Are EU In or Out? – Part 4: The Issues – Trade, Economy and Finance

Qualifier: The following article shall cite political views which represent, to the best of my understanding, the positions of the Official Remain and Leave campaigns. As such they may not necessarily represent the views held by myself or by any organisations or political parties of which I am a member. My own views shall be indicated throughout.

Are EU In or Out? – Part 1: What is The EU? can be read here

Are EU In or Out? – Part 2: A Brief History of Brexit can be read here

Are EU In or Out? – Part 3: The Issues – Immigration can be read here

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Active, Pending and Proposed Free Trade Agreements involving the EU

Trade, Economy and Finance

If immigration has been the big push card for Leave then the Economy has been the same for the official Remain campaign. Once again, as in the 2014 Scottish Independence Campaign, nothing says “Project Fear” like that Great Leap into the Unknown that comes with trying to predict the state of the economy after a shock event like Brexit (Little tip. In this era of rampant financial speculation, if anyone could actually predict the economy, there wouldn’t be one because that person would now have ALL the money). Similarly, Leave, whilst fighting a much weaker campaign in this respect, are promoting the fear of overburdening and uncontrollable regulation which is holding the UK back from its true potential. Of course, the parallels with the 2014 indyref abound on both sides. It certainly shall be interesting if and when a second indyref comes round and the words spoken by several prominent figureheads involved in this current campaign end up held against them (of course, this may well happen to unwary activists on our side too)

The “Leave” campaign view: The EU economy has stagnated, bogged down by regulatory diktat passed down by faceless, unelected bureaucrats. The UK, as a member of the EU, is unable to conduct its own trade deals freely whereas if we leave we negotiate with places like the Commonwealth and China on our own terms. We could also shed ourselves of burdensome regulations covering working conditions which would help create thousands of jobs. Trading with the EU from the outside shall simultaneously allow us to avoid TTIP whilst maintaining full access to the Common Market, in similar with countries like Norway or Switzerland, the difference being that the net gain from not having to pay our EU membership fee will allow investment in the economy or into public services like the NHS. As the UK has a negative balance of trade with the EU, they will lose more than we shall by not allowing us access to the Single Market. By taking back control of economic sectors like fishing, we can remove ourselves from the Common Fisheries Policy which has severely negatively impacted that industry.

The “Remain” campaign view: The entry of Britain into the Single Market has been to the great benefit of the economy of the UK with the dropping of tariffs and borders making it easier than ever to buy and sell goods between the member states of the EU which make up our largest trading partner. Given that we currently run a trade deficit with the EU, it is important that the UK does not do anything which could either cause the return of trade tariffs or a shock to the economy resulting in a drop in the value of the pound which would have ramifications for trade not just with the EU but with non-EU countries too. David Cameron’s reform package has ensured not only that the UK shall not be descriminated against for continuing to use the pound rather than the euro, the UK will be fully reimbursed for any money sent to the EU in the form of bailouts for the Eurozone. Further, the financial services of the City of London has been afforded protection from having Eurozone regulations imposed on it against the will of the UK.

The Common Green view: It’s easy to be ambivalent or conflicted on this topic as there are many conflicting or mutually exclusive views within this topic. In general, I believe that the days of mercantilism and protectionism are going the way of the old Imperial model of global trade (i.e. if you want something from somewhere, conquer them and take it). As a planet, we appear to be slowly moving towards a position of economic convergence within neighbouring or closely linked countries (Such as the EEA, NAFTA, Mercosur, EAEUECOWAS, ECCS etc) and either common external tariffs or free trade agreements between those blocs. By conglomerating into these blocs it is generally considered that a better deal can be achieved than countries could make with individual, bilateral or unilateral treaties with those blocs. In this respect, I’m rather more on the side of the official Remain camp than the alternatives. As a case in point, Switzerland is held up by Leave as a nation able to deal with China even though the EU doesn’t have a formal trade deal yet. What is rather neglected to be mentioned is that the terms of that deal allow China full, free access to the Swiss market whereas Switzerland will only enjoy a partial or slow dismantling of tariffs and barriers over the next 15 years. A better arrangement than not having a deal, to be sure, but not precisely an equally balanced treaty.

We also have to consider the very nature of the inter-bloc treaties. Whilst deals like the proposed EU-USA treaty, TTIP, will do little in terms of tariffs (which are already low to non-existent) it may come with rather unsavoury non-tariff arrangements such as ISDS, the ability for companies to sue governments for profits lost due to legal restrictions, or side-effects of “harmonisation” whereby the USA may be allowed to import goods to the EU which wouldn’t meet the EU’s own more stringent health and safety standards.

