26 April 2016

UK House of Commons: Committee unanimously agrees EU referendum analysis

[...] This report does not provide an exhaustive list of all costs and benefits of EU membership for the UK, or of all potential consequences of withdrawing from the EU. Instead, we highlight the major issues that we believe voters may wish to consider when reaching their own conclusions on how a so-called “Brexit” might affect the UK’s role in the world. [...]

Here are some factors voters may wish to consider:

1. The UK’s trading relationship with the rest of the EU.

Should the UK remain a member of the EU which gives it full access to the EU’s single market, with a role in shaping its rules; or should the UK negotiate a new, looser trading relationship with the EU which, for example, could permit restrictions to be imposed on the free movement of workers?

This report discusses how, if the UK left the EU, negotiating a bespoke free trade agreement would be a likely path to follow. The Government should recognise the probability of no mutual interest deal being concluded within the two-year notice period. If no deal could be concluded within the two-year notice period, the UK would move to standard WTO relationship terms and would then need to decide which of the 6,987 directly-applicable EU Regulations would need to be replaced by UK law. Mutual economic interests should result in a comprehensive free trade agreement over time.

2. The UK’s trading relationship with the rest of the world.

Does the UK benefit from better terms of trade with non-EU countries by being a part of the EU, which has free trade agreements in place with 50+ countries around the world and more, including one with the US, being negotiated; or would the UK outside the EU, and able to pursue an independent trade policy, secure more economic opportunities for international trade?

This report outlines the choice between staying in the EU, which, as the world’s largest single market, has clout in trade negotiations with other countries (the EU can offer access to a market of 500 million relatively wealthy consumers, in return for gaining access to other countries’ markets); or leaving the EU, which would increase the UK’s flexibility (the UK would decide its own negotiating position and not need to accommodate the disparate views and interests of other EU countries when negotiating). In other words, the EU has more leverage in securing favourable terms in bilateral and multilateral trade deals and in shaping globally-accepted standards, but it may be slower and less focused on purely UK interests, whilst the UK alone would have less leverage but could be more nimble and focused, for example on its services industries.

3. The UK’s international representation and reputation.

How far does UK membership of the EU affect the UK’s international standing and help multiply UK influence? Does withdrawal mean the UK will be perceived, rightly or wrongly, as more isolationist? Alternatively, would it present an opportunity for the UK to affirm a unique role as a foreign policy player close to, but independent from, both the US and Europe?

This report acknowledges that all key UK allies support the UK remaining in the EU, partly because for some allies, such as the USA, the UK is seen as a positive influence on the direction of EU foreign and defence policy. For others the UK is a useful entry point to the EU single market. These factors are in these countries’ interests, and we look at how the UK could protect its own interests, remaining a member of numerous international organisations, and how it would manage its international position and reputation after “Brexit”.

4. The ways in which the EU and the EU’s external policies might develop with or without the UK.

If the UK stays in the EU, would it help or hinder the rest of the EU in overcoming crises, such as the migration crisis? If the UK left the EU, would it weaken or strengthen the EU’s foreign and defence policy?

As a major military power with global reach, the UK is one of the most influential players in driving EU foreign policy. For example, UK leadership pushed for and obtained robust EU sanctions on Russia following the Ukraine crisis. However, the UK’s level of influence has arguably declined in recent years.

There is no doubt that Europe faces increasing instability in its neighbourhood, from Libya to Syria to Ukraine. There is a debate about whether “Brexit” would destabilise the rest of the EU at a time when it is struggling to cope with currency and migration crises, or whether it would spur the remainder of the EU to act more coherently. Either way, the UK would no longer be a part of the “balance of power” in the EU, which could have an impact on how the EU develops with respect to its economy, its enlargement process, and its confidence and capabilities in its regional and global roles.

Decisions on defence, like foreign policy, currently remain at the national level, but some in the EU encourage stronger institutionalisation of defence co-operation. The UK has traditionally been reluctant to agree to this. “Brexit” could therefore allow the EU’s common defence policy to develop in a way which could undermine the cohesion of NATO, or which could improve Europe’s overall collective defence.

Finally, the evolution of the eurozone matters. Currently the euro currency is used by 19 of the 28 Member States; all non-euro states except the UK and Denmark are committed to joining in the future. An effective, high-performing and sustainable eurozone would likely benefit the UK economically, as more prosperous trading partners would buy more of our goods and services. However, to become sustainable, the eurozone will need to reform in ways which entail greater economic, financial and fiscal co-ordination and integration for participating states. This could leave the UK on the outside of an ever-tighter decision-making majority, with eurozone countries banding together in ways which could damage UK interests, particularly in the financial sector. This was recognised as an issue in the Government’s renegotiation, leading to future changes aimed at protecting the UK as a non-euro state. However, despite the safeguards, the UK inside the EU would not necessarily be able to stop the potentially detrimental political consequences of greater eurozone integration. On the other hand, despite its freedoms, the UK outside the EU would not be in a position to stop potentially detrimental economic consequences of the eurozone agreeing a position against UK interests.

Full report

© House of Commons