Which parts of the EU should we remain in?
When trying to understand which parts of the EU Britain should or should not remain part of, it’s helpful to look at the countries on the bloc’s fringe. We can think of these different relationships with the EU as a scale, from greater closeness but less control to lesser closeness but more control.
At the closest level, some MPS propose that UK should stay in the single market and customs union. Staying in the single market would mean the UK’S domestic regulations being set for us by the EU. Staying in the customs union would mean the tariffs we imposed on non-eu countries would be decided by the EU. Perhaps we could imagine withdrawing from the two in some sectors but not others. But wherever we stayed, we would have no control.
The next level would involve the single market or the customs union but not both. Turkey is outside the single market, but inside “a” customs union for manufactured goods. Such customs unions can function selectively, applying only to certain sectors.
We could withdraw from the customs union but not the single market, like Norway, which can do trade deals with non-eu countries to cut tariffs, but its domestic regulation has to follow the EU’S (with limited Norwegian input).
We can think of Switzerland’s arrangement as involving three baskets. The first covers those areas where it signs up to do the same thing as the EU in the same way. The second includes the areas where Switzerland and the EU agree that they will do the same things but differently. Then there are areas where they totally diverge.
The UK government’s current policy appears to involve some more restricted variant of the Swiss model. The EU says it is unwilling to contemplate such a “three baskets” approach, saying it expects there to be a free-trade agreement (FTA) akin to those with Canada and Korea.
Many Brexiteers would agree, since an FTA typically has no agreement to coordinate domestic regulation. That would be taking back control.
Dr Andrew Lilico is executive director of Europe Economics