MOST OF THE alternatives to full membership of the EU are unattainable, unappealing or both. The EU will not disappear as an institution or a big market. A post-Brexit Britain will have to form a set of trading and institutional relationships with it. The uncertainty is over what these would be—and how long they might take to negotiate. Article 50 of the Lisbon treaty, which allows a country to leave, talks of two years for a deal, but to anyone who knows Brussels that seems optimistic.

Broadly, there are five models to choose from. The first is to join the European Economic Area, a solution adopted by all but one of the EFTA states that did not join the EU. But the EEA now consists of just one small country, Norway, and two tiddlers, Iceland and Liechtenstein. The second option is to try to emulate Switzerland, the remaining EFTA country. It is not in the EEA but instead has a string of over 20 major and 100 minor bilateral agreements with the EU. The third is to seek to establish a customs union with the EU, as Turkey has done, or at least to strike a deep and comprehensive free-trade agreement. The fourth is simply to rely on normal World Trade Organisation (WTO) rules for access to the EU market. The fifth, preferred by most Eurosceptics, is to negotiate a special deal for Britain alone that retains free trade with the EU but avoids the disadvantages of the other models.

In his Bloomberg speech Mr Cameron expressed doubts that either the Norwegian or the Swiss model would be in Britain’s best interests. At first sight that seems surprising. A visitor to the Norwegian capital, Oslo, finds himself comfortably ensconced in one of Europe’s richest and most successful countries, and one that controls its own fisheries to boot. Switzerland is almost as rich (even though it lacks Norway’s oil and gas), its capital, Bern, is prettier and the food is better. Over the past 20 years both countries have grown faster than the EU average. Yet the visitor also hears that both are on the brink of recession, and neither is satisfied with its relationship with the EU. Most politicians in both countries urge Britain not to follow their example.

The EEA option at least has the merit of being potentially available to a post-Brexit Britain (although Norwegians might not be happy with a large new member unbalancing their small club). Norway has full access to the EU single market for goods and services without having to participate in the CAP or the common fisheries policy. But in return it must abide by all the EU’s single-market rules without having any say in drawing them up. It is also, as a member of the Schengen area, obliged to accept free movement of people from the EU. And even though it is not a member of the club, it has to make so-called solidarity payments into the EU budget which, in net terms per person, add up to roughly 90% of Britain’s own contribution.

Norway’s beefs

Many Norwegians are unhappy with this. A few years ago the government invited a group of academics under the chairmanship of Fredrik Sejersted (now the country’s attorney-general) to examine Norway’s relationship with the EU. Mr Sejersted and his colleagues reported that it raised serious democratic concerns because Norway was forced to implement laws that it had no say in making. One way to put this right would be to join the EU, but Norway has twice rejected that option. Ulf Sverdrup, director of the Norwegian Institute of International Affairs, who was secretary to the Sejersted committee, notes that over 70% of the Norwegian public are still against joining.

The practical disadvantages of EEA membership can be striking. Vidar Helgesen, Norway’s Europe minister, says that because his country is not represented in the Brussels institutions, it often finds it difficult even to discover what laws are being proposed and adopted. Kristin Skogen Lund, director-general of the Confederation of Norwegian Enterprise, cites the example of OSO Hotwater, a maker of hot-water tanks, which faced considerable challenges a few years ago because an EU directive unilaterally discriminated against large electric water heaters.

The EU also tends to ignore Norway’s special interests, notably the Arctic, and the country’s fishing industry is benefiting less than it had hoped from remaining outside the EU’s common fisheries policy. That was a key reason why Norway rejected full membership in 1972 and again in 1994, but a shift from wild to farmed fish has meant that exports to the rest of Europe have become a lot more important to its fishermen. Under the EU-Canada trade accord and the prospective Transatlantic Trade and Investment Partnership (TTIP) deal, its rivals Canada and America may win better access to the EU fish market than Norway itself. No wonder that Mr Helgesen, like Mr Sejersted, advises the British to steer clear of the Norwegian model at all costs.

What about Switzerland? The Swiss rejected EEA membership in 1992. Since then they have laboriously negotiated two sets of bilateral deals with the EU, one adopted in 1999 and a second in 2004, that give them partial access to the EU single market. This arrangement, unlike the EEA, is not dynamic: changes in the rules have to be separately negotiated and implemented, and there is no procedure for adjudicating disputes and no provision for sanctions. (Indeed, that is one reason why the EU would be extremely reluctant to negotiate anything similar with Britain.) And yet, as one pro-European MP, Christa Markwalder, puts it, the Swiss are in practice obliged to pursue a path she dismissively describes as the “autonomous implementation of EU regulations” over which they have no say. Switzerland also has to pay a tidy sum into the EU budget, though its net contribution per person is only about half as big as Norway’s.

