Hard or soft Brexit?

Teacher notes

This lesson looks at a topical question, what is the decision recently made by the UK to sign a free trade agreement with the EU, a trade bloc they had previously been a full member of.  So what are the benefits of a simple free trade area, compared to a closer union, such as a customs union / common market is preferable?

Beginning activity

Outline the difference between a common market, customs union and a free trade area?

A free trade area is simply an agreement where by nations agree to trade freely, without tariffs or quotas on goods and/or services.  Countries that enjoy a free trading relationship with the EU include Ukraine and Turkey.

A customs union works similarly except that in a customs union a nation can impose its own tariffs on third nations outside of the trading bloc.  Norway is an example of such a nation, being a member of the EU's single market, but it is not part of the customs union.

Lastly, there is the single market, which is the most ambitious type of trade co-operation.  This is because as well as eliminating tariffs, quotas or taxes on trade, it also includes the free movement of goods, services, capital and people.

Opening activity

Start by watching the following short video and then answer the questions which follow:

Questions

1. Explain why the commentator on the video suggests that British Prime Minister, Teresa May, ordered a croissant with jam but now wants to eat a very hard boiled egg for breakfast?

During the campaign Teresa May, then home secretary, actually campaigned for the remain side.  http://www.youtube.com/watch?v=-7BlY_t3vuo

However, following the referendum decision and her election as Prime Minister, she changed tact, stating that her duty was now to carry out the will of the people.  Interestingly, also, the leader of the opposition, Jeremy Corbyn, campaigned for the remain campaign, despite spending much of his political career campaigning against the EU project.  http://www.youtube.com/watch?v=cVJZTxbCaKA

2. Why does the commentator state that if 'many voters had known that the boiled egg, on the menu, would be served hard boiled', many would instead have ordered a Spanish omelette with Danish bacon for breakfast?

The UK has been part of the EU, formerly the EEC since 1973 and few of the electorate actually knew (for sure) what life without the EU would be like.  

3. Briefly outline Britain's choices as it faces life outside of the European project?

 In a survey, shortly after the referendum vote, 90% of voters wished to keep access to the free market.  However, at the same time, 70% of the same voters wished the UK to have greater control over immigration - a seemingly impossible combination.  

4. What is meant by a soft Brexit?  What versions of soft Brexit might be available to the UK?

A soft Brexit, or Brexit lite may come in different forms and each has both advantages and disadvantages for a nation.

These can be summarised in the following table:

ModelEU membershipEFTA (Norway option)EFTA Switzerland optionTrade deal (Canada option)EFTA (Turkey option)WTO rules (hard Brexit)
Single market memberyesyespartialnonono
Tariffs?nonenonenonelimitednone on manufactured goodsyes
Free movementyesyesyesnonono
Customs Unionyesnononoyesno
Contributes to the EU fund?yesyesyes but limitednonono

The above information was accessed at: bbc.co.uk

5. Use your answers above to explain the difference between trade diversion and trade creation? 

All members of the EU, as well as Norway and to a lesser extent Switzerland, enjoy the full membership benefits of being part of the bloc.  While nations like Canada,Turkey and now the UK enjoy low or even zero tariffs with the worlds largest trading area.  By contrast membership of the single market ensures complete ease of trade - zero tariffs, no customs controls and even the extension of these benefits to services.  

But such access comes at a cost, a nation within the EU has to abide by all community rules with respect to tariffs on nations outside the trading bloc.  So the UK (or any other EU member) loses the power to negotiate third party deals with nations outside the bloc.  

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