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  July 28th, 2016 | Written by

What Will a Post-Brexit UK-EU Relationship Look Like?

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  • The UK-EU future relationship will be determined in upcoming negotiations.
  • EU demands of the UK may rub some British politicians and voters the wrong way.
  • Valdis Dombrovskis, vice president of the European Commission: “The first step now needs to come from the UK.”

Now that voters in the United Kingdom decided to opt out of the European Union, their future relationship will be governed by an agreement which will be the subject of upcoming negotiations.

If the UK expects a free-trade agreement with the EU, it is going to have to accept EU principles, and that may rub some British politicians and voters the wrong way. One of the reasons cited for the Brexit vote was the influx of immigrants from elsewhere in Europe, and yet that is exactly what the EU would expect of the UK in an FTA.

“Access to the single market would require the UK to accept four freedoms: free movement of goods, services, capital and labor,” said Valdis Dombrovskis, a vice president of the European Commission, in remarks before the Atlantic Council in Washington earlier this month. “The first step now needs to come from the UK.”

In other words, the UK can’t have it both ways. It can’t exit the EU and yet try to pursue an FTA with the union while executing an immigration policy that is inimical to the Europeans.

“Our immediate focus is to deal with the uncertainty arising from the UK vote,” said Dombrovskis. “The EU economy has what it takes to cope with the downward pressure on growth the referendum has created.”

Preliminary assessments indicate that the uncertainty stemming from Brexit could reduce the UK’s GDP by one to 2.5 percentage points by 2017. In the other 27 member states, the downward slide could be on the order of 0.2 and 0.5 percentage points.

“If we respond with the right policies we will be able to limit the impact of this adjustment,” said Dombrovskis. “That should be the main goal for both sides in the upcoming negotiations.

The new UK government will presumably be setting out what it wants from a future relationship with Europe in the near future. “That would give us more predictability and a basis on which to negotiate,” said Dombrovskis.

Dombrovskis sees the remaining EU member states as showing a strong commitment to stay united. “This is a feeling that extends well beyond political leaders,” said Dombrovskis. “In Germany, opinion polls last week showed a 13-percent increase in support for European integration. There’s similar sentiment in other countries. And none of Europe’s core strengths have disappeared. Europe’s talent for innovation is still there. Our industry is still competitive. Our workforce is still highly productive.”