Such trade deals may turn out to be rather detrimental to individual member nations of the EU even if they benefit the EU as a whole so it can be understood if those members start to consider “escaping” the deal by leaving the EU.

Of course, it’s not quite as simple as that. TTIP specifically is expected to include other non-EU states which want to be part of the Single Market, like Switzerland and the EFTA nations. If a post-Brexit UK wishes to remain part of the Single Market in a post-TTIP EU then it may be compelled to adopt it anyway. More directly, the official Leave campaign are not themselves seriously discussing that the UK join EFTA or even adopt a Swiss-style arrangement with the EU (I shall cover this in more detail in a subsequent article but suffice to say that a Free Market deal which includes a demand for Free Movement of People would severely undermine Leave’s anti-immigration pitch). It’s looking more likely that a post-Brexit UK-EU relationship would itself be modeled on TTIP via it’s Canadian cousin CETA.

Added to this, TTIP is itself coming under increasing attack from within the EU with even large nations like France and, at least by the grassroots, in Germany are starting to rethink the whole thing. Activists seriously concerned about TTIP may find the route to its scrapping coming from within the EU rather than from without. This view represents a significant turnaround for myself who, for a time, was seriously considering an Out vote on the basis of TTIP. The realisation that it’s being driven largely by the Tories who want it even if we leave and that public sentiment on the Continent is increasingly against it has led to my own reconsideration on this point.

Within the EU, further ambivalence can be found in some of the redistribution plans run by the Union. I’ve mentioned before that the Common Fisheries Policy has been a disaster for Scottish fishers in particular (although it must be noted that much of it could have likely been mitigated  by better or less malevolent management by Westminster and that recent reforms to the CFP could help rebuild the industry if properly managed). I would not blame anyone whose job relies on Scottish fisheries for wanting out of the EU (recent polls may back this view with areas like the Highlands and Islands showing the lowest levels of support for the EU in Scotland).

Conversely, our onshore farming industry, again despite mismanagement from Westminster and more recent mishandlings by the Scottish Government, may find life rather difficult if a Brexit results in them losing out on CAP payments. The Official Leave campaign have stated quite baldly that the money received from the EU “probably wouldn’t [be spent] on the same things” as they are now, though they stop short of actually laying out who would be hit by cuts and by how much (indeed, how much would actually be available to spend will be dependent on not only the state of the economy after we leave but also on the post-Brexit deal. An EFTA type deal which involves membership payments to remain in the Single Market would significantly eat into any supposed “leaving dividend“). In antithesis to the fishers, I think I can say that the farmers will be rather more likely as not to be voting for Remain. Again, the polls appear to back this up with even places like the Tory leaning Borders showing significant support for the EU.

One major sticking point for Leave are those burdensome EU regulations. If only, they say, we can leave the EU then we could scrap things like paid parental leave, mandatory paid holidays, the Working Time Directive (the UK is already one of the more over-worked nations in the EU and we don’t even have the productivity gains to show for it) and other worker’s rights then we can streamline things for businesses and let them grow the economy. Sounds great for the businesses but sounds like we workers are going to get chucked right under the proverbial bus…again. There’s noting, of course, preventing a post-Brexit UK from maintaining or re-introducing these rights. It places those of us on the Left in an interesting conundrum. Can the EU really be all THAT right wing if it’s actually protecting us from the worst depredations of our own home-grown Tories who have, after all, fought the introduction of these rights at every step of the way?

And as for all those overbearing business regulations we keep hearing about (remember the one about not selling bendy bananas?), well the EU Commission has an entire website dedicated to debunking all of those headline grabber stories. You can read it here. The truth behind the bendy bananas story was merely a regulation saying the Class A bananas had to meet stringent criteria but other bananas were more loosely constrained.

Which  brings us neatly onto another topic beloved by the Right. The Financial Sector and the City of London. As mentioned earlier, the City was specifically singled out amongst David Cameron’s reform package as to be afforded specially protection. This is no new thing in the annals of English and UK legal history being that it’s “ancient rights” were protected in the Magna Carta and the City Remembrancer still holds the right to monitor the House of Commons to protect the rights of the City.

