Will Britain be Norway, Switzerland or Canada? The trade deals the UK could follow to strike a Brexit deal with the EU

Now that we've voted ourselves out of the EU, it's time to work out how we're going to trade with all its 27 member countries in future - and the rest of its trading partners.

Altogether, that's more than 50 countries. And since 90 per cent of future global growth 'will happen outside Europe's borders', according to the European Commission, and the fact it's already taken Canada seven years of negotiation to forge a trade deal with the EU, we'd better get cracking.

So how do other non-EU members trade with the EU bloc and would any of their models suit us?

If money makes the world go round then protecting free trade should be a priority for an independent UK

There are several main models to consider and these include replicating how other European but non-EU member countries do it, such as Norway and Switzerland. 

We can also look at how the EU trades with other countries across the rest of the world such as Canada for inspiration. Or what about the default option for global free trade - the system devised by the World Trade Organisation?

Here's how each model works. 

The Norwegian model

Fishing is one of Norway's key industries and salmon farming in the Lofoten Islands is big business

Norway is not a member of the EU but it is part of the European Economic Area, which is what gives countries access to the single market and free trade.

To enjoy the benefits of free trade, EEA members have to accept the four freedoms of the EU - the freedom of movement for goods and services, people and capital. But they are not bound by other EU policy that relates to the areas of agriculture, social and employment law, justice and home affairs.

Norway is bound by the bulk of EU legislation but being part of the EEA does not enable non-EU members to vote when decisions are made and laws are passed about how the single market operates. So while Norway has the right to sit on certain committees and comment on some areas of EU policy it is affected by, it gets no formal say on what gets decided.

The country also has to pay for admittance to the single market by contributing to the EU through an EEA grant. Slaughter and May analysis referred to data from the House of Commons Library that said in 2011, Norway was the tenth biggest backer of the EU through its per capita contribution of £106, while the UK's was £128.

Once money received from the EU is factored into consideration, further number crunching by InFacts, a journalist-led campaign group backing a remain vote ahead of the EU referendum, found that for 2016, Norway's and the UK's net contributions to the EU were likely to be the same at £96 per head. 

A central part of the Leave campaign ahead of the Brexit vote was concern over the scale of immigration from EU countries to the UK.

As joining the EEA and single market involves the requirement to accept the freedom of movement of workers and citizens, the UK would theoretically gain no more control of immigration of EU nationals than it currently has. 

So while the Norwegian model would give the UK access to the Single Market, it would still cost us approximately the same as it currently does to trade with the EU but we'd have less influence over policies that affect us and would have no more control over immigration. But access to the Single Market could far outweigh the costs.

The Swiss model

The European Commission explains that 'Switzerland's economic and trade relations with the EU are mainly governed through a series of bilateral agreements where Switzerland has agreed to take on certain aspects of EU legislation in exchange for accessing the EU's single market'. 

In fact there are more than 100 bilateral agreements between the EU and Switzerland that govern how trade is conducted. Generally, there is free trade for industrial products made in Switzerland but its banking sector doesn't enjoy the same free trade terms. 

The Swiss have chosen to maintain some protection for its agricultural goods. Other products made in the country are sold to the EU with relatively low tariffs. 

Switzerland is a member of the European Free Trade Association, as are Iceland, Liechtenstein and Norway. EFTA describes itself as 'an intergovernmental organisation set up for the promotion of free trade and economic integration to the benefit of its four Member States'.

They trade freely with each other and have free trade agreements in place with Canada, Central American states, China, Singapore and many others - as well as the EU.

Switzerland exports far more goods and services to the EU than it imports from the trading bloc

To have access to the European single market, Switzerland has to accept the free movement of people and contribute financially - billions of pounds - to many European projects, including social and research programmes, and comply with some EU legislation.

However, two years ago, Switzerland held a referendum of its own and its people voted to curb the free movement of people. While the change has yet to be implemented, the EU reacted by stopping Switzerland benefiting from some of the programmes it had been financially contributing to - particularly research projects which has affected universities and students. 

So if the UK were to follow Switzerland's lead, we'd still spend a fortune on EU projects to enjoy access to the single market and while we might be able to curb immigration, we may be forced to pay for it in other ways.

