I have written before that I expect the UK to leave the EU soon (probably during the next Parliament), and that the suggestions that the UK might adopt a position like Norway or Switzerland, as small countries focused on free trade with all on a global basis, seems wrong to me.

A universal free trade posture is what to do if all you care about is the economics.  That's relevant if you are the global hegemon (as Britain was during the high-point of its free trade posture in the nineteenth century) or if you are a small country focused upon building the affluence of your citizens but with few aspirations to mould the world (e.g. Norway or Switzerland).  Imposing tariffs on other countries damages your consumers, by making imports more expensive, and curtails international engagement (reducing the flow/exchange of fruitful new ideas), reducing innovation and long-term growth rates.

A common error is to imagine that a partial free trade agreement, such as a customs union, must at least be progress towards universal free trade.  But that is not necessarily (or even typically) so.  In a customs union there is free trade between the members of the union but a common external tariff towards those outside.  That diverts trade – in other words, relative to unilateral free trade, you trade less with those outside the customs union and more with those inside.  Such trade diversion can be inefficient, and that inefficiency can exceed any efficiencies created by increased trade with customs union members.

Since trade is diverted in this way, it is easy to be confused about the significance of trading.  For example, it is common for supporters of EU membership to say that membership is very valuable because a reasonably high proportion of our trade is with the EU.  But that is to put cart before the horse.  What happens, in fact, is that a reasonably high proportion of our trade is with the EU precisely because we are EU members.  Conversely, it would be a mistake to measure the potential significance of future trading arrangements with, say, Canada and Australia by simply looking at current volumes and forms of trade (even if trade were the main goal of a post-EU relationship with Canada and Australia – which it wouldn't be).  We trade much less with Canada and Australia than we would if we had a unilateral free trade posture.  And the amount we would trade with Canada and Australia under a unilateral free trade posture is much less than if we had a customs union with Canada and Australia.

So unilateral free trade is economically advantageous – it maximises consumer welfare and dynamic innovation.  But if your goal is to build cultural, economic and political interdependence, so as to combine forces with others in projecting your values and ideas around the world, and moving global events, the economic advantages of a free trade posture can be outweighed by the tie-deepening advantages of a customs union or single market programme.  Precisely that trade diversion that might be inefficient economically can be desirable culturally, socially and geo-politically.  That is why state-building enterprises (such as the German unification project of the nineteenth century, or the European Union) often involve customs unions.

Britain has been a player in world affairs these past three and a half centuries.  She has seen several Empires come and go, her influence fall and rise many times.  There is little reason for Britain to shuffle off to her retirement home, now, focusing upon her own comforts and abandoning her power aspirations.  Perhaps being Norway or Switzerland would make us richer.  But that isn't enough.  That isn't what Britain (Britain, not England) has ever been about.  Britain is the world's third or fourth military spender, and probably the second military power.  Her daughters in the Anglosphere and Commonwealth strut the Earth.  Her values and philosophy inform the constitutions and polities of almost every developed nation.  She is set to become the most populous country in Europe by the mid-21st century (treating the Single European State as its members for now), perhaps the third or fourth largest economy.

Thus, Britain's exit from the EU will be a major event in international politics, and what she does next will be of significant interest – especially if what she did next were to seek new allies.  She would offer wealth and dynamism and creativity and cultural richness and be populous (perhaps even keen to export some population).  She should seek the most like-minded allies available, offering living space for further expansion, resources to combine with her enterprise, socio-cultural youth and vigour and ambition to combine with her socio-cultural cunning and experience and deep roots.

In Europe, Britain sought to be European, reflecting our sense of necessary involvement in European affairs in two World Wars and our desire to learn from the European economic dynamism of the 1950s and 1960s.  Post-EU, Britain should seek to be British.  We should seek to build and deepen cultural and economic ties with other British nations, who share our assumptions and history and philosophy (though of course doing so in their own ways), and in combination with which our shared values can still be globally fecund.  Everyone knows who these other British nations are – Canada and Australia (plus New Zealand if we're interested in rounding errors).  A new relationship of equals with our brothers abroad is the most natural follow-on after the end of our EU relationship of equals with our friends near at hand.

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