by Mary Honeyball MEP and Michael Fabricant MP / 17 Jan 2013
This article is from the February 2013 issue of Total Politics
Yes, says Mary Honeyball
Certain elements of the British political class have for too long treated the European Union as a scapegoat for our economic woes. Always a simplistic view, this attitude to the EU is becoming increasingly untenable.
As far as the broad economic argument is concerned, the essential point is that much of the western world is in recession. We are, inevitably, all in this together. Britain’s economy and that of the eurozone are inextricably linked.
The eurozone is the UK’s biggest trading partner, and the decline in the bloc’s fortunes – the 17-nation eurozone contracted by 0.1 per cent between July and September 2012, following a 0.2 per cent decline during the previous three months – contributed to our falling back into recession earlier in 2012.
It is the eurozone, and by extension the EU single market, that really matters to the UK. The majority of our exports go to the single market, and as a result any dip in the eurozone economies will have an adverse effect on Britain.
Given the single market’s importance, it seems extraordinary that anyone in government would think about upsetting the balance so necessary for the UK’s prosperity, yet this balance would be utterly undone if our much-vaunted repatriation of powers were to be applied to the single market. The government, along with London mayor Boris Johnson and assorted eurosceptics, think they can negotiate a “single market-lite”. What they mean is bringing EU employment law, health and safety regulations and anything else to do with working conditions back to the UK, presumably with a view to reducing these social provisions once they are safely restored. And it’s not only employment legislation. Trying to negotiate this single market-lite would have serious implications for London’s financial services. More euros are traded in London than Paris and Frankfurt combined, but would this still be the case after a ‘Brixit’?
EU leaders have made it clear they don’t see an attempt by Britain to repatriate powers as a plausible action. French President François Hollande has already insisted EU member states must comply with the terms of EU treaties they have signed and ratified, saying: “Europe is not a Europe where you can take back competencies. It is not Europe à la carte.”
The single market agreements and treaties serve a very real purpose and are not simply a means for the EU to impose its will on recalcitrant member states. For the single market to function, there needs to be a level playing field. This is the reason employment law and other work-related matters need to be broadly the same across the EU. If one country were able to have an easier time than the others, it would have an unfair advantage and undermine the power of the single market and its ability to function.
Given that the EU single market, which Britain entered under the premiership of the eurosceptic Margaret Thatcher, is so important for our exports, attempts to repatriate powers from this economically beneficial part of the EU seem like a prime example of cutting off our nose to spite our face. Britain’s economy needs a fully functioning single market – it is the most crucial reason Britain needs the EU.
What is more, any proposals for repatriation of powers would need the agreement of the 26 other EU member states, an unlikely scenario if the French president is anything to go by. The fact that there is little likelihood of any new treaty negotiations happening before the European Parliament elections in 2014 just adds another layer to a misguided fantasy.
The UK is one of the big players in the EU. German chancellor Angela Merkel does not want a ‘Brixit’. A source close to her recently said: ”The chancellor and her closest advisers are trying very hard to make it easy for Britain to keep the EU door open. The chancellor does not belong to the school that is fed up with Britain; she believes it is essential Britain remains at the heart of Europe.”
Given that there is still such goodwill towards Britain, it would be sheer folly to throw this away in a desperate bid to attempt to repatriate powers from the single market and thereby undermine Britain’s economy. We should, instead, take stock of where our economic interests lie in relation to the European Union before it is too late.
Mary Honeyball is Labour MEP for London
No, says Michael Fabricant
Let’s be clear: the single market is a good thing. Co-operation and trade with our closest neighbours and allies is important to the UK and the welfare of our people.
Here’s what isn’t so good. Britain is recovering from one of the most severe economic storms ever to hit its shores. The very principles of our free market economics have been brought into question, our Treasury was pillaged first by the selling of gold and then by profligate and imprudent spending; it’s now being repaired.
Our businesses were hit by forces way beyond the protection of anything Europe could provide, and now we face the deterioration of a currency invented to enhance the political beliefs of a small elite of non-elected eurocrats in Brussels.
The euro and all that goes with it was never going to be in our interest. Our economy is completely different and out of phase with so many of those countries now using the single currency.
Prime evidence of this is that Britain is the largest direct investor in the US, 110 times that of China. The US is the largest direct investor in Britain. Recent trade figures demonstrate that the UK’s trade with the European Union has declined by around seven per cent in recent quarters while increasing with the rest of the world by 13 per cent. What these facts show is a country still outward-looking economically. And doing well at it, too.
Geography and economics are exposing the politics of the EU. If the single market were completed and trade were the EU’s main focus, it might again increase its relevance in the future of the UK, but this focus is being ignored. Back in the days of the cold war, it could have been just about conceivable that trade should be marginalised into a regional bloc, when Europe was bordered by the USSR and a strong USA.
However, today, with an increasingly liberal, trade-orientated southeast Asia, the EU is looking slower and more cumbersome than it was ever envisaged to be. An email takes microseconds to cross the globe and shipment of goods is cheaper to the US than to many European destinations – geographical proximity is almost an irrelevance. And in or out of the EU, we remain a member of the World Trade Organization, which offers a measure of protection.
Nevertheless, it’s a fact that we trade more to Belgium and Ireland (17m people) than to India, Brazil, Turkey and China combined (2.9bn people). Anybody can see that these figures are not sustainable.
Beyond the euro crisis, the European Commission is doggedly determined to introduce a Financial Transaction Tax across the EU.
Over 80 per cent of EU financial transactions arise in the UK. This tax would overwhelmingly put our country at a disadvantage. In the 1980s and 1990s, Sweden introduced a similar tax on its financial services following its own banking crisis.
The Swedish finance minister, Anders Borg, said that Sweden was forced to abandon the tax after almost all of its traders left the country: “Between 90-99 per cent of traders in bonds, equities and derivatives moved from Stockholm to London.”
With this stark historical reference in mind, it would be a catastrophic mistake to think that the introduction of this tax would do anything other than destroy jobs in the UK.
With some eurozone countries now facing the ever realistic possibility of an exit from the euro and a return to their legacy currencies, it’s important that the UK and its economic focus is on growth and the good things that the EU provides: namely, a single market and economic partnership, not navel-gazing, political meddling and increasing regulation from a centralised, cumbersome Brussels.
Too often size is used as the argument for throwing our lot in with Brussels. If that were true, America would be richer than the Cayman Islands, China more than Hong Kong, and the EU more than Norway. Per capita, they’re not.
The UK should not be scared of its position. We’re still trading globally, we’re still outward-looking. Long may it continue. Time may well say that our obsession with European trade was but a short historical blip.
As to whether the EU’s current policies still serve our economic interests, I suspect the answer is a firm ‘No’. But until the Treasury publishes a comprehensive quantitative cost-benefit analysis, that’s a question that cannot be definitively answered. And that, tellingly, they still refuse to do.
Michael Fabricant is Conservative MP for Lichfield