UK election throws up wider array of Brexit alternatives

By PAN PYLAS Markets Associated Press

Prime Minister Theresa May had hoped the election would provide more certainty to Britain's exit from the European Union. Her failure to even retain a majority has delivered anything but, throwing up an even wider array of Brexit scenarios.

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One analysis of the vote's outcome points to a "softer" Brexit, one that leaves Britain with some degree of privileged trade access to the EU's massive, tariff-less single market. A diminished Conservative Party had been threatening to break away completely from the EU's single market, but could now have to compromise.

The Conservatives will need the support of Northern Ireland's Democratic Unionist Party to govern, and the opposition Labour Party, which has been more outspoken against a "hard" Brexit, has been emboldened.

By contrast, Britain's minister in charge of the Brexit talks, David Davis, expressed no such signs of compromise this week.

The stakes are high: 44 percent of British exports in 2015 went to the EU while 53 percent of imports came from the bloc.

It's nearly three months since May formally triggered the two-year Brexit timetable. With any final deal requiring the lengthy approval of EU and national legislatures, most think a deal to leave the EU and negotiate new relations will have to be concluded by the autumn of next year.

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Despite May's quip that "Brexit means Brexit," the reality is that there are many shades of Brexit and they all appear to be back in play following the election.

Here's a guide to some of the alternatives.

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WTO OPTION

Though May backed "remain" in last June's referendum, she became a Brexit advocate on becoming prime minister soon after.

Her tough stance in the run-up to the election — no deal on trade was better than a bad deal, she often said — raised fears Britain was heading for "hard" Brexit. That would see Britain crash out of the EU and have to pay tariffs on exports and comply with product standards and safety regulations as a condition of selling in the post-Brexit EU market of 440 million people.

It's a possibility that many, including Davis, say would be a worst-case scenario.

In such a case, Britain would trade under rules devised and policed by the Geneva-based World Trade Organization. Under these rules, Britain would not be able to trade with its former EU partners on terms that are more advantageous than other countries that do not have trade agreements with the EU, such as the United States.

Many pro-Brexit campaigners think there's nothing wrong with this option, arguing that a proper cost-benefit analysis should incorporate potential gains from trade deals eventually negotiated with non-EU countries. Britain, they add, could also take a lead in reducing tariffs to lower costs for its businesses.

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DOING A NORWAY

Since the election, many observers have argued that Britain should look to remain in the EU's tariff-free single market — the "soft" Brexit option. May and even some in the Labour party say that's not possible as one of the main motivations for leaving the EU is to clamp down on immigration. The EU says Britain cannot block EU migrants but also retain the privilege of being a full member of the EU single market.

Britain could look to the example of non-EU states Iceland, Liechtenstein and Norway. They are part of the European Economic Area, which was established in 1994 as a way of allowing non-EU countries to be members of the single market. Britain could join the EEA but that would mean abiding by rules prescribed by others, including on the free movement of people, and remaining subject to rulings by the European Court of Justice. It would also mean continued payments into the EU coffers.

For many Brexit advocates, these conditions would be impossible to accept as the referendum was largely about getting back control over the country's laws from the EU.

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OR A SWITZERLAND

A more bespoke arrangement could see Britain going down the route chosen by Switzerland, which has struck deals with the EU on trade and other matters.

May has said she would prefer this route, ideally getting a free trade deal.

History suggests that such trade deals can take a long time to cobble together and are often patchy — Canada's recently concluded one with the EU took seven years and didn't cover the services sector.

For its part, Switzerland has had to accept free movement of people in return for access to the single market in goods, though not services. And there have been hiccups. The country's decision in 2014 to introduce restrictions on the free movement of people prompted the EU to cut off funding for student exchange schemes, for example.

Many proponents of a compromise Brexit think the Swiss example may be the best for trade, through a series of bilateral deals that would need to include services, by far the biggest component of Britain's economy.

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OR EVEN A TURKEY

A final alternative would be to follow the example of Turkey.

It is not part of the EU or the EU single market, but is part of what's called the customs union. That means many of its exports, but by no means all, don't face a charge when sold within the EU. Industrial goods coming in from non-EU countries are charged a tariff, however — the charge on cars, for example, is 10 percent.

The big drawback is that Britain, if it were to replicate the Turkish deal, would have no say in setting the rules of the customs union. It would also constrain Britain's ability to carve out trade deals beyond the EU, as May has said she wants to do.

All in all, no easy choices and no easy compromises.

So all scenarios remain, including the prospect of no deal. Some, including French President Emmanuel Macron, have said the door remains open for Britain to end up staying in the EU.