These protections will go a long way to further the UK Conservative’s continuing goal to prevent the EU from implementing a Financial Transaction Tax (also known as a Tobin tax, or a Robin Hood Tax) which would raise revenue from and act to limit financial speculation especially the automated high frequency trading to which the Forex and CFD world is now accustomed. Such a tax, if implemented, could raise tens of billions of pounds per year and, by dampening the volatility of the stock market, would protect our “real” economy from shocks and bubbles caused by speculators. A far-ranging study was published last year which produced a pretty strong negative correlation between the growth in a country’s Financial Sector and the growth in the rest of the economy.

Financial Sector

Essentially, if we want to grow the economy in a way which actually helps the majority of people then we should be shrinking our financial speculation and gambling sectors. Sack the Bankers!, if you will. Incidentally, this study also highlights the danger of fetishising simple figures like GDP, or even GDP per capita. They don’t reflect what’s actually happening to the lives and wellbeing of people.

It could well be that the UK’s leaving the EU will be the trigger which allows the EU to get on with the job of implementing a financial transaction tax and rebalancing the Continent’s economy although this would then have severe implications for the Brexiteers.

Again, I’ll go into this aspect in greater detail in an article on the Brexit Negotiations but there is very good evidence to suggest that the EU will not be content with a deal which allows Free Trade in trade and goods (with or without Free Movement of people) but which allows protectionism in services. Allowing the City to trade with Europe whilst protecting itself from regulation and things like an FTT may well be deemed “uncompetitive”. If we want to trade with the EU, we – as a country of 65 million against a continent of around 450 million – will have to play by their rules. And if we want to influence those rules, we may have to sit in the club to do so.

My conclusion

Whilst I find myself agreeing with Remain in that EU membership has been to the benefit of the UK in terms of trade and economy I am at odds with the Official campaign with regard to their protectionism of the financial sector. Whilst I can appreciate Leave’s arguments with respect to some aspects of EU regulation, mostly in terms of fishing, I recognise that much of the damage has been due to UK misapplication of those areas of governance (if we were talking about the case of an independent Scotland within the EU I’m certain that many of those objections would fade considerably). I also rather reject Remain’s Project Fear arguments that everything will collapse into ruin if we Leave. We may not entirely enjoy the results, but I rather think we’re mature enough to more-or-less get through it. The re-run of the final weeks of the 2014 indyref does little to add enlightenment to the debate.

On balance I believe that the economic argument lies with Remain although internal vigilance is perhaps more important. Whether we’re in or out of the EU will guide or flavour the future shape of the economy of the UK but it will be our own Conservatives, for the next few years at least, which make the final determination of our direction. I’m not sure we want to leave it to them unfettered.

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10 thoughts on “Are EU In or Out? – Part 4: The Issues – Trade, Economy and Finance

  1. Errors?

    “Trading from the EU from the outside shall . .”

    ‘in the EU’ not ‘from the’?

    “By conglomerating into these blocs it is generally considered that a better deal than countries . .”

    “better deal can be achieved than . .”?

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  2. I am not convinced Craig that the CFP was the main driver for the mess that our fisheries got into. The CPF certainly exacerbated the situation by the political trading that always diminished the scientific evidence, but the main driver was our own fishing effort. Think of the investment made in catching effort where one modern pelagic trawler can fish the equivalent of up to 40 pre-1960 drifters. And given the electronic wizardery available to skippers to spot fish shoals, it is no longer a hit and miss business.

    Secondly, until a few years ago, the black fish catch was many times the official catch, making the data on population estimates almost meaningless. At that time the fishermen were saying that the official estimates were underplaying the true position. What was happening was that we were fishing out the older stock and we had an artificial boost of young stock to fill the ecological niche. But that was an unsustainable situation.

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  3. Error?
    “(the UK is already the more over-worked nations in the EU”

    “most overworked”?

    Also, this doesn’t tally with Radek Sikorsky’s Blenheim Speech on the EU in 2012 . .

    “Myth No. 7: Through its invasive Social Chapter, the EU is preventing hardworking British people from working longer hours than feckless continentals.
    Facts: The average Pole works 40.5 hours per week, The average Greek works 42. The average Spaniard, 38.1. The average for all EU27 is 37.2. The average for the UK? 36.2.”

    See https://www.msz.gov.pl/resource/ff80e9c3-19f6-460c-9921-c73bbb089c54:JCR

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  4. Pingback: Are EU In or Out? – Part 5: The Issues – Brexit Negotiations | The Common Green

  5. Pingback: Are EU In or Out? – Contents Page | The Common Green

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  7. Pingback: Are EU In or Out? – Part 6: The Issues – Sovereignty | The Common Green

  8. Pingback: Are EU In or Out? – Part 7: Final Thoughts | The Common Green

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