INTRODUCTION

The decision of the UK to leave the EU runs counter to recent trends towards further integration in most parts of the world. Over recent decades a range of customs unions (CUs), free trade agreements (FTAs) and economic unions (EcUs) have been established and have significantly expanded their membership. These include, among others, the Association of Southeast Asian Nations (ASEAN), the Caribbean Single Market and Economy (CSME), the Gulf Cooperation Council (GCC), the Southern Common Market (MERCOSUR), the North American Free Trade Association (NAFTA), the Commonwealth of Independent States Free Trade Area (CISFTA), the Trans-Pacific Trade Partnership (TTP) and the Eurasian Economic Union (EEU), and their members now account for 153 (80%) of the 192 countries that are members of the United Nations. In addition a large number of proposed agreements are also being negotiated, and indeed a number of countries, such as Turkey, Serbia, Montenegro and Albania, are looking to join the EU.

This increased integration has been both a driver and an effect of globalization. Reduced trade barriers through customs and other economic unions as well as adherence to World Trade Organization rules has made a more fragmented production system possible where inputs are sourced internationally (Feenstra 1998).

While the UK’s decision to turn its back on the EU runs counter to the trends of recent decades it is not unprecedented. In 1985 Greenland voted to leave the EU and Algeria, which was an integral part of France, seceded from France in 1962, although that was not a decision against the then EEC.

A number of different existing arrangements between the EU and other countries have been suggested as possible models for the relationship between the EU and the UK. One often cited model is the relationship between Norway and the EU. As this model involves full access to the markets of the EU and the UK respectively it would have the least real economic impact. However, the arrangement between the EU and Norway entails free movement of people and labour, participation in the common external border, accepting almost all EU directives and significant financial contributions by Norway to the EU budget, which means that this arrangement amounts to something resembling EU membership but without voting rights.