The EU Referendum in the UK: A very personal view

Unpacking my “Remain” suitcase

I’ve heard plenty of reasons cited for voting “out” – here are my “vote in” arguments, in much more detail.

1. It will be at best bad and at worst catastrophic for the UK economy if our citizens vote “out”.

Leave campaigners take umbrage at this, positing, “We are a great trading nation, and economically we will be the same or better out of the EU”. Not so. We are a great trading nation, and that’s precisely thanks to making pragmatic decisions when presented with important ones, like this referendum.

I am not an economist, but then neither are most people flinging about fantasies about some sort of panglossian world of trade for the UK outside of the EU.

Straightforward facts:

• More than 40% of our trade is with Europe. Perhaps that proportion might be a bit lower in the future, but it’s never going to be below 30%, if only for geographic convenience and the sheer sizes of Germany and France.

There is simply no way that the EU is going to offer us a better deal once we’ve flounced off in a huff. Cross-border service agreements and trade without freedom of movement? I don’t think so. Why? First, all the other EU agreements (e.g. EEA, Swiss) require free movement in exchange for free trade. Second, excluding London’s financial services will only be a big win for Paris and Frankfurt. Expect massive lobbying, pushing hard on an open door to prevent any trade deal including financial services.

Take an example of a German company wanting to be competitive in the UK: BMW may sell so many cars in the UK, but it will be in the EU’s interest to negotiate BMW to sell many, many more cars to the US and China (that’s what really keeps the BMW people in Munich up at night). Also, BMW doesn’t care as much about having tariffs for their expensive cars entering the UK as they do about the market distribution of those tarrifs, and whether they make BMW less competitive as a brand in the UK compared to other car makers. They may lose a little market share if Jaguar continues to have a UK manufacturing base, but it’s not really enough to swing a trade deal one way or the other.

Making new trade deals with China, India and the USA on our terms? The bigger economy always sets the terms, always has done (I refer you to the Swiss/China deal) and always will. The UK might be the 5th (nominal) or 9th (PPP) biggest economy in the world, but the first non-NAFTA, non-EU economy smaller than us (on PPP terms) is South Korea, then Saudi Arabia, Turkey and Iran. Even with those countries, it is very hard to imagine that the EU trade block negotiators will allow a better deal to be struck with the UK than with the EU. Let us please, please not snooker ourselves in a negotiation before we’ve even started. Embarrassing.

• In the best case, negotiations will take around 5 years. It is more likely they will take closer to 10 years. During all that time, our first priority will be to sort our relationship with the EU (where we have ~40% of our trade now).

In the best possible scenario, our new, crack team of trade negotiators will be moving on from their discussion with the EU within 5 years, talking next to South Korea and Turkey, both of which may well be happily bargaining to compete with the UK’s freshly negotiated position with the EU, for another 5 years. Perhaps we’d get a good deal eventually, perhaps not.

Our points of leverage – international finance, pharmaceuticals – have a strong track record of moving their centre of gravity, and multinationals can reasonably be expected to position themselves to minimise the risk of screwing this up and, at the very least, de-emphasing Britain. Far worse, they might be expected to withdraw completely during this time. This would mean even less leverage for Britain, not more.

• In the best case, after 10 years any loss in our economy might be mitigated by freer terms of trade with Turkey, South Korea, Saudi Arabia and Iran (n.b. we will not get a better deal than the EU with NAFTA or China), assuming the EU’s negotiators with those countries tank and really screw up their competitive position.

Really? South Korea, Turkey, Saudi Arabia and Iran? Does this sound like a better alternative to free trade with Germany?

• In the worst case, after 10 years we would be kicked around in trade deals and forced to accept the terms on offer from countries/trading blocks that, understandably, put their own interests first.

None of these countries or trading blocks would shed a single tear over the great trading nation that the UK used to be. They’ll get the best deal for themselves, and move on. That’s what trade negotiators do. Of course this sounds all rather grubby, realpolitik and unfair, but the reality is that, as always, we must choose our battles carefully. Very carefully.

Why on earth would we voluntarily suffer certain short-term pain, and risk catastrophic long term pain? What is the motivation behind this self-destructive impulse?

2. With the current offer, we have our cake and eat it, too.

There are some who argue, “We don’t want to be part of an EU super-state“. This is usually combined with statements asserting, “The EU is undemocratic,” and “We should reclaim our sovereignty“. The dismaying thing about these arguments is that they are part of an old fight, and one that has already been won. Britain is not in the Eurozone, where much of the further integration is happening. The UK is clearly outside – in effect, it leads (or could lead if it wasn’t so self-obsessed) the non-euro component of the EU.

Super-state?

