3 alternative visions of the UK-EU relationship

3 alternative visions of the UK-EU relationship

Pro-Brexiters have suggested that the UK could adopt the models of several other wealthy, open economies that have been able to thrive on their own. Here are three examples

3 alternative visions of the UK-EU relationship

NORWAY

Population: 5.3 million (8% of UK)

GDP per capita: £48,400 (166% of UK)

Norway’s enormous individual and collective wealth and strong social safety nets are built on the proceeds of the country’s oil reserves. Over decades, the Norwegian sovereign wealth fund has invested locally and globally for social goals and for profit, which in turn are used as an endowment for its future. Some estimates suggest that the fund owns around 1 per cent of all stocks worldwide.

For the libertarian right wing of British politics, which is largely responsible for the march towards the European exit door, the Norwegian model would be a difficult ideological suppository to take. The oil company is owned by the state, while the government retains major stakes in telecoms, industrial giants and the country’s largest bank. The power utility is state-owned. Government spending on social programmes is high — the public sector accounts for more than half of Norway’s gross domestic product.

The country is a member of the European Economic Area, but that membership is not without its controversy. Opponents complain that Norway is subject to the rules of the EU, but has no stake in negotiating them. The UK would suffer the same challenges, should it decide to leave the union but retain tariff-free access to its markets.

SWITZERLAND

Population: 8.3 million (13% of UK)

GDP per capita: £54,300 (186% of UK)

Switzerland’s financial services sector may feel a little beleaguered in light of overlapping banking secrecy scandals. The country’s vaunted secrecy, and position as a secure place to hold money on the fringes of Europe, has been a controversial topic in Brussels for years. Unlike Norway, Switzerland is not a part of the European Economic Area, although it is a part of the single market and a part of the Schengen agreement on open borders — a concession needed to secure its access to the main bulk of Europe.

The UK is currently not part of Schengen. The Swiss example suggests that signing up to the agreement, or making concessions on open borders, could be a condition of further British participation in the single market – although that is not guaranteed.

Switzerland, like the UK, was seen as a safe haven for financial investors during the eurozone crises. Many people parked their money in the country and bought the Swiss franc as a way of preserving value. You can, however, have too much of a good thing, and the Swiss central bank struggled to keep the currency from appreciating too sharply by printing francs and buying euros, in order to keep the country’s exports — which make up more than 70 per cent of GDP — competitive. This cost them a fortune. In the end, in January 2015, they simply gave up. The currency rocketed upwards, driving some exporters into yet more serious difficulties.

SINGAPORE

Population: 5.6 million (9% of UK)

GDP per capita: £36,600 (125% of UK)

The ‘Little Red Dot’ is a city-state half the size of London, stuck on the end of Malaysia — a country that it was briefly part of in the 1960s. Under its independence leader Lee Kuan Yew, it developed at extraordinary speed to become a modern city, buoyed by its position as a strategic port, strong governance and the rule of law. The financial services industry loves its low-tax environment, and it has become a major international hub for finance — although major banks, including Barclays, have recently pulled out.

High levels of public spending on housing and social programmes mean that standards — and costs — of living are high, particularly for the country’s immediate region, and the crime rate is extraordinarily low. The government’s infamous social order laws, including banning spitting and limiting the importation of chewing gum, are only part of a wide range of public controls and state ownership — opponents say interference — which run deeply through society.

For all of its successes, Singapore is now struggling to maintain its pace of progress. It is heavily dependent on economic growth in its neighbours. When China sneezes, Singapore catches a cold, while the rest of the Association of South East Asian Nations, or ASEAN, view the country with a degree of suspicion, and do not always cooperate. To be a small, isolated and open trading economy on the fringes of a much larger economic bloc, it turns out, does not guarantee sustainable success.

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