Learn the difference between a hard Brexit and a soft Brexit in just four minutes

The 'Norway model', a WTO default - IBTimes UK untangles the jargon in a look at the UK's options.

In a related video, PM May says a running commentary on EU talks 'would not be right'Reuters

The distinction has been outlawed by Theresa May, but talk of a "hard" and "soft" Brexit persists. Not least on Wednesday 29 March, when the prime minister invokes Article 50 and triggers divorce talks with the EU. The contested definitions attempt to explain Britain's future trading relationship with the bloc.

The problem for MPs and voters is that the government has only hinted at what kind of agreement it wants with the EU. Brexit Secretary David Davis has ruled out an "off-the-shelf solution", while explaining May's administration would prioritise immigration curbs over membership of EU's single-market.

Davis' comments have invoked fear of a so-called "hard Brexit". That would see the UK trading under World Trade Organisation (WTO) rules, a default option for Britain as it leaves the EU.

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This option would come into force if the UK splits from the EU's single-market and the bloc's customs union, while failing to negotiate a free trade agreement with Brussels.

The position would give the UK a similar status to Russia or Brazil, who can trade with EU nations but faces tariffs – and vice versa.

The advantages are that Britain would not have to pay contributions to Brussels, would not have to sign-up to free movement rule – a top issue during the EU referendum campaign – and the government would be able to negotiate free trade deals with non-EU nations.

Another problem for the UK is that it joined the WTO as a member of the EU. It is expected, therefore, that Britain would have to negotiate new and updated terms for its WTO membership.

"If we leave the EU, then we would need all other WTO members to agree how the UK will take on the rights and obligations that we have formerly taken as a part of the EU," a UK government paper warned in February.

The Treasury have told ministers this hard Brexit option could cut the UK's GDP by up to 9.5% and see the ministry miss out on £66bn per year in tax revenues, according to The Times.

A similar analysis released by the department in April, ahead of the EU referendum, estimated that tax receipts would drop by £45bn a year under the WTO rules.

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Canadian model

In between the "hard" and "soft" Brexit options is a negotiated bilateral agreement, such as the agreement Canada has made with the EU.

"It will remove customs duties, end restrictions on access to public contracts, open-up the services market, offer predictable conditions for investors and help prevent illegal copying of EU innovations and traditional products," the Canadian government said.

The option offers less favourable access to the single market than the UK currently has as an EU member, but again it will allow Britain to make its own free trade agreements and not commit to free movement rules.

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'Soft Brexit'

Switzerland and Turkey also have their own deals with the EU, with the later signed up to the bloc's customs union. Moving to a "softer" Brexit, there is membership of the European Economic Area membership (EEA).

The option would see the UK joining the likes of Iceland, Liechtenstein and Norway. Unlike Britain's current terms, the UK would not have complete access to the single market.

EEA membership would grant the country substantial access to the bloc, with the ability to forge its own free trade agreements outside the EU because the UK would not be in its customs union.

However, the option would see the UK signing up to free movement of people rules, contributions to the EU budget and would mean the country does not have any political representation in EU institutions.

The Open Europe think-tank described such an option as becoming an "EU-satellite state". But the Treasury estimated that EEA membership would do the UK the least economic harm, with £20bn a year expected to be lost in tax receipts.

Voters and businesses will have to wait until next year to get more details on what kind of Brexit the UK is going to pursue. May has promised to trigger Article 50, the official mechanism to break from Brussels, by March 2017. Negotiations with the EU will follow.

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