EU referendum: influence, and romance

Britain’s got more clout as part of Europe
June 17, 2015
This piece follows on from Wolfgang Münchau, writing on the choice facing Britain

Heart, not head. Whichever way you vote in the referendum on Britain’s membership of the European Union, don’t claim it’s because of the economic benefit. That is the argument that Wolfgang Münchau is setting out here. As the contest begins to gather volume, it is a provocative one. Claims that staying in brings great economic value to the United Kingdom are all but bogus, he says.

Is he right? Broadly, yes. In arguing that economic concerns are not decisive, he undervalues the benefits, I think, but there are other factors you might also consider which could balance that out. Overall, though, this turns powerfully on questions which go beyond economics. Pollsters (see Peter Kellner, next article) steadily record that immigration is high in people’s concerns. For me, the loss of influence that I believe Britain would suffer if it left is a powerful reason to stay in.

Britain's relationship with Europe, in pictures:

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For a start, Münchau is too blithe, in my view, about the ease with which the UK could renegotiate trade agreements with countries outside the EU if it left. On terms as good as those the EU has secured? I’m sceptical; that’s been the whole point of the bloc having a single trade negotiator, rather than each country trying to strike its own deals. And he doesn’t even take into account the complexity of dealing with the other EU countries; there’s a real possibility that some of the directorates in Brussels could behave vindictively, if only to discourage others from following.

He’s right to point out that the benefits of the single market—so far—are smaller than the cheerleaders would have it, and that productivity has stubbornly refused to improve. But the single market is hardly perfect (this is an understatement). In abolishing barriers to competition, it has been fitful, patchy and often unimpressive. Services have fared worse than manufacturing, and they account for 70 per cent of EU economic activity, according to the European Commission, although the definition takes in financial services, accountancy and law, retail and many creative industries.

That is, as it happens, the main reason why the single market in services has never been “completed”; the different industries are tangled up in national directives and no single piece of European legislation will set them free with one bound. Those who look wistfully to that “completion” as a way of transforming EU growth are chasing a fantasy. Yet much more could be done to reduce the number of regulated professions and to boost competition generally; Münchau is arguably too pessimistic about prospects for productivity and growth, and so about the future benefits of membership.

It is also too casual to dismiss the benefit of the City to the UK; however sceptical you are about the contribution of financial services to the economy, few would put that contribution at zero. If the UK left the EU, the remaining EU countries would move fast to create a new rival to the City.

But if he overstates his case in those three ways, he understates it in another. It is hard to see how the EU can escape its present predicament as a zone of low growth (at best). An ageing population, heavy social commitments in pensions and healthcare, and the need to repair public finances in many countries, together with long standing problems of lack of innovation and an ambiguous attitude to promoting competition within the EU are not assets.

Putting that together, I think he’s right that the champions of membership overstate the economic value, although there still is a case that it is positive.

But even if economics doesn’t deliver a knockout case for Yes, there are other arguments that, to me, tip the balance resoundingly in its favour. One is the value of retaining Britain’s influence in the world. Barack Obama’s administration has made clear—and here it surely speaks for its successors too—that if Britain falls out of the EU (and to boot, loses Scotland), it will be far less interesting as an ally. Britain within the EU is in a position to have much more influence on foreign relations. The negotiations over Iran’s nuclear programme, in which both UK officials and Catherine Ashton, as the EU’s High Representative, have played a central part, are one example.

Of the three big current challenges to western values—China, Russia and radical Islam—two are on Europe’s doorstep, and the third represents its biggest source of imports. It is not to Britain’s advantage to be left out of the deliberations that decide how the EU responds.

The final reason is romance. The EU is one of the big, idealistic projects of our time; the expansion eastwards, to take in the applicant countries of the former Soviet bloc, was an astonishing achievement. The values the EU represents are ones that, overwhelmingly, the UK shares. It comes down to whether people want to be part of that.

Many, perhaps driven by opposition to immigration and the strains on services and cohesion that that can bring, may feel they have good reason to say No. I’d be profoundly disappointed—and surprised—however, if a majority of British people did not in the end say Yes.