August 17, 2016 Print

The United Kingdom’s referendum to leave the European Union, known as the “Brexit,” has been controversial in nearly every quarter. Now that the decision has been made, however, the question becomes how to implement the withdrawal in a way that maximizes the benefits of political independence while minimizing potential drawbacks such as decreased international trade and labor mobility. The Institute of Economic Affairs (IEA) is working to ensure that Brexit becomes a free-market opportunity worth seizing.

“We should use the opportunity of Brexit to reduce regulation in several key areas,” writes Philip Booth, the IEA’s academic and research director and professor of finance, public policy, and ethics at St. Mary’s University, Twickenham. “We should also liberalise significantly financial regulation .... Above all, we must have a liberal migration policy. The Brexit campaign has been dominated by calls for reduced migration and more restrictions so, again, this will be a difficult area for the government. We should resist a central planning approach such as the Australian points system. And, to prevent abuse, we should develop a contribution-based welfare system that ensures that welfare for all — migrants and non-migrants — is contingent upon a record of work.”

Even as the United Kingdom disentangles itself from the EU’s political oversight, options remain open for it to participate as a trading partner within the European Economic Area (EEA) and its European Single Market. The EEA already includes the participation of Iceland, Liechtenstein, Norway, and Switzerland, none of which are EU members, so precedent already exists for the United Kingdom’s participation in the Single Market as a non-EU state.

“We are preparing to embark on hugely important negotiations with no negotiating team and without a clearly stated idea of what we want to achieve,” writes Ben Kelly, online director at Conservatives for Liberty, in an IEA commentary. “Looming over this is the economic damage caused by the uncertainty of our future trading relationship. This is why it is crucial that we adopt an existing model as a political and legal framework to simplify Article 50 negotiations and allow for a carefully managed exit. The EEA option, which entails remaining in the Single Market via the EEA Agreement, is the optimal transitional arrangement which give us a ‘soft landing’ and acts as a stepping stone in choppy waters.”

The United Kingdom also has the chance now to “perform an even more granular analysis” of ideal domestic policies, explains Diego Zuluaga, head of research at EPICENTER, an independent initiative of six European think tanks, including the IEA.

“The political shock of Britain’s departure from the EU is already rippling through to other economies,” Zuluaga writes. “Furthermore, it is likely that the direction of policy in the UK will change with a new government and new circumstances. Finally, all of these developments are taking place in a context of slowing global growth, amid uncertainty about the coming U.S. presidential elections and the future of the Eurozone.”

EU agricultural subsidies could be reduced, Zuluaga explains, although pressure from U.K. farmers makes this politically unlikely at present. Fisheries management can be returned to the local level, which would allow collective property rights enforcement and sustainable management of fish stocks. There is also now an opportunity to eliminate many of EU regulations that constrained financial markets in the United Kingdom, pursue new international trade agreements outside the purview of EU oversight, and open domestic employment opportunities to willing international workers.

These are not easy tasks, especially in the face of protectionist and populist sentiments from people in Britain who fear free trade and migration. The “VoteLeave” campaign, however, has had strong free-market influence from the start, headed by Matthew Elliott, founder of Atlas Network partner the TaxPayers’ Alliance (TPA). The IEA has had decades of successful experience building a case for both economic and personal freedom — and it will continue to lead the policy debate. There are also key players within the post-Brexit political environment who favor a free economy.

“The appointments of Liam Fox to oversee international trade and David Davis to conduct the Brexit negotiations sent an encouraging sign that Brexit Britain will [be] a market-orientated country with a global outlook,” writes IEA Director General Mark Littlewood. Both public officials have been long-time friends of the IEA and its mission of limited government, sound money, and free trade.

“Focus is now on the path the UK will choose, and the tension between retaining access to the single market and an electorate that largely wants stricter controls over borders,” says Alicia Barrett, IEA American outreach officer and executive assistant to Littlewood. “There is much work to be done and the IEA is committed to making the case for post-Brexit policy changes that are as favourable to free markets as possible, including maintenance of freedom of movement.”