Hard Brexit describes the scenario when UK leaves the EU and its single market and no interim solution or subsequent agreement has been achieved. UK will leave the customs union and becomes a third country from an EU perspective. Under the World Trade Organization (WTO) agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. This principle is known as most-favoured-nation (MFN) treatment. However, as customs unions are exempted from the MFN-clause, UK may not benfit from this special rule. In case of a hard Brexit, customs formalities have to be fulfilled and import duties to be paid.

Also in case of an immediate Free Trade Agreement (FTA) between the EU and UK, which reduces or completely removes customs duties to be levied, additional administrative workload will remain. Further, the EU aims to sign the so-called new generation of FTAs, which are wide and comprehensive. These FTAs do not only concern tariff issues such as suspension of customs duties for origin products, but also consider regulation in services, non-tariff barriers (e.g. import permissions, licences) as well as other commercial aspects like capital investment and competition regulations.

The same is applicable if UK joins the European Economic Area (EEA). This scenario seems to be unlikely, as EEA is a Free Trade Zone between the EU and three EFTA countries (European Free Trade Association – Norway, Iceland, Liechtenstein), which stipulates besides preferential treatment of origin products also certain adoptions of EU-law. The EFTA-countries commited themselves to adopt the “four freedoms” of the European Single Market – free movement of goods, capital, services and labour – as well as EU competition rules into national law, amongst others. This may not be in the interest of the Brexiteers.