European Policy Analysis
to negotiate an agreement with the EU which happens to be a WTO member . Of course , such negotiations can only start after article 50 has been triggered . The UK may be able to get a CETA-like agreement that may even cover parts of the service sector , but definitely not “ passporting rights ” for its financial industry . However , such an agreement would still require for the UK to fulfill EU rules in terms of standards , safety , and health regulations , i . e . most of what has been labeled as “ red tape ” by the proponents of the leave camp . This may become even more of an issue if the EU moves along more quickly with its banking union and financial market regulations . The potential loss of the EU “ passport ” for financial institutions will not be the end of the City of London but would for sure generate farreaching changes in the set-up of financial businesses , including partial re-locations . Taking the WTO path , of course , not only demands negotiations with the EU ; the UK needs to apply for full membership with the WTO at the same time . Then it needs to start negotiations with the 53 countries with whom the EU currently has free trade agreements , as all those agreements will no longer apply to the UK when the country leaves the EU . It seems fair to expect that most of those potential trade partners of the UK want to know a bit more about the modalities of the future EU – UK relations . but would be the self-abandonment of the EU , and thus will not happen . Given the worrisome state of the union and given national preferences of some member countries , it may well be the case that the European Council with the support of the Parliament eventually offers the UK a deal that would give the UK the right to control free movement from within the EU not only for a brief period and under certain conditions , as offered to the country prereferendum , but for a longer period without a precise criteria catalogue . Such an offer would simulate the exemption countries like Germany and France negotiated at the time of the Eastern enlargement . Such a deal would present a bad equilibrium , though , that , on the one hand , is not reflecting the initial Brexit intentions and , on the other hand , would make the EU an even more fragile entitythat is easy game of national politics . In the EU , where German Chancellor Merkel very much sets the course of the ship , such a deal should not be discarded easily , yet it would be a deal that turns the EU into an increasingly useless entity .
Brexiteers may make the case that neither the Norway model nor the WTO model actually are realistic paths forwards . Rather , they are optimistic that the EU will treat the UK as a special case and will be much more willing to compromise . A hardcase special deal would be to allow the UK unlimited access to the common market and , at the same time , exempt the country from free movement of people . Of course , such a special deal is in the interest of UK
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