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That Britain’s business leaders overwhelmingly want to stay in the EU, even if half would prefer a purely economic community, underlines the possibilities for those arguing for a British exit in the forthcoming referendum.
Some advocates for leaving, going beyond the Norway option of belonging to the single market institutions without being a member of the EU, have suggested that the UK can simply maintain free trading relations with the bloc it has just left by signing a bilateral trade agreement. An FTA would give the UK access to the single market without formally having to be a member and hence without committing to implement all its rules. [...]
Along with most of the magic solutions peddled by the leave campaigners, this solution is both a political non-starter and of uncertain economic benefit. Politically, the EU is highly unlikely to give a post-exit UK a pact like that offered to Moldova or Ukraine. [...]
And even if the UK achieved full access to the single market without a formal pact, it would rapidly find itself having to adopt many of the regulations of that market if it wanted to survive. The UK is not a big exporter of manufactures that needs merely a traditional agreement on goods tariffs. Its comparative advantage is in sophisticated services, particularly in the financial sector, that are governed by complex regulation. To continue selling into the EU, the UK will find itself adopting large swaths of the single market’s rules without having any say over how they are created.
Attractive though it is to imagine the EU as a purely economic community, full access to a trading area without accompanying commitments on regulation, free movement of labour and so on is not an option. British businesses are right to prioritise the market aspects of the EU, but the UK would have to be a full member to enjoy them to their best advantage.
Full article on Financial Times (subscription required)