(From the archives) Originally posted on January 17, 2012 by markdowe
THE UK AND THE EU
Argument for the UK to leave the EU… The European Union was sold to the British people as an economic proposition. In exchange for giving up a measure of democratic self-government, it was assumed that the UK would be part of a flourishing trade bloc. The credibility of that argument has been seriously eroded – if not mortally wounded – as most British people associate the EU with a loss of sovereignty and a loss of prosperity. The argument for saying that the UK should leave the EU goes much deeper than the euro crisis – though that has certainly damaged the credibility of those EU pragmatists who, a decade ago, were assuring us that we would be ruined if we kept pound sterling. When Britain joined the European Union in 1973, Western Europe accounted for 40% of world GDP. Today that figure is 25%, and in 2020 it is projected to be just 18%. In retrospect, we could not have picked a worse moment to join. Western Europe had grown spectacularly during the three decades after the Second World War, the years of Germany’s Wirtschaftswunder. But following the OPEC oil crisis in the 1970s, it never properly got going again. Far from joining a dynamic market, we have confined ourselves in a cramped and declining customs union. In doing so, we have stood aside from the parts of the world which are still growing—not least the Anglosphere markets to which we are connected by affinities of habit, outlook and commercial practice. The inauguration in the 1950s of the European Economic Community (EEC) allowed a strong case to be made for regional blocs. Now, though, that case has been undermined and overtaken by technology. With the internet having removed the problem over distance, geographical proximity is not an issue in a globalised market in which Capital can surge around the planet at the mere touch of a button. A company located in the UK can deal as easily with one located within its own shores as it can with a firm located anywhere else. London has the benefit of being English-speaking. Others around the world will have similar accountancy techniques and use compatible common-law arbitration methods. The alternative to EU membership is a free-trade arrangement, along the lines of that enjoyed by Switzerland. Under a series of bilateral accords negotiated in the 1990s, along with the more recent Schengen Agreement, the Swiss participate fully in the four freedoms of movement of the single market – goods, services, people and capital. However, the Swiss are outside the common agricultural and fisheries policies and the EU’s political structures, and pay only a token contribution to the EU budget. Whilst true, of course, that Swiss exporters must meet EU standards when selling to the EU – just as they must meet standards when selling to anybody else – they are not obliged to apply every EU directive or diktat to their domestic economy. But, critically, they are also free in signing trade accords with third countries, and often do so when they feel that the EU is being pedantic or excessively protectionist. Britain, by contrast, is bound by the common external tariff, and is often prevented from adopting a more liberal position by the interest of a cosseted producer elsewhere in the EU. In 2010, the Swiss exported four times as much per head to the EU as the British did. What credibility does that give to the argument that the UK’s exports to the continent depends on its participation in the EU’s political structures? It can hardly be the case that other member states might discriminate against those exports if the UK were to leave the EU. The UK would still be covered by World Trade Organisation (WTO) and European Economic Area (EEA) rules. More to the point, perhaps, is that Britain’s trade with the EU, which was in surplus before it joined, has been in deficit in all but one of the subsequent years. In 2010, the UK ran a deficit of some £52.4 billion with the EU, but a net surplus of £15.7 billion with the rest of the world. Over the period to which Britain has held membership of the EU it has had a cumulative surplus with every continent except Europe. The UK’s trade deficit would not be a reason for leaving the EU. But it gives the lie to any notion that the other members would seek to restrict cross-Channel trade when they are the chief beneficiaries. Some might say that the EU is showing its age. Essentially, it is a 1950s construct, and is falling rapidly behind in a competitive and globalised world. If Britain were to leave there is nothing stopping it from maintaining its trade links with other countries in the EU, its intergovernmental co-operation and its commitment to the military alliance. Argument for the UK to stay in the EU… The pro-Europeans would start this debate against the backdrop of much negative public polling. Nevertheless, for the UK to cut itself off from a market of some 500m people generating in excess of £10 trillion would not just say we had lost faith in Europe, it would say we had lost faith in the ability of British companies to ever out-compete, out-innovate and out-think their European competitors. To consider how the debate has shifted in recent years, we should look no further than in comparing two ICM polls ten years apart. According to one poll, today, 49% of the public would vote to get the UK out of the EU, against just 40% who would prefer that Britain stayed in. When the pollster asked a slightly different worded question in May 2001, some 68% to 19% of the public indicated Britain should remain a member of the EU, a 49 percentage point lead for the pro-Europeans. One might suggest that there is an implicit propensity among some pro-Europeans to blame the media, or even the voters, for the fact that support has been deteriorating. But are pro-European propositions being rejected because they are not being proposed anywhere near enough in a pro-European way? Not that this will help those advocates win the argument as to why Britain should be firmly embedded within the European Union. For those who support the UK as an active member doesn’t necessarily imply that they will be defending the status quo in Europe or saying that Europe does not need to reform and change. By being part of a wider and integrated union gives a member nation within it influence and real power. There are two dominant arguments that resonate in terms of Britain’s continued EU membership. The first is on access to the single market, and being a powerful voice in shaping rules by which it is governed. Only those who want to compete on low-skill, low-value added production could argue that having access to these markets without a voice in shaping the rules would be sufficient for Britain. But that’s lubricious. Clearly, with a market of 500m people, Britain needs its companies to be competitive, innovative and by being in a position to out-think their competitors across the EU. Having a voice means engaging in a pragmatic way that benefits contributory nations. The position of the British Government has become a little difficult to understand. It is now understood that, despite the prime minister’s assurances, the new draft EU treaty does include references to the single market – but, for reasons not yet clear, David Cameron has decided to walk away from the table. Laws on common standards, educational property and competition need to be underwritten – such as those involving the law, business and financial services, medical technology and within creative industries – but if the UK is not in the room when critical decisions are being made on such matters, it will lose the ability to shape them in a way that is most advantageous to British business. The second most pressing argument for the UK remaining part of the EU relates to finding ways in which the British voice can be heard. In an era of billion-person countries and multi trillion-dollar economies, this is most likely to happen if the UK is part of a £10 trillion economy rather than just a £1.5 trillion economy. The only logical way to change the rules of the game with large emerging economies (such as China) is to work closely with our European partners. That’s the only way, surely, that markets will be prised open in these countries. Political and economic leadership is about doing what you think is right rather than what you think might get you short-term popularity. See also:
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