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The Morning After: Why Brexit Would Mean Uncertainty

22/12/2015 09:18 GMT | Updated 21/12/2016 10:12 GMT

The in-out referendum debate and uncertainty about the result obscure other, equally important uncertainties about the consequences of a vote to leave the EU. These can essentially be divided into two categories. One is about the destination - what the future relationship between the UK and the EU would ultimately look like. The other is about the journey - how to get there - and the uncertainties along the route.

In a speech last month setting out his negotiating demands Prime Minister David Cameron noted the flaws of the Norwegian and Swiss models. The former is based on membership of the European Economic Area, which gives access to the single market, but little influence over its policies. The latter is based on a series of bilateral accords negotiated over several years to access parts of the single market. He could equally have picked out the Turkish model, based on a customs union, or the Canadian model, based on a free trade agreement.

What he and others have exposed is that eurosceptics cannot agree on what the UK's relationship with the EU should look like if the UK votes to leave. This is because it involves a trade-off: what is most attractive politically, because it allows more independence, is also the most damaging economically, because it limits access to the single market. Brexit supporters will make this trade off in different ways. What they can agree on, however, is that they don't want to talk about it before the referendum for fear that voters will be distracted from the deceptively simple in-out question.

There are equally many uncertainties about the journey. This is because the process of leaving the EU is unclear and because politics - in the rest of Europe as well as the UK - would get in the way.

The first point to note about the journey is that it cannot be smooth. If the Prime Minister loses the referendum he would almost certainly have to resign. This means a Conservative leadership contest would be called in which each candidate puts forward his or her vision for the future relationship with the EU. Under party rules MPs first narrow the field down to two candidates, with the final decision taken by the full membership. It is therefore these two groups who would determine what a vote to leave the EU should mean. But they would not have the final say. The relationship would still need to be negotiated with the EU. And that negotiation would be much tougher than what the Prime Minister is attempting now as he prepares for the referendum.

This is partly because the process is unclear. Under the EU Treaty the new UK government, once formed, would have two years to negotiate a withdrawal agreement. This is almost certainly insufficient; it took 12 years for Switzerland to negotiate its bilateral accords. The period could be extended but only if all member states agree, which could not be taken for granted. Poland, for example, might object if it thought the interests of its citizens in the UK were threatened. If no agreement was reached within two years then all treaty obligations would lapse, which would be damaging for all parties, but especially the UK which would be shut out of the single market. If the negotiations were extended then businesses in the UK would find that they were still affected by new EU regulations over which the UK would have little influence. Meanwhile civil servants would have the fiendishly complicated and time-consuming task of disentangling UK legislation from its EU underpinnings and filling in the gaps.

One response is to argue that there would be a strong economic incentive for the UK and the EU to get a deal done quickly. This is true. But it misses a more important point which is that politics would be likely to get in the way and be decisive in determining both the Brexit destination and the path to reach it. The dominant influence of politics is evident in the UK now, but would become equally apparent in other EU countries following a vote to leave the EU. The French and German leaders both face elections in 2017, most likely soon after the referendum. How they respond to the UK following a vote for Brexit would be in large part be determined by domestic opinion. The same would be true in other member states even if they are at different points in their electoral cycles.

This means that if Britain votes to leave the EU it would not resolve Britain's 'Europe problem', but rather Britain would face a new kind of problem. The interdependence between Britain and Europe means Britain would not be able or want to ignore Europe. The UK would in effect be choosing to leave the EU shortly before attempting to negotiate a way back in to some or all of the single market. Many member states would require concessions to make this politically sellable at home, making the outcome more unpredictable. The morning after a vote for Brexit the UK would be setting out along unclear path to reach an unknown destination.