Britain: leaving the EU quite soon?

The European project is in tatters as there's little EU-wide resolve for Eurozone fiscal union. The UK could opt out soon.

There's little European-wide political will for fiscal unification, along US lines.  Only by such union would there be centralised power to maintain recalcitrant or profligate members, like Greece.  Britain never entered monetary union and so has been able let the Pound devalue to prop up exports.  However, this hasn't benefitted the UK much with its trade imbalance with Europe.

How profitable is Britain's EU relationship? 

While Britain's principal trading partners are indeed other EU states, the UK runs huge trade deficits with them.  Business with Europe accounts for something like 50% of all UK's trade.  Actually it's a bit less than that, as the 'Rotterdam Effect' reduces this percentage to around 40%.  This effect is caused by goods transported to Holland's Europoort not being offloaded but instead shipped off to countries outside the EU.

This trade deficit is a long-term issue for Britain.  Evidently, since joining the European club in 1973, Britain has suffered a trade deficit with the EU every year from 1987 to 2010, except 1994-8.  After a honeymoon period following entry, involvement has reaped losses not profits.  

Is this due to the sort of things that Britain exports?  Perhaps.  Or, is it likely the result of reluctance by other members to buy foreign-made goods and services.  It is certainly difficult for the British to circumvent this type of narrow patriotism by snapping up firms in big European states like Germany, Italy, France or Spain.  If they were able to do that, they'd hire locals and sell local items/services to that domestic market.  But  economic union has not led to unfettered multi-directional free trade, it appears.

To be fair, the Netherlands has been more sympathetic to British involvement, yet that usually involves joint enterprises like:
  • Royal Dutch Shell, the oil giant (1907)
  • Unilever, the consumer goods multinational corporation (1930)
  • Reed Elsevier, the publisher and information provider (1993). 
Exceptionally, deals are struck elsewhere too, like:
  • In Spain, where International Airlines Group (IAG) was formed by merging British Airways (BA) with Iberia (of Spain)
  • In Germany, where Mannesmann, a German telecomms provider, was bought by Vodafone 
  • In France, where Crédit Commercial de France (CCF), a French banking group, was acquired by HSBC.
But these are rare. And often subject to chauvinistic hostility inside countries where a company is a bid target. Domestic investors close ranks to thwart the acquisition. Or that member state's government or its agencies step in to protect national icons or interests by making life difficult for a British predator. 

In 2009 The Economist wrote about French government bail-outs of Renault and
PSA Peugeot Citroën, two carmakers, to save French jobs:

"It prompted little debate over whether the state should bail out car manufacturers with public money, or even whether such state aid would distort competition" the paper reported. "Such arguments were left to the European Commission, as well as to central and eastern Europeans livid at protectionist comments made by Mr Sarkozy, who suggested last month that it was “not justified” for a French carmaker to build a factory in the Czech Republic in order to sell cars in France. At home, though, barely a voice was raised to recall that the freedom for companies to do this is enshrined in Europe’s single-market laws...If anything, the policies regarded in Brussels as protectionist are in France considered too liberal." 

Britain suffered a trade deficit with the EU in 2010 and benefits from a balance of trade surplus in its non-European trade. There should be a referendum in Britain on its membership of the European Union. There hasn't been one of those since 1975.  Then, the plebiscite posed "Do you think the UK should stay in the European Community?"  A somewhat leading question, some say.  The response was "Yes".  But back then Britain had only been a member of the European club for a couple of years.  And they'd been quite profitable ones.

But in joining the EU back in 1973, the British damaged profitable trading relationships further afield, with places like New Zealand, Nigeria, India and Australia, the rest of the Commonwealth and Latin America. 

In addition to loss of markets, Britain (the only English speaking major economy in Europe and a country with an 'Anglo-Saxon' free market approach) has borne the brunt of massive immigration from Poland, France and numerous countries in Eastern and South-Eastern Europe.  Reports indicate these migrants have taken the bulk of newly created jobs and considerably strained public services. Yes, the UK gained often hard-working and eager citizens, but at what cost to domestic social cohesion, or involving the welfare dependent in economic development?  Are the present London riots fuelled only by opportunism and greed, or by frustration and anger too?

The cost of membership in time and money:

It seems that while the European Commission rolls out an endless stream of regulations and initiatives few members other than the UK bother to abide by them. Most either ignore them or initiate obfuscatory tactics. By contrast, Britain follows to the letter each expensive, bureaucratic rule change.

Renowned Eurosceptic British Conservative MEP Daniel Hannon alerted us all in June 2011 to:
  • The European Commission has just published its new draft budget. It wants an extra 46 billion euros, proposes to scrap Britain’s rebate, and suggests various forms of EU taxes, including a levy on financial transactions which would disproportionately hit the City of London.
  • Britain increased its net contribution by 74 per cent in 2010. Much of the increase will be wasted.
  • Worst of all, though, is the way in which the EU is assuming bank liabilities in advance of a default which everyone can now see coming. Britain has been dragged directly into the Irish and Portuguese bailouts, and indirectly into that of Greece. 
The case for review:

Now, as the UK Coalition government revitalises domestic manufacturing industry or encourages tech enterprise so as to develop markets in rapidly growing economies like Brazil and India, the time for a political review of Britain's stance on Europe is nigh.  

In the short term, this will likely take the form of a renegotiation of the EU relationship.  However, after the 2015 UK election, a stand-alone Conservative government would be unshackled from coalition constraints with Europhile Liberal Democrats.  It would be in a position to present a referendum on EU membership to the people.  The Conservatives might even get Liberal Democrat agreement to an EU membership vote prior to 2015, as LibDems have expressed a desire in the past for a referendum on the issue

There hasn't been one of those since 1975.  Then, the plebiscite posed "Do you think the UK should stay in the European Community?"  A somewhat leading question, some say.  The response was "Yes".  But back then Britain had only been a member of the European club for a couple of years.  And they'd been quite profitable ones:  from accession in January 1973 until referendum in June 1975, the UK had a trade surplus with the club for five out of nine quarters.

The likely outcome?

In July 2011, an opinion poll conducted by Angus Reid, a polling firm, found the following: 

49% of those polled would vote to leave the EU in a referendum
25% wanted to stay
57% believed that being in the EU has been negative
32% thought it had been positive. 

A British departure would not be before time, it seems to me.

Check out all commentaries here.

No comments:

Post a Comment