During the 1980s and the 1990s there was an EU roadmap, which had it evolving into an explicit federal structure with a common currency and a political union across Europe. European Heads of State and government leaders decided to attempt monetary union first, before political union. However, a series of events radically changed the course of this strategy, affecting the whole of the EU but the UK in particular. There were three major changes: the treaty of Maastrict in 1992, the French and Dutch referenda on the European constitution in 2005, and the recent agreement brokered by David Cameron for the UK.

The Maastrict treaty of 1992 involved the UK and Denmark’s opt-out of the euro. All of the other EU Member States agreed to either adopt the currency together, or to “eventually” adopt it. The start of the euro was an exciting turning point, as it provided a “fair weather” monetary union and agreements about fiscal policies underpinning it.

It was partly bloody-mindedness and partly thorough economic analysis that got the UK an opt-out of the euro. The UK Treasury argued that a successful currency union required fiscal (i.e. ‘what state spends’) union, and fiscal union requires political union to work properly. For the UK, it was all (monetary, fiscal and political), or nothing. This position was defended during the Labour years by Gordon Brown at the Treasury against the political direction of Tony Blair, an episode often forgotten about Brown’s legacy.

European constitution? Eurozone?

That this monetary union was intended to pave the way for a political union was enshrined in a “European Constitution”, which was put to a vote in 2005. But a resounding “Non” from France and “Nee” from the Netherlands stopped the constitution in its tracks. The Treaty of Lisbon ‘tidy-up’ treaty left the Eurozone with a monetary union but no strong fiscal system. In this state the Eurozone entered the 2008 crash (to be fair, not caused by Europe), when the “fair weather” rules were tested almost to destruction. This unhappy state of affairs is still unresolved today.

Respected economists and political analysts agree that the Eurozone must either break up or become nation-like, with enforceable, federal-scale rules and a quid-pro-quo arrangement whereby wealthier countries fund substantial public works and establish safety nets in poorer countries in exchange for stability. Breakup would involve a reversion to a zone of German influence, wherein countries that trade most with Germany will voluntarily link to its currency (with all the headaches that implies). Frankly, both options look impossible at the moment, but maintaining status quo is equally impossible. Surely, something must give. Whatever happens, the UK remains outside of it all.

Possibly the only major concession secured by David Cameron was an agreement to change the European Union from operating as a single currency block (i.e. euro) with some unmerged secondary currencies (e.g. pound, kroner) to explicitly acknowledging that the EU will be a multi-currency union. This is a profound win. It reverses the part of the Maastrict treaty in which all states except the UK and Denmark were going join the Eurozone. It officially separates the boundaries of the Eurozone from the boundaries of the EU, and limits the Eurozone in regards to regulation of the currency/trade processes. I am sure there is a whole host of technical details about this that I don’t understand, but for sure this is an important change.

So – given all of this – the EU can no longer be considered a ‘European super-state’. The Eurozone might emerge as a ‘super-state of the future’, but the agreement is clear that the UK will not be part of that. The current deal we are being offered is a rather too-good-to-be-true offer.

Many northern Europeans think the UK is already being offered a very sweet deal. Eurosceptics of the 1990s should appreciate this – that there is a free trade area made up of nation states, and it is called the EU. Freedom of movement still a concern? Read on.

Non-democratic?

As for the democratic credentials of the EU, it is not for want of trying, as demonstrated by the European Parliament. National politics (in the UK and in many other places) treats the European Parliament as an irrelevance, a scapegoat and object of derision. But honestly, its structure is no more odd than, say, having the second chamber of a national parliament composed of life-appointed peers and hereditary peers who vote internally on who gets to vote. For the UK to be indifferent to the democratic systems of the EU and then complain about its lack of democracy is a bit weird.

The European Council (confusingly, completely different from the Council of Europe) is where the Heads of State/Government meet, and has equal power to the European Parliament. These democratically elected individuals feel quite strongly about their mandate. There is no pretending that this is somehow a clear governance situation; it has developed organically and, with all its different layers, attempts to balance the different sizes, political styles and cultures of the EU Member States. As a Brit well accustomed to complex constitutions and evolution rather than revolution in government, I find this organic approach somewhat comforting. It’s certainly more baroque than many (most?) systems, but it’s hardly unique in Europe, where the accidents of history have a way of creating political structure.

It is not the time to reform these structures, and it won’t be until the final end point of the Eurozone is clarified. In the event a federal fiscal system emerges, better structures must be hammered out, in which the EU’s relationship to non-Eurozone countries is spelled out. A big bun fight is inevitable, but the first bun will not soar until the question of whether the Eurozone is going to be a federal state is resolved. In the event no such state emerges, the dismantling of the Euro will give rise to new structures during a time of great disruption.

