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Britain needs Europe a lot more than Europe needs Britain

"The idea of Britain leaving the European Union sounds superficially attractive. Who doesn't like the idea of freedom and independence?

"But it isn't as simple. In fact, Britain needs Europe a lot more than Europe needs Britain. Isolation is costly.

"Look at international trade. The share of British trade with the European Union is a lot higher than the exposure of the EU countries to Britain. This is simply because of size: Britain is relatively small compared to the rest of Europe.

"Therefore, Britain has an interest to adopt the regulations that govern trade and investment in the European Union, with the EU Single Market at the core. At the moment Britain still has a place at the negotiating table and plays a part in determining those regulations. If Brexit happens, Britain will become a passive receiver. This is the model of Norway and Switzerland. Those countries adopt the same regulations but have zero say.

"Look at immigration. It is tempting to blame Britain's problems on immigrants. However, the academic research says that we need immigration to pay our bills. One reason is the declining fertility of the native British population. Another reason is the skills gap in the British labour market.

"The European Union will not accept a deal that allows free trade with an 'independent' Britain but without any mutual migration. It is a fantasy to believe that Britain could control immigration from the EU once it left. Again look at Norway and Switzerland where migration to and from the EU is commonplace.

"Then look further abroad beyond Europe. One claim of Brexit campaigners is that an independent Britain would be able to negotiate its own free trade agreements, for example with the United States. That is true. But those agreements would be dramatically worse than what the European Union can achieve. After Brexit, the United States would make Britain a "take-it-or-leave-it offer". But as part of the EU, Britain has leverage and can implement its priorities.

"In fact, the Brexit debate is already damaging to British interests right now. Other EU countries do not like the antagonistic approach and therefore form interest groups that exclude Britain. As a result, Britain's negotiating hand is already weakened.

"In summary, we cannot just ask whether Britain should leave the EU or stay. We have to ask: what would the world look like if Britain were on its own? In many ways, Britain would be in a weaker position."

Dennis Novy, Associate Professor, Department of Economics

Dennis Novy

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