There is a case for Britain remaining a member of the European Union, but it has little to do with economicsby Wolfgang Munchau / June 18, 2015 / Leave a comment
Published in July 2015 issue of Prospect Magazine
As a non-British citizen who lives in the United Kingdom, I am one of those who will not have to answer the question: “Should the UK remain a member of the European Union?” If I were, I would consider the following two answers—both of which would render my ballot paper invalid: “Define European Union!” and “Could you ask me that question again in five years time?”
There is nothing flippant about those responses because it is important to understand, at some level of technical detail, the nature of the institution I am being asked to leave and to consider ongoing political developments that would have a material bearing on my answer.
The EU that France or Germany belong to is very different from Britain’s EU. I am not speaking about perceptions or attitudes but about the EU as legal entity. Britain is not a member of the eurozone, nor of Schengen, the group of countries that have enabled passport-free travel between one another. Britain has exempted itself from justice and interior policies and also has a special prerogative that limits the ability of the European Court of Justice to interfere with how UK courts implement the Charter of Fundamental Rights.
And these are only the formal opt-outs. Then there are the areas of policy that Britain is technically involved in, but in reality is absent from. Vladimir Putin’s EU interlocutors are Germany’s Chancellor Angela Merkel and France’s President François Hollande, not David Cameron. This was Cameron’s choice. And while Cameron accepts the legal principle of the free movement of labour within the EU, he does not accept the principle of non-discrimination when it comes to benefits those workers might receive—the so-called in-work benefits.
Britain’s relationship with Europe, in pictures:
So what’s left? There is, of course, the customs union, of which any EU member is a part. If Britain left the EU, it would eventually have to leave the customs union. But customs unions are really only relevant for manufactured goods, which form a small and steadily declining part of gross domestic product (GDP) in all countries. The customs union was a much bigger deal in the smokestack economies of the 1950s and 1960s than it is today. It would matter for a number of non-British companies that have chosen the UK as a production location for exports to the rest of the EU. A British decision to exit the EU might persuade some of them to leave, but it is hard to judge how many would do so, and whether the impact would be significant or whether there would be countervailing factors. For instance, some companies might relocate to the UK if it were to offer lower taxes or a better regulatory environment once it is outside the EU. But I would distrust studies claiming to know the answer to this question, since these always fail to take account of the real dynamics at work.