UK must remain in the EU, says British think-tank

Britain leaving the EU would raise more questions than answers - what the UK needs is a new model of EU membership, says Open Europe think-tank

Growing public and political frustration with the costs of European Union membership, in Britain, is unsustainable in the long-term and cannot be ignored. In addition, events in the eurozone are likely to mean that the status quo will not be an option even if the United Kingdom wished it so. These factors have led some to suggest EU withdrawal and the Norwegian, Swiss and Turkish models of European cooperation as alternatives that the UK could follow. However, all of these options come with major drawbacks for the UK's trade with the EU.

The union remains by far the biggest destination for British trade. Given the large proportion of goods trade we do with the EU, the UK's trading interests are currently best served by remaining within the customs union. It allows goods to flow freely without complex 'rules of origin' and although the liberalisation of services trade has stalled somewhat, the EU still accounts for around 39 per cent of UK services exports, so access to the single market remains a key interest.

Plainly, trade is only one part of the equation when it comes to assessing the costs and benefits of membership. The Norwegian option, or European Economic Area membership, would free the UK from the Common Agricultural Policy, EU fishing rules, Europe-wide regional policy and reduce our budget contribution. It would also maintain UK access to the single market in services and goods. Although, outside the customs union, access for goods would be subject to rules of origin. However, crucially, Britain would still be subject to EU rules on employment and financial services regulation but with no formal ability to shape them.

If we had an arrangement similar to the Swiss-EU bilateral deal - we would also be without the CAP, EU fishing rules, EU-wide regional policy and the country have a reduced financial contribution. This would offer more sovereignty than the Norwegian model and less Brussels' regulation. But, the UK's access to the single market would be dependent on the deal we could negotiate with the EU. The Swiss deal currently excludes the vast majority of services, including financial services.

So, from purely a trade perspective, these options are not very attractive. Additionally, contrary to popular belief, all the alternatives to EU membership - except simply falling back on World Trade Organisation rules and seeing some exports facing relatively high tariffs, some 10 per cent on car exports for example - would require negotiation with and the agreement of the other member states. This would come with unpredictable political and economic risks. It means that negotiating a new UK relationship with Europe outside the EU treaties – in reality, leaving the EU - would present similar difficulties to renegotiating membership terms while remaining a member of the EU.

It is increasingly clear that the UK public is growing ever more frustrated with the union exactly at the same point as the eurozone is moving towards more integration. Therefore, in order to justify continuing EU membership and avoid being driven by the electorate inexorably towards the exit door, Britain needs a new set of membership terms. This would involve the country remaining a full member of the customs union and single market in goods and services – allowing it to remain at the heart of European cross-border trade – but substantially reducing the non-trade EU involvement and costs whenever possible; including bringing powers back to the UK. As the eurozone is likely to need a new set of treaty arrangements to move towards further integration, Britain will have a unique chance to stake out such a model.

Stephen Booth is research director of the Open Europe think-tank and co-author of the report Trading places: Is EU membership still the best option for UK trade?