The EEA model

The European Economic Area is sometimes referred to as the single market, as it encompasses all the countries that are part of Europe's free trade area, with the exception of Switzerland.

All members of the EU automatically become members of the European Economic Area, giving them access to the single market.

Three EFTA members, Iceland, Liechtenstein and Norway, are part of the EEA too. As outlined above, Switzerland has forged separate bilateral trade agreements with the EU to allow it to participate in the single market in some areas.

The European Parliament explains: 'The EEA was formed in 1994 in order to extend the European Union’s provisions on its internal market to countries in the European Free Trade Area.

'The purpose of the European Economic Area is to extend the EU’s internal market to countries in the European Free Trade Area. These countries either do not wish to join the EU or have not yet done so.'

Law firm Slaughter and May explains that the EEA agreement 'covers the adoption of EU legislation in the agreed policy areas including the four freedoms, but not areas including policies such as those relating to agriculture, social and employment law, justice and home affairs'. 

Britain could seek to become a member of the EEA but not the EU and keep hold of access to the single market.

This could retain British citizens' right to live and work across the countries operating in the single market.

The nation's businesses would also be able to trade freely with those countries and access the market's more than 500 million consumers.

We wouldn't be part of the EU and have to commit to ever closer political union, as most of its members do. We could also potentially impose some controls on immigration to the UK, a cornerstone of the winning Leave campaign, although this would be subject to fierce negotiation.

However, our financial services sector could also be hampered by joining the EEA by the lack of cohesion regarding regulation across the single market that sees members unable to sell their services across all single market members.

The concern is that being unable to shape legislation in this area, the UK will not be able to bring about favourable trading conditions for its financial sector, which accounts for 8 per cent of GDP and 3.5 per cent of employment.

The Canadian model

Heading over the brink? Maybe the Canadian model for trading with the EU offers some hope for the UK

For the past seven years, Canada has been locked in negotiations with the EU over a free trade agreement - and to many people it has appeared to a possible indication of what may be possible for a future UK trade deal.  

The legal framework for the Comprehensive Economic and Trade Agreement between the EU and Canada was drawn up in late February with EU Trade Commissioner Cecilia Malmström and Minister of International Trade of Canada Chrystia Freeland heralding it as representing 'the new global standard of progressive trade agreements'. 

As a result of the deal, around 99 per cent of import tariffs (with the exclusion of some agricultural products) are set to be axed within seven years of the agreement coming into force and imports and exports of goods and services between the two parties are expected to rise by 23 per cent, or €26 billion, a year.

Both parties have also agreed measures to reduce technical barriers to trade such as aligning certain regulations and product standards to make companies more competitive in both the EU and Canada. This lowers costs for companies, for example removing the need to test products to prove they comply with each country's standards.

Other measures include allowing both parties to bid for government contracts and Canada has guaranteed to EU financial service providers that its existing framework 'will not become more restrictive with regard to the provision of crossborder insurance, reinsurance and intermediation, as well as portfolio management services'. And the deal confirms that the EU and Canada fully preserve their right to regulate.

On the sticky subject of movement of people, the agreement stops far short of free movement. Instead it includes a clause for ‘temporary entry’. Companies will be able to transfer staff between both Canada and the EU. Both Canada and the EU have undertaken to allow companies to post their 'intra-corporate transferees' to Canada for up to three years - regardless of their sector of activity. 

And the agreement guarantees for the first time that intra-corporate transferees may be accompanied by their spouses and families when temporarily assigned to subsidiaries abroad.

Canadian and EU nationals who provide a service as so-called ‘contractual service suppliers’ or ‘independent professionals’ will be able to stay in the other country for up to 12 months instead of the previous six months.

The agreement has been translated into the 22 EU treaty languages ever since with the aim of having it signed by the European Parliament and Council this year and coming into effect in 2017. But the deal has just hit the skids. 

Canadians have been dealt a major blow as in the wake of Brexit, the European Commission has decided that all national parliaments of EU member states will have to ratify the deal.

It took five years for them to ratify a deal with South Korea.  

