Wednesday, September 19, 2012

Suppose the UK leaves the EU by default?

Over the last week the global financial crisis, as it affects Europe, has changed direction. Several of the critical uncertainties that were dogging the Euro have now been resolved. The German constitutional court has ruled that German participation in the current rescue plan is legal, and that future plans are a matter for votes in Bundestag. The Dutch electorate have sung solidly behind pro-EU parties, and the European Central Bank has begun to deploy substantial firepower directly in the markets.

The countries that have advocated greater Eurozone integration seem to be winning the argument, and the focus of debate has moved on towards how and not whether a new European Federation can be constructed.

Many on the right in the UK are determinedly contemptuous of these increasingly dramatic developments. As at the Messina Conference, where the founding members of the EEC sent Ministers, while the UK sent a junior civil servant, the UK has- by default- taken a decision not to be involved in a major question of European integration. There has been no real discussion, but over the course of the past five years, Britain has essentially withdrawn from about half of the activity of the European Union. The list of projects that the UK is not involved with includes, of course, the common currency but also the common visa zone- where several non-EU members, such as Switzerland and Norway are members. The UK is also opted out of large chunks of common policy, from fundamental human rights, to administration of justice. Although Denmark has the same number of opt-outs as the UK, in practice it co-operates with the rest of the EU in these second areas, and is of course a member of the Schengen zone. In other words, Britain is already the least engaged member of the EU.

If we listen to Liam Fox, then this semi-detached status is no bad thing. Indeed, Dr. Fox suggest that the UK should completely withdraw from any EU activity that he deems "political".

Yet the idea that the EU should simply be a "common market" and nothing more is already 25 years out of date. The scope of integration and engagement is already "political", and it will become ever more so. The majority of EU member states expect far greater integration, with the "political" disputes being how best to achieve this integration.

The British right wing, of course, views this with horror. It is very easy to portray the EU as some kind of enemy, and the lazy journalism of discredited newspapers find "Brussels" a convenient Aunt Sally for the UK's own problems. When Dr. Fox blames Brussels for the economic crisis, he presumably does not hear the storm of protest in the rest of the EU that firmly blames the irresponsible banks and their loosely controlled businesses based in London for the fiasco. When the British try "to defend the City of London" they become extremely unpopular, since the City has become, however unfairly, the lightening rod for discontent and anger about the Banks. 

This is certainly not reported in the Daily Mail.

The fact is that British opinions are increasingly ignored. Worse, they are actively discounted. Many member states find the British detachment from the rest of the EU a symptom of bloody minded arrogance, and are not too concerned about whether the UK packs up its toys and leaves the EU altogether or not. The Germans regard British comments on the Euro- "told you so", with something approaching cold fury. The constant British inability to see Germany as a modern democratic state, but simply as the progenitor of two wars, has helped to turn Berlin into a political opponent. Yet long standing friends in Scandinavia, for example, are no longer inclined to defend the British positions, still less associate themselves with them. The UK has few friends- and given the poisonous nature of the British media, there is virtually no understanding in Britain as to the true nature of European debate. Founded on mistrust and ignorance, the megaphone diplomacy of the British Right has alienated even our friends.

Now it would take years for even a government in London that was sympathetic to a goal of greater EU integration to acquire the political heft to do more than meekly agree to the decisions of those countries that have already functioned for decades in EU systems that the UK opted out of. 

Britain could not catch up in the next ten years.

Yet a European Federation could be a reality within a decade. 

If we listen to Dr. Fox then the British would say that we would simply treat our relations with such an entity in the same way as we deal with China or the United States. Yet the UK is massively economically integrated with the wider European economy: we trade more with Ireland than we do with all of the BRICS: Brazil, Russia, India, China combined. We are dependent on the European markets to a huge degree, which is why, in the end, we took the decision to join the EEC in 1973, sixteen years after the first Treaty of Rome was signed, and would have joined earlier, if we could have done so.

Dr. Fox and the Tory Right have a naive vision that, freed of the EU "yoke", Britain could become a free market "privateer" economy. Yet that implies massive economic change. The country would, for a star,t need to maintain confidence through much tighter control of the government finances than it has done at any time over the past 60 years. Real deficit and debt reduction would probably be needed, and that would been a radical shift in the funding of, for example, the NHS and pensions. Light touch regulation would have to be quite subtle, since the country could face accusations of "dumping" if regulations are deemed by our largest markets to be insufficient. Interest rates too, for a much smaller economy than the new Federation, would probably be higher- giving a structural problem of how to compete with the new Federation. 

A "privateer" economy might end up far less competitive than that of the new Federation. After all in the 1960s, the UK slipped ever further behind the then six members of the EEC, and that could well be the reality again. The difference is that the Federation will embrace substantially all of the current 27 members of the EU. There is no EFTA comfort blanket for the UK to cling onto this time.

I believe that it is time to bring the British European debate into the open. The policies of the Tory right have already cost the country respect, influence and a lot of money. They could end up costing us a whole lot more. I believe that we need a national debate about our whole relationship with the rest of the World, not merely the EU. 

In the end I believe that "privateer Britain" is a mirage. We have far more to gain as a member of the EU, fully engaged with all of its activities, than as a sulky and petulant stand-out. I think it is better to recognize this now, than to have to come back in 20 years, meekly pleading to join institutions that we had no part in shaping, and indeed have tried to obstruct.

Of course, in 20 years time given the wide range of opposition the UK has inspired amongst its former friends, it might be more than a General de Gaullle saying "Non". 

We risk being shut out for all time.  We must not let that happen without at least a real debate.

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