However, Britain never joined the EMU and has maintained the ability to set its own independent monetary policy and yet maintained all of the benefits of being integrated into the EU regulatory and free trade zones. This seemed to me to be the ideal situation, as it avoids all of the contagion that comes with being part of a poorly managed monetary union by having a free floating exchange rate with the Euro, while still enjoying all of the benefits of reduced regulation and impediments to free trade. It seems like a sweetheart deal that Britain has, which is why it is so puzzling to me that they would want to reject it.
Anatole Kaletsky makes a number of very excellent points in this article, the first and most important of which is that Britain will never get the kind of deals that Switzerland and Norway have, without exchanging at least as much -- or possibly even more -- sovereignty than they already have to be part of the EU, and they will lose any determination that they presently have over those stipulations. As Kaletsky says, "Norway and Switzerland have accepted wide-ranging obligations to abide by EU laws over which their citizens and parliaments have no influence, as the price for access to European markets—complete for Norway, but limited in the case of Switzerland to products and services defined in over 100 bilateral treaties. Could Britain hope for a better deal post-Brexit?" There will be no better deal than they currently have. I could liken it to the Trans Pacific Partnership that is on the table in the U.S. We have to trade sovereignty and other favors in order to obtain less restrictions on trade in the Pacific ring, there is simply no way around that. It is how global diplomacy works.
Secondly, the Brexit (British exit from the EU) would necessarily be a messy breakup filled with all of the trappings of a divorce, the hatred and spite, the vengeance, and the desire to punish. Even from a purely pragmatic standpoint, the Germans and French will seek to punish Britain for leaving the EU if only to prevent further states from exiting. The deals that Britain receives post-Brexit will not be fair or generous, but punitive and driven by vengeance.
Third, France and Germany will be more than happy to replace London as the center of trade in Europe as the gateway to the European market. By breaking of the present structure, "London would surely lose its role as Europe’s financial hub and would thereby lose its dominance of the world’s most attractive time zone, with working hours overlapping both America and Asia. Most euro-denominated financial activity would likely move to Paris or Frankfurt, while asset management and other activities subject to EU regulation would move to Luxembourg or Dublin." Free market forces will dominate over any kind of manipulation by Britain in attempting to improve its trading status with the EU.
Fourth, Britain's trump card (ironic considering that the Republican Presidential candidate is pushing the same ideology) is imposing tariffs on European goods and holding trade with Europe hostage until specified conditions are met. Starting trade wars to attempt to artificially fix domestic issues is not a strategy that works well, and the secondary and tertiary costs to trade wars are more significant than the domestic issues that they are trying to fix. They are playing games in attempt to avoid actually resolving domestic issues by pushing those problems abroad, in a manner very similar to the beggar-thy-neighbor currency manipulations played by the EU, Japan, the US in 2008-2014, and many other nations to lesser degrees.
All of these points will coalesce into a bleak reality for the British in a post-Brexit world. Leaving the European Union is not the right answer for the British. It will not fix any of the domestic problems, only hamper any benefits currently enjoyed by membership in the EU.
http://www.prospectmagazine.co.uk/features/why-brexit-could-be-britains-biggest-diplomatic-disaster
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