The move follows pressure largely from France and Germany for national governments to have a say on the Canadian deal, which is seen by many as laying the ground work for the Transatlantic Trade and Investment Partnership between the EU and the US, which has also been in the pipeline for years. 

A lot of the proposed Canadian model could be attractive to Britain in forging its deal with EU - the removal of tariffs, reduction in technical barriers to trade, flexibility to transfer staff abroad (all of which we already enjoy). And we would also be able to tighten the rules on how long foreign workers can stay in the country, which may appease some Brexit voters whose concerns about immigration lead them to vote 'out'. 

However, what the Canadian deal lacks in concrete rules for the way financial services companies will be treated when trading with the EU. There's no mention of anything like 'passporting', whereby a company authorised by the relevant financial authorities in any European Economic Area (EEA) state is entitled to conduct its business in the same way in any other EEA state by either setting up a branch or subsidiary. So if we went for the Canadian approach, we'd have to add this consideration to the negotiations - and this is where the EU is most likely to demand compromise on the free movement of people. 

The US model

The US-EU deal will be worth billions of dollars

EU member states gave the European Commission the formal nod to begin trade negotiations with the US in 2013. A legal agreement is still some way off, as the EU continues to ensure 'TTIP [Transatlantic Trade and Investment Partnership] can't be a deal at any price', or so says the Commission's website. 

Terms currently being mulled over include cutting or scrapping customs taxes on goods flowing both ways and measures to make it easier to sell services and investment in US, such as putting in place rules that cut or scrap altogether limits now in place on how much an EU shareholder can own of a US company. 

Other possible measures include whether to let EU firms bid for US public contracts while safeguarding EU governments' right to run public services as they wish and agreeing rules that determine where a product is from. 

While free movement of people is not on the table, the EU does want to improve workers' mobility. It wants them to be able to enter the US more easily and to enable professionals, such as architects, to practise on either side of the Atlantic by recognising each other's qualifications.

As per the Canadian model, the UK's Brexit negotiators would likely want to replicate a lot of the proposed measures in this potential US/EU agreement - particularly the easing of restrictions for financial services companies. 

People would still be able to move between the UK and EU to live in work but it would be under far stricter circumstances than it is now. It would be far easier for highly skilled workers than those in lower-skilled professions to relocate, which could make life harder for British companies who recruit lots of EU nationals such as carehomes, and even the NHS to some extent, to fill vacancies. 

The WTO option 

If we decide to truly pursue our own course and forge a free trade deal with the EU, or anyone else for that matter, the default model for 'free trade' around the world is based on a set of five principles laid down by the World Trade Organisation. But note, while 'free trade' is the objective, the immediate priority is fair play. Tariffs and other types of protectionism are allowed in some circumstances.  

These are:

1. Trade without discrimination - this hinges on the 'most-favoured-nation' premise, which means countries cannot normally discriminate between their trading partners such as granting one a special favour (lowering customs duty, for example). If you change your policies for one partner, you have to do the same for all other WTO members - though certain exceptions apply. It also follows that members are expected to agree to 'national treatment' - treating foreigners and locals equally. But this rule only applies to goods and services once they have entered a market so countries could impose customs duty on those coming in from abroad.

2. Freer trade gradually, through negotiation - by lowering trade barriers such as customs duties, quotas and red tape. 

3. Predictability: through binding and transparency - the WTO explains: 'Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition — choice and lower prices.' 

Put simply, countries are not obliged to offer free trade in all circumstances but, to aid transparency, 'binding' commits them to the pledges they make to trading partners.

The bindings can be changed but only after negotiations with trading partners - which could include compensation for loss of trade.

4. Promoting fair competition - this is a complicated area given the subjective nature of fairness. There are many WTO rules that try to establish what is fair or unfair. They include rules on 'how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade', according to the WTO.

5. Encouraging development and economic reform - the WTO tries to encourage and facilitate developing countries. So while they are are expected to accept most of the obligations required of developed countries, they are given more leeway in how long they take to implement certain rules. 

The UK will obviously want to negotiate as much free and fair trade as possible with the EU (and its partners who we currently trade with by piggybacking on the agreements they have forged with the EU), but the WTO rules are no way near as advanced as the agreements we currently have with the EU. They're just a starting point - at the very least. 

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