44 Britain The EconomistJuly 22nd 2017
12 eat it. It would be possible, they claimed, to
escape EUregulation and the ECJ, leave the
single market, walk away from the customs
union and save £350m ($450m) a week in
budget contributions—while still retaining
the benefits of being an integral part of the
world’s biggest trade block.
This misleading claim explains why the
other 27 EUcountries were apprehensive
about the government’s approach to
Brexit. Although they preferred Mrs May,
who campaigned on the Remain side, to
other Tories, they also knew that her main
experience of the EUcame in 2013, when as
home secretary she negotiated Britain’s
opt-out from a raft of justice and home af-
fairs measures and then chose which ones
to opt back into. That cherry-picking ap-
proach was quite specific to that particular
dossier; it cannot be done by a country
turning its back on the club altogether. The
EU27 are determined to stop any attempt
at repeating it with Brexit.
Talk by various ministers in London of
no deal being better than a bad deal also
went down badly in Brussels. A Brexit
without a deal would certainly be bad for
the EU. But it would be much worse for
Britain: goods would back up with no cus-
toms agreement, airtravel would stop
without an aviation deal, tariffs and non-
tariff barriers would appear overnight. The
EUalso frets over Mrs May’s belief that her
predecessor, David Cameron, failed to win
enough concessions in hisEUnegotiations
because of his unwillingness to walk away.
In Brussels, the bargaining power is seen as
being on the EU’s side, not least because of
Article 50’s two-year deadline.Menu by menu
This is reflected in the EU’s approach to
Brexit, which is to insist that future rela-
tionsmust followone of a number of
fixed-price menus. Each menu has advan-
tages and disadvantages; each has a few
side dishes that can be added at the mar-
gin. But what is not permitted is to go à la
carte. Mr Barnier underlined this recently
when he declared that it was not possible
to leave the single market but retain all its
benefits, nor to quitthe customsunion but
keep frictionless trade.
The first menu is full membership,
which the Brexit referendum rejected. Sec-
ond is membership of the European Eco-
nomic Area (EEA), which links Norway, Ice-
land and Liechtenstein to the EU. EEA
members are fully integrated into the EU’s
single market for most goods and services,
but not for agriculture and fisheries. They
are not in a customsunion with the EU,
which allows them to strike free-trade
deals with third countries, although this
means their exports are also subject to
rules-of-origin inspection. But single-mar-
ket rules require them to accept the EU’s
four freedoms of movement of goods, ser-
vices, capital and, crucially, people. Theyalso have to observe laws which they have
no say in making and which (at least im-
plicitly) are enforced by European judges.
And they make contributions to the EU
budget almost as large as Britain’s, on a per-
person basis.
The third menu is a Swiss one. Along
with Norway, Iceland and Liechtenstein,
Switzerland is a member of the European
Free Trade Association (EFTA), but it is not
in the EEA. It has two sets of complex bilat-
eral deals with the EUthat give it privilegedaccess to the single market for goods,
though not for agriculture. Butit is outside
the market for most services (including fi-
nancial services). It is also outside the cus-
toms union. It too has to observe the free
movement of people, and to accept most
single-market laws. And it makes a big con-
tribution to the EUbudget.
Mrs May’s insistence on taking back
control of borders, laws and money means
that she has ruled out both these menus.
Yet some frills could be attached to make
either more appealing. EEAcountries have
an “emergency brake” to block the free
movement of people, though it has never
been used. Liechtenstein is allowed to set
quotas forEU migrants. The Swiss are not,
but they may be allowed to ensure that
most jobs are offered first to Swiss citizens.
As for budget payments, they are smaller
than for full members and are mostly
dressed up as research funds or aid to east-
ern Europe. But Britain would struggle to
get a deal like that of Switzerland. The EU
dislikes the complexity of the arrangement
and would be unlikely to replicate it for the
far bigger British economy.
The fourth menu might be called Turk-
ish. Like San Marino and Andorra, Turkey
is not in the EEA, EFTAor the single market,
but it has formed a customsunion with the
EUfor non-agricultural goods trade. This
forces Turkey to apply common external
tariffs fixed by the EU, but that brings the
advantage that there are no barriers or
rules-of-origin checks on exports to the EU.
If Britain were to form a customsunion
with the EU, it could try to add some ser-
vices as well (Turkey and the EU are negoti-
ating an upgrade of theirown customs un-
ion to do just that). The advantage of being
in a customsunion butnot the single mar-
ket is that it dispenses with the EU’s four
freedoms, budget contributions and the
ECJ. It would also prevent the return of cus-
toms controls at the Irish border.
The main disadvantage of the customs-
union option is that it precludes free-trade
deals for goods with third countries. In ef-
fect, it would do Liam Fox, the internation-
al-trade secretary, out of a job. Yet some ar-
gue that barrier-free trade in goods with
the EUis worth more than any number of
hypothetical future free-trade deals with
third countries being touted by Dr Fox. To
quote the words of one MP, “We export
more to Ireland than we do to China, al-
most twice as much to Belgium as we do to
India and nearly three times as much to
Sweden as we do to Brazil. It is not realistic
to think we could just replace European
trade with these new markets.” This was
Mrs May, speaking in April 2016.
Fifth is the menu that the prime minis-
ter herself favours: a deep and comprehen-
sive free-trade deal. Examples include the
association agreement with Ukraine and
two simpler trade deals with Canada and
Japan, the latter not yet concluded. ThisPublic opinionSoftening?
A
YEAR on from the referendum, few
Britons have changed their minds
about whether to stay or go. Polls find
that, were there another vote, the result
would be similar to the 52:48 split last
June. They also show that most Remain-
ers concede that Brexit should go ahead.
What sort of Brexit, though? The
referendum provides a mandate for
neither the hard nor the soft type, since
Brexiteers claimed both that free move-
ment would end, which implies a hard
exit, and that Britain would stay in the
single market, which suggests a soft one.
A poll forThe Economistby YouGov
finds that of those who voted Leave, 69%
now favour hard Brexit and 24% prefer
soft (3% have switched to Remain and 4%
don’t know). The hard approach taken
by Theresa May is therefore in line with
the desire of most Leavers.
But what if Remainers’ views are
considered? Forced to choose between
hard and soft Brexit, 81% opt for soft,
against 15% for hard. The upshot is that,
among voters at large, soft Brexit beats
hard Brexit by 52% to 44%. Few have it as
their first choice, but it is the one option
that commands a reluctant majority.Most want to stay in the single marketBrexit means...Source: YouGov*Of those surveyed expressing
a preference for Remain/LeaveBritain, preferences for type of exit from the EU*
By vote in EU referendum, % responding
Referendum vote, June 23rd 2016Current preference, July 10th–11th 2017 Don’t
knowRemain 48 Leave 52Soft Brexit 52 Hard Brexit 44 4