Tuesday, June 28, 2016

EU blocking UK trade deal may end EEA

Now that we have seen a lot of responses to the Brexit referendum, we have seen a lot of fearsome scenario's. I personally expected the UK to immediately start to make friends with EFTA. To date however it is still unclear whether the UK will travel this road. There are basically three options for the UK:
1. the Norwegian model
2. the Swiss model
3. the Canadian model

Norwegian model
The Norwegian model involves joining EFTA and the EEA. From the media this seems like an unpopular model since it would mean that the UK would still have to follow many EU regulations and would still have to pay contributions to a number of EU programs. The plus side is that it would continue UK access to the European common market place. In addition to Norway, this model is also used by two other EFTA members: Iceland and Liechtenstein.

Swiss model
The Swiss model also includes EFTA membership, however Switzerland is no member of the EEA. Instead it has a number of bilateral agreements for trade with non-EFTA members.

Canadian model
Canada is no EFTA member and therefore cannot join the EEA. Instead it is now working on an elaborate trade agreement with the EEA called CETA.

Both the Swiss and Canadian model would require a new trade agreement between the UK and EEA. A number of politicians however seem rather reluctant to give the UK a good deal. They hope that a bad deal - even if it hurts themselves as much as it hurts the UK will stop other countries from leaving the EU.

Tragically it may actually push some of the UK's trading partners out of the EU and/or EEA. Ireland
will be a major victim and although support for the EU is currently strong, that support may waver when other EU countries block a good deal with the UK. Although the focus now is mostly on the EU, the EEA is also in danger. Iceland and Norway may favor relations with the UK over the EEA and adopt the Swiss model instead, allowing them to make their own trade agreement with the UK, rather than wait for an EEA deal that may never come.

EFTA may even try to negotiate an alternative deal with the EU that much more resembles the CETA or TTIP agreement than the current EEA agreement. Such a deal would create a ready alternative to EU membership for all members considering leaving the union.

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