A Swiss role

Switzerland does not have free access to the single market, notably for services, including the financial sort

Worse, unlike Norway, Switzerland does not have free access to the single market, notably for services, including the financial sort (except for non-life insurance, which is covered by a separate agreement). This means that big Swiss banks have to establish separately capitalised subsidiaries inside the EU, usually in London, to sell services inside the single market. Smaller Swiss financial firms find it increasingly hard to do cross-border business in the EU. Given the weight of financial services in Britain’s economy, the loss of automatic access to the EU market would be a big drawback.

Part of the price of even the limited access Switzerland has to the EU market is that, like Norway, it has to accept the free movement of people from the EU. In both countries the share of the population that has come in from the EU is a lot bigger than in Britain. In a referendum in February 2014 the Swiss voted to restrict immigration from the EU, starting in February 2017. That has landed their country in big trouble with Brussels. Their government says it is negotiating with the EU, but its bargaining position is weak. The EU refuses to accept the restrictions, and the Swiss know that if they impose them unilaterally, many of their other bilateral deals will lapse. The flow of student finance and research money from the EU has already been interrupted. The EU is playing it tough partly because it knows that any concessions to the Swiss on free movement would quickly be seized on by the British government. It has also insisted that Norway and Switzerland must take a fair share of the asylum-seekers now pouring into the EU, or face penalties.

Would a customs union like the one with Turkey offer more attractive prospects? The Turkish deal was designed as a precursor to possible EU membership. On its own, it would be unsatisfactory. Tariffs and other trade rules for third countries are set in Brussels without any Turkish input; services are largely excluded; and Turkey has to comply with all EU trade arrangements and apply most EU single-market directives and regulations. If it fails to do so, it can lose market access or face anti-dumping duties.

A deep and comprehensive free-trade deal (like those struck by some east European countries that are not in the EU) might be better for Britain, but it would have drawbacks of its own. The deeper and more comprehensive it set out to be, the more the EU would insist on full compliance with single-market rules and regulations. It would cover goods, notably manufactured goods, but not most services. To retain access to the EU for financial services, in particular, would require Britain to apply almost all the EU’s laws and regulations for the industry. The advent of TTIP would complicate matters even further. Yet again, it would require observance of standards and trading rules over which Britain would have had no say.

The fourth option is for Britain simply to apply the normal trading rules of the WTO, as most other countries do with the EU. It would not be obliged to implement EU rules and regulations or to accept the free movement of people, nor would it have to pay into the EU budget or be part of the CAP or the common fisheries policy. But there would be many disadvantages. Services, including financial services, would not be covered. Non-tariff barriers would be harder to resist. And although tariffs themselves are much lower than they used to be, some significant ones remain: the EU currently imposes an import tariff of 10% on cars and 5% on car components, along with around 15% on food and 11% on clothing, among others. If Britain relied only on a WTO-type relationship, it would not be able to avoid these tariffs.

That is why those who want Britain to leave the EU are touting a fifth option: a new special deal tailored to Britain’s size and importance. A post-Brexit Britain would be the biggest single market for the rest of the EU. The Out crowd reckon that, as the world’s fifth-biggest economy, it would have far more clout than Switzerland, Norway or Turkey. They also point out that Britain runs a large current-account deficit with the rest of the EU: as one Eurosceptic puts it, since they sell more goods to us than we do to them, they have an even stronger interest in a free-trade deal than we do. The German car industry, says another, would soon put paid to any talk of tariffs on cars. In short, the Eurosceptics believe Britain would be able to negotiate a form of EEA lite: full access to the single market without observing all the EU’s rules or contributing heavily to its budget.

It does seem likely that a post-Brexit Britain would be able do some free-trade deal with its largest trading partner. Yet judging by the Swiss example it could take many years to negotiate, and it might not be anything like as favourable to Britain as Eurosceptics hope. The argument about the current-account deficit is misleading, for two reasons. First, what matters is the relative size of the market, and the EU would be almost half of Britain’s export market, whereas Britain would be only 10% of the EU’s. Second, almost all of Britain’s deficit with the EU comes from trade with Germany and the Netherlands; other countries depend much less heavily on exports to Britain, but every one of them would have to approve a new special trade deal.

There is another consideration. All the EU’s trade deals with its neighbours, including Norway, Switzerland and Turkey, were done on the assumption that they might eventually lead to full membership. A post-Brexit Britain would be travelling in the opposite direction (and also depriving the club of a chunk of money). Just as a book club offers a free book only to those who might join, not to those who have left, the EU would have little incentive to be generous to Britain. Indeed, it would have an incentive not to be, lest it encourage others to make for the exit as well.

So at best, Britain’s relations with the EU after Brexit would be deeply uncertain, which would discourage foreign investors. At worst, they could prove more unsatisfactory than they are now, leaving both Out and In campaigners dissatisfied.