Last week the President of the EU Council, Donald Tusk said there was no ‘soft Brexit’. Speaking at a conference in Brussels, Mr Tusk dashed the hopes of those hoping Britain could remain inside the EU’s single market or negotiate some special form of association. The tenor of the UK’s referendum campaign had been to, “radically loosen relations with the EU, something that goes by the name of ‘hard Brexit’” he said.
“In my opinion, the only real alternative to a hard Brexit is no Brexit,” Mr Tusk said. “Even if today hardly anyone believes in such a possibility.”
The President’s stance has infuriated Brexit supporters in the UK Cabinet, such as Liam Fox, Boris Johnson and David Davies (known collectively as the ‘three Brexiteers’).
This article examines the crucial differences between hard and soft Brexit and what it will mean for the British people and its economy.
A so called ‘soft Brexit’ would involve the UK negotiating a deal similar to what countries such as Norway, Lichtenstein and Iceland. These countries belong to the European Economic Area. Under this model, the UK would still be part of the single market but it would have the freedom to negotiate independent trade deals outside the EU because it would not be part of the customs union. However, Britain would be required to pay substantial fees to Brussels to retain access to the single market and crucially, the country would have to abide by the four fundamental freedoms of the EU; freedom of capital, goods, services and people.
A hard Brexit would involve the UK leaving the single market and the bloc's customs union. The country would be in the same position as Brazil or Russia, trading under the World Trade Organisation (WTO) rules and paying tariffs.
A ‘hard Brexit’ will allow the UK to negotiate its own trade deals and regain full control over its borders. Britain would also be free from paying membership fees to the EU.
The first thing the British government must do in the event of a ‘hard Brexit’ is renegotiate its membership of the WTO. This is because Britain joined the WTO as part of the EU, which would mean that in theory, the UK’s membership of the WTO will cease upon it leaving the bloc.
Once the two-year ‘divorce’ process has ended and Britain has left the EU, then a new trade deal with the other 27 nations will have to be negotiated. This is likely to take many years to complete. To protect British exporters, it is likely that Prime Minister, Theresa May and her government will attempt to negotiate an interim agreement to ensure trade continues whilst new deals are worked out.
Recently leaked papers have revealed that a ‘hard Brexit’ may cost the UK Treasury £66 billion per year.
The documents say, “The Treasury estimates that UK GDP would be between 5.4% and 9.5% of GDP lower after 15 years if we left the EU with no successor arrangement, with a central estimate of 7.5%.
“The net impact on public sector receipts – assuming no contributions to the EU and current receipts from the EU are replicated in full – would be a loss of between £38bn and £66bn per year after 15 years, driven by the smaller size of the economy.”
Both hard and soft Brexit scenarios have advantages and disadvantages for the British economy and its people. Until Article 50 is triggered (this is likely to be in March 2017 according to the Prime Minister), we will not know which direction the government will take.
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