AIB’s Fellows are among the most accomplished scholars in the International Business field. To help more of our members take advantage of their expertise, we’ve asked them to contribute a series of think pieces on topics that are currently trending in international business. Our first AIB Expert is Pervez Ghauri who, along with his co-author, Ursula Ott, has managed to map out the most likely outcomes of Brexit and the UK’s ongoing negotiations with the EU.
After more than forty years of membership, the United Kingdom has been negotiating its exit from the European Union for over two years. In this piece, we outline four possible outcomes of these negotiations. These examples are drawn from past instances of negotiation with non-member countries which, nevertheless, have maintained a close relationship with the EU—we believe these precedents may provide some indication of where Brexit is headed.
The Brexit Negotiations could have been conducted amicably with offers and counter-offers. However, while the EU has demonstrated a preference for such a rational approach, the UK has taken a somewhat more emotional approach, independently publishing a so-called White Paper, which announced a set of twelve objectives that government representatives were determined to achieve. Below, we have also taken into account how each possible negotiation outcome is likely to serve or hinder those objectives.
- Norway Model: This model allows access to the single market by paying a membership fee and allowing free movement of people, conditions which were clearly rejected by the British referendum and government White Paper. Therefore, this model needs to be negotiated, which is likely to prove difficult.
- Canada Model: This agreement was achieved after several years of negotiations and includes free trade in many products and services, though with no free movement of people. Given the long period of negotiation required for this model’s success in the past, it would likely result in several more years of uncertainty for UK residents.
- Ukraine Plus Agreement: This model is rarely discussed by British politicians or by the media. However, it seems to help achieve most of the objectives listed in the White paper. In addition to free trade in most products and services, plus no free movement of people, this agreement includes a number of security collaborations which are desired by both the UK and EU.
- UK Model on the Table: Single market access (through tariffs, quota, agreements and payments) and special agreements to be negotiated for financial services, security issues, Northern Ireland border and no free movement of people. The negotiations will proceed following offers and counter-offers depending upon the bargaining power of parties.
While remaining in the EU seems to be the best economic option for the UK, this appears not to be achievable at present unless there is a second referendum and a majority of voters choose to remain. Considering the current deadlock in the UK’s parliament, a second referendum or an exit without an agreement are the most probable options.
Our review of the above negotiation models suggests that the Ukraine plus model would yield the most desirable results for the UK as it is likely to achieve most of the government’s stated objectives. Conversely, the Norway model seems to be the least desirable option for the UK, as it would be required to pay a membership fee and accept some level of free movement of people.