3. Leaving the EU will not improve our ability to handle immigration.

A small number of older people I meet sometimes rage against modern Britain, incenses about immigration. “We must control our borders and immigration better,” goes the chorus. “We are losing our country,” goes the verse. This is hard to talk about sensibly, because what triggers this gut reaction is so amorphous.

My main answer is that leaving the EU will not fundamentally change these issues for the UK, and that poorer countries outside of the EU need to resolve some of the serious issues that are putting pressure on their people to leave. Over half of the immigration into the UK is not from the EU, so in terms of numbers, half the problem is completely unrelated to our membership.

It is easy to miss that 5% of NHS staff (10% of NHS doctors) are non-UK EU citizens, paying taxes and keeping our health system afloat. You might not notice the millions of young EU citizens – from waiters to engineers – working, paying UK taxes and, mainly thanks to their youth, making very few demands in return (one estimate puts increased demand on the NHS from non-UK EU citizens at 1%).

A laissez-faire approach to cultural integration is unlikely to work, as described by commentators such as Trevor Philips. But EU migrants integrate well, so that’s not really the challenge here. British culture is no more or less quirky than any other northern European culture – just open a can of Swedish surströmming (fermented herring) if you don’t believe me. In my experience, when you push people on the cultural integration of Europeans in different European countries, they are not just tolerant, they actively like their Italian / French / Swedish / Maltese neighbours, delight in explaining English peculiarities to them. and enjoy learning a bit about other cultural quirks. Polish builders/plumbers, a favourite immigration example of yore, get quite good press these days, having demonstrated a couple of decades’ worth of hard work and pragmatism. So cultural integration is mainly a non-issue when it comes to other European cultures.

Lower-skilled people in the UK often voice feelings that they have had opportunities taken away from them from low-skilled (or more skilled but happy to work cheaply) people from elsewhere in the EU. Certainly over the past 50 years there has been a levelling out of developed and developing nations, with shifting patterns of employment where large-scale manufacturing happens and job opportunities open up. This is not my field of expertise, but it would seem sensible in this shifting environment to agree on minimum conditions and wages across as broad an area as possible to minimise any potential negative impacts of this kind of movement.

It would not, however, seem sensible to assume that leaving the EU would result in a sudden resurgence of semi-skilled jobs in the UK.

4. Our future is with Europe.

Like it or lump it, we are just 21 miles from France, connected by a tunnel. We continue to have massive, regular trade in goods, people and ideas with the Netherlands, France, northern Germany and many other parts of the EU.

Our history is intimately linked with those of France, Holland and Germany, from the Plantangents through Protestantism to the English coronation of Hanoverian kings.

Ours are important islands in Europe, but by no means the only ones, joining Ireland, Malta, Sardinia, Corsica, the Majorcas, the Azores, Copenhagen and Gotland who could point to clear blue water separating “them” from the “rest of Europe”.

In terms of everything that matters – culture, trade, electricity, pollution, holidays, food, football, rugby, tennis, language – we are European, definitely part of the broader sweep of northern nations with strong Anglo, Celtic, Viking and Protestant traditions.

Like every other major European nation, we can be proud of our contributions to the world and, like every other European nation, be proud to learn from our mistakes. We can perhaps indulge in being slightly more proud than others about certain things (Most Nobel Prizes in Europe?  Longest-running Parliament? Rule of Law?). But we could never pretend that French poets, philosophers and mathematicians (leaving aside Napoleon) haven’t had an impact, or that the French revolution did not leave its mark on the world. Europe suffers no shortage of impressive achievements. So why on earth would putting two fingers up to the EU suddenly make our achievements seem more important?

We will inevitably need to agree on many things with our fellow European nations. We do not generate electricity consistently enough to unlink our electrical grid from Europe. We do not have enough gas from the North Sea to avoid trading for it. We do not produce enough food to sustain ourselves and eschew the produce of other countries. Viruses, bacteria, pollution will never submit themselves to border controls. Our parents might retire (or have retired already) to sunnier shores outside the UK, in other parts of the EU, and we will doubtless wish to (or need to) visit them easily. Our children will seek to enrich their lives by living in another country for a time, whether it’s for a summer or a couple of years.

We must have a sensible level of agreement with the largest grouping of developed nations in the world, and the largest pool of educated, qualified people on our doorstep.

For better or for worse, the EU, with all its faults, is the place to make these agreements. We will not dodge trips to Brussels, or arguments with our peers in Paris or Berlin, by leaving the EU. We have already changed the EU, partly through sheer bloody-mindedness, and partly by thoroughly analysing what is working and what could work better. Us being out of the Euro and showing that there is a productive non-Euro, inside EU life is key. If we stay engaged and keep our seat at the table, there is much more we can change for the benefit of all. What is on offer – to be part of the EU and not part of the Eurozone – is a remarkable opportunity. We’d be fools not to take it.

VOTE REMAIN.