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This document assesses continued UK membership of the EU against the three existing alternative models:
membership of the European Economic Area (EEA), like Norway
a negotiated bilateral agreement, such as that between the EU and Switzerland, Turkey or Canada
World Trade Organisation (WTO) membership without any form of specific agreement with the EU, like Russia or Brazil
The Treasury’s analysis shows that the UK would be permanently poorer if it left the EU and adopted any of these models. Productivity and GDP per person would be lower in all these alternative scenarios, as the costs would substantially outweigh any potential benefit of leaving the EU. The analysis finds that the annual loss of GDP per household under the three alternatives after 15 years would be:
£2,600 in the case of EEA membership
£4,300 in the case of a negotiated bilateral agreement
£5,200 in the case of WTO membership
The negative impact on GDP would also result in substantially weaker tax receipts, significantly outweighing any potential gain from reduced financial contributions to the EU. After 15 years, even with savings from reduced contributions to the EU, receipts would be £20 billion a year lower in the central estimate of the EEA, £36 billion a year lower for the negotiated bilateral agreement and £45 billion a year lower for the WTO alternative.
“The tectonic plates of the world economy are shifting. With an independent trade policy, Britain can put itself in a strong position to benefit, opening up access to fast-growing markets across the world.” Liam Fox, in The Financial Times, 11 November, 2017
The imperial British vision of free trading Ships at Spithead 1797
Image source: Wikipedia
“The very day that the U.K. leaves the European Union, it also leaves all the trade agreements that [the EU has] with third countries.”
Trade Commissioner Cecilia Malmström, in interview with Politico,
12 December, 2017