'smayorBoris
Johnson,havepledgedsupportfortheoutcampaigners.Inearly2015thechancesofBrexit
BritaindepartingfromtheEuropeanUnionseemedremote.Today,largelybecauseofEuropes
migrationcrisisandtheinterminableeuromess,thepollshavenarrowed.Somerecentsurveyseven
findamajorityofBritonswantingtoleave.
MrCameronishimselfpartlyresponsible.Althoughhe
hasrepeatedlyurgedhispartytostopbangingonabout
Europe,hisEuroscepticbackbenchers,scaredwitlessby
theriseofNigelFaragesvirulentlyantiEUUK
IndependenceParty(UKIP),haveconstantlyhassled
himtoadoptatougherlinewithBrussels.Hisresponse
hasgenerallybeentoappeasethem.Oneearlymorselhe
threwthemwasthe2011EuropeanUnionAct,which
requiresanyEUwidetreatythatpassessubstantivenewpowerstoBrusselstobeputtoaBritish
referendum.Thatsoundedlikeabigconcession,butnonewtreatiesweretheninprospect.InJanuary
2013,MrCameronpromisedthat,iftheTorieswerereelectedinMay2015,hewouldrenegotiate
Britainsmembershipandholdaninoutreferendumbytheendof2017.
FollowinghiselectionvictoryinMay2015,theprimeministerclaimedtohaveembarkedona
renegotiationtofixwhathesaysiswrongwiththeEU.Yethewasdeliberatelyvagueaboutwhat

changeshe
wants,partly
forfearthat
ifhis
shoppinglist
leaks
Eurosceptics
inhisown
partywill
rubbishitas
inadequate.
Atthe
European
summiton
October
15th16th,
however,he
wastoldby
hisfellow
headsof
government
toproducea
listofprecise
demandsin
Novemberif
therewasto
beany
chanceof
the
negotiations
being
concluded,asheatonetimehoped,attheDecemberEuropeansummit.Hedidproducealistof
demandsbutadealstilleludeshim.Theprimeministerisnowhopefulofgettinganagreementbythe
endofFebruary.
Thetwocampaigns,"BritainStrongerinEurope"and"VoteLeave",thatarelikelytoformtheoffical
lobbygroupsforeachsideinthereferendumhavesetouttheirpositionsonthemaintopicsthatwill
formthebasisforthereferendum(seetable).
BritainsuneasyrelationshipwiththeEuropeanUnionhasalonghistory.In1950only10%ofBritains
exportswenttothesixcountriesthatformedtheEuropeanCoalandSteelCommunity(ECSC).

ConcernsabouttheCommonwealth,thewelfarestate
andsovereigntyledittomisstheboatattheMessina
conferencein1955,whentheECSCcountriesdecidedto
formtheEuropeanEconomicCommunity,theprecursor
oftodaysEU.Instead,in1960Britaincajoledsixmuch
smallerEuropeancountriesintoformingtheEuropean
FreeTradeAssociation(EFTA).Butin1961aTory
governmentunderHaroldMacmillan,impressedbythe
EECssuperioreconomicperformance,decidedtosubmitthefirstofseveralBritishapplicationsto
join.Britaineventuallyjoinedin1973underEdwardHeath.
BritishtradewithotherEUcountrieshasrisenrapidly
since1973,thoughastheEuropeaneconomyhas
slowed,itsshareofthetotalisdeclining(theEUnow
takesover51%ofBritishexportsofgoods,andcloseto
45%ifservicesareaddedin).YetwhetherBritainisinor
out,theEUwillbeakeypartner.Fornonmemberssuch
asNorwayorSwitzerland,tradewiththeEUmakesupa
biggershareofthetotalthanitdoesforBritain.The
effectsofEUmembershipontradepatternsaredifficulttomeasure,butJohnSpringfordoftheCentre
forEuropeanReform,aLondonbasedthinktank,andcolleagueshavecarriedoutamodelling
exercisewhichconcludedthatBritainstradewiththerestoftheEUwas55%greaterthanitwould
havebeenifoutside
RegulationisperhapstheEuroscepticsbiggestbugbear.
WhentryingtoshowhowmuchBritainmightgainfrom
leavingtheEU,theytotupallthecostsofEUregulation,
assertthattherearenobenefitsfromitandassumethat,
afterBrexit,thewholelotcouldbescrapped.TheOECD
clubofmostlyrichcountrieshascomparedtheextentof
regulationinproductandlabourmarketsamongits
membersandfindsthatBritainisamongtheleast
regulatedcountriesinEurope.Indeed,BritaincomparesfavourablywithnonEUcountriessuchas
America,AustraliaandCanada.Andthereislittletosuggestthat,ifitweretoleavetheEU,itwould
tearupmanyrules.Moreover,ifapostBrexitBritainwantedtoretainfullaccesstothesingle
Europeanmarket,itwouldalmostcertainlyhavetostickwithmostoftheaccompanyingrules.
WhataretheoptionsifBritaindecidedtoleavetheEU?Mostofthealternativestofullmembershipare
unattainable,unappealingorboth.TheEUwillnotdisappearasaninstitutionorabigmarket.Apost
BrexitBritainwillhavetoformasetoftradingandinstitutionalrelationshipswithit.Theuncertainty
isoverwhatthesewouldbeandhowlongtheymighttaketonegotiate.

Broadly,therearefivemodelstochoosefrom.Thefirstis
tojointheEuropeanEconomicArea,asolutionadopted
byallbutoneoftheEFTAstatesthatdidnotjointhe
EU.ButtheEEAnowconsistsofjustonesmallcountry,
Norway,andtwotiddlers,IcelandandLiechtenstein.
ThesecondoptionistotrytoemulateSwitzerland,the
remainingEFTAcountry.ItisnotintheEEAbutinstead
hasastringofover20majorand100minorbilateral
agreementswiththeEU.ThethirdistoseektoestablishacustomsunionwiththeEU,asTurkeyhas
done,oratleasttostrikeadeepandcomprehensivefreetradeagreement.Thefourthissimplytorely
onnormalWorldTradeOrganisation(WTO)rulesforaccesstotheEUmarket.Thefifth,preferredby
mostEurosceptics,istonegotiateaspecialdealforBritainalonethatretainsfreetradewiththeEUbut
avoidsthedisadvantagesoftheothermodels,butitwouldbeextremlyhardorevenimpossibleto
negotiatethisinanatmosphere,postBrexit,thatwouldhardlybeawarmone.

Whosin,whosout

CountrygroupingsofEurope

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none

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CYPRUS

InfactBritainhasinfluencedtheEUforthebetter.TheEuropeanprojectitjoinedin1973hadobvious
flaws:ludicrouslyexpensivefarmandfisheriespolicies,abudgetdesignedtocostBritainmorethan
anyothercountry,nosinglemarketandonlyninemembers.ThankspartlytoBritishpoliticalclout,the
EUnowhaslesswastefulagriculturalandfisheriespolicies,abudgettowhichBritainisamiddlingnet
contributor,aliberalsinglemarket,acommitmenttofreertradeand28members.Likeanyclub,it
needsreform.Buttheworstwaytoeffectchangeistoloiterbytheexit.
Readmore:OurrecentSpecialReportonBritainandEurope
(http://www.economist.com/news/specialreport/21673505thoughbritainhasalwaysbeen
ratherhalfheartedabouteuropeanunionits)