UK/EU Referendum: Are there alternatives to Membership?

Dear Editor, 

Within the next few months, the UK electorate will have to decide on the UK’s relationship with the EU. In February, the Heads of State of the EU Member States will discuss to what extent Cameron’s demands can be accommodated in a new settlement. In June (probably) the renewed relationship between the UK and the EU shall be put to the UK electorate in a yes/no referendum. This timing already suggests that Treaty change (i.e. to the TFEU) is out of the order – 4 months is nowhere long enough for 28 national parliaments to ratify the changes, and the Member States that are so constitutionally required to hold a referendum (even presuming that they all agree with the new compromise). It seems that any reforms would have to be legally enshrined as changes to secondary legislation. Such changes, however, require the consent of the European Commission and the European Parliament, which is difficult to be secured given their general pro-integration stance. It will remain to be seen to what extent Cameron’s demands can, and will, be accommodated by his European partners. 

Whichever settlement is agreed in Brussels in February, it will be for the British electorate to decide on its merits. This letter aims to briefly set out the alternatives to British membership in the EU, so as to inform this decision. If the British electorate votes ‘no’, and the UK leaves the EU, we can think of three possible scenarios for the relationship between the UK and the EU. It seems that the main objective of any new relationship would revolve around securing access to the EU’s internal market (crucial for many British industries, and particularly for the City of London), without having to follow the rules of Brussels that are perceived as problematic (free movement of persons, migration, budget, social policy etc). 

This first option could be called the ‘Norwegian option’. Norway is not a EU Member State, but does have access to the internal market. Like Liechtenstein and Iceland, it is part of the European Economic Area. If the UK were to leave the EU and join the EEA, it would secure access to the internal market (but the UK would also have to accept related rules, such as free movement of workers, citizens, social policy, and some budgetary commitments). This option does not allow for any individual negotiation between the UK and the EU, and would consist of the UK joining a pre-existing arrangement. The main problem with this approach is not only its lack of specificity, but also that the EEA states are policy-takers, not policy-makers. They cannot participate in the law-making process of the EU, but they have to follow the rules made by the EU institutions. This, naturally, generates significant democratic problems. This is less problematic for countries such as Iceland or Norway, which would not necessarily have much of a say either way. 

The second option is the ‘Swiss option’. The relationship between Switzerland and the EU is a bi-lateral international agreement. This approach has the main advantage that it can be tailored specifically to the needs of the UK and the EU, both in relation to the policy areas covered, the applicable rules, the institutional arrangements and the legal instruments that apply. In the Swiss case, there are a number of policy areas covered (namely free movement, access to the internal market, Schengen), and there is no requirement to implement new EU norms. This latter rule allows the Swiss Parliament to decide which new EU rules to implement and which not to. In reality, however, empirical research suggests that the Swiss Parliament over-implements new EU norms, out of the fear that – if Swiss national rules do not follow new EU market norms – Swiss companies will not be able to access the single market. In addition, the Swiss-EU bi-laterals contain a so-called ‘guillotine clause’, whereby in case one of the provisions is breached by either of the parties, the other party can suspend all agreements. This has led to a situation whereby the hands of the Swiss Parliament and electorate are tied by the initial agreement with the EU. The terms of that initial agreement, of course, to a large extent depend on the relative strength of the negotiation positions of the EU and the UK. It is obvious that the former is in a much stronger negotiation position, and it therefore seems very unlikely that the ‘Swiss scenario’ will lead to a significantly better relationship between the EU and the UK from the British perspective. Access to the single market while limiting migration; a lower budget transfer to Brussels but a veto on sensitive issues; limiting social rights legislation while pushing for liberalization of the services industries – such scenarios are simply unrealistic in a bi-lateral negotiation process that has to be ratified by each of the 27 remaining EU Member States. 

The third possibility is not having any specific agreement with the EU. The UK would be like the US, Uruguay or Uzbekistan. Its relationship with the EU would be covered by international agreements (such as the WTO) or a specific trade partnership (such as the currently negotiated TTIP). This option has the advantage of simplifying things: Westminster decides on everything – Brussels has no say on anything. A radical split from the EU may enhance democratic and civic engagement in the UK. Unfortunately, this solution seems to have some big disadvantages. First, the UK would lose free access to the internal market, meaning custom duties for some of its producers, and the possibility of companies in the City re-establishing themselves in Luxembourg, Frankfurt or Paris, where they can access the single market. More structurally, even non-EU Member States de facto abide by some of the rules of the EU. This is known as the ‘Brussels effect’, and suggests that in certain policy domains (such as privacy, competition law, chemicals regulation or product safety), EU law has extra-territorial effect. An example might clarify this process. The privacy settings of users of Facebook, an American company, are regulated by different legislators in different countries. The EU’s level of regulation, however, is the most protective of privacy of its users. Facebook, wanting to access the EU’s market of 500 million users, will have to abide by those standards, and, given the technical indivisibility of privacy settings, will set its global privacy settings 

to the level of the EU. In other words, in many regulatory areas, EU law applies globally. The capacity of the UK to influence these norms (rather than simply follow them), therefore, seems to require it to be an insider to the EU’s policy making. 

These three scenarios present challenges to the relationship between the EU and the UK that are as least as problematic as the reform process itself. It suggests that, given the proximity of the UK to the EU’s borders and market, the UK can never be fully free from the influence of the EU. The main question is: How can the UK’s interest be best protected – as an insider or outsider to the process? 

Yours, 

Floris de Witte

Assistant Professor of Law

LSE

(26 Jan 2016)

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