Brexit – Freer Trade plus More Legislative Independence
For an economist who shares a liberal oriented point of view Great Britain’s decision to leave the European Union is somewhat puzzling. On the one hand, the claim that EU legislation is suffocating the British economy is fairly understandable. The Brussels bureaucracy has indeed tightened its grip in the last decades on most aspect concerning trade within the European Union (from technical standards to environmental legislation). There is, of course, ample room for discussion whether the best way to reform the system is from within or from outside the Union.
On the other hand, the main problem for Great Britain is whether the political decision to leave the EU will affect its trade flows. From a commercial point of view, trade has been Great Britain’s growth engine, both historically and recently (disregarding for simplicity the distinction between trade in goods and trade in services). Given its geographical position and its strong connection to the world economy, Great Britain cannot afford to become an autarchy (i.e. it cannot unilaterally retreat from international trade). As an economist, one cannot help but be concerned whether the political decision to leave the EU can affect the country’s ability to participate in the international trading system.
Finally, there is also the technical problem of leaving the Union. The Lisbon Treaty indeed included an exit clause giving a member state the possibility to unilaterally leave the EU, but there is, to my knowledge, no express technical procedure to actually do so. Everything will probably depend on negotiations between Britain and the remaining Member States. Will exiting the EU mean that Great Britain will have to unilaterally renegotiate all its trade agreements with all the other European countries? This surely would be a diplomatic nightmare! The only decent option left open for the British in the opinion of the present author would be EFTA. This could secure Britain’s ability to maintain both free movement of goods and people within the EU and a higher legislative independence.