By Brian Lait
The departure of the UK from the EU is now known as Brexit. Those who want to leave are called Eurosceptics, those to stay are Europhiles. The result of the referendum to decide the issue, to be held by the end of 2017 at the latest, will shape the UK for generations to come, but what astounds, and disturbs, me to date is the total absence of any of those in power, on either side of the argument, making any effort to clearly and concisely present the public with the pros and the cons.
A definition of a statesman is an individual who thinks of and works for the next generation, whereas a normal politician is simply thinking of the next election. There are no statesmen today in the UK, since it is very clear that those on either side of the House are more concerned about what will happen to them personally or their party as a result of the vote, rather than caring about the future of their country. For example, there are several prominently placed Conservative members who are well known Eurosceptics, but who have not recently voiced their opinions, no doubt because if they do they will almost certainly lose their positions on the front bench, as it is now clear that Prime Minister David Cameron is in favour of the UK remaining within the EU.
However, it is worth reminding ourselves of Mr Cameron’s thoughts on the EU that he voiced back in November 2007 before he became prime minister: “The last gasp of an outdated ideology, a philosophy that has no place in our new world of freedom, a world which demands we fight bureaucratic over-reach and lead Europe into the hope and potential of a post-bureaucratic age.” Leopards can change their spots!
But I am rambling.
My intent here is to apply logic to some areas of Britain’s relationship with the EU, and at this time I purposefully sidestep the issue of immigration on which everyone is presently fixated and which sadly, but inevitably, totally overshadows key legal and economic matters which in the long run are as, if not more, important to the UK and other EU members.
First off is the inordinate fear that millions of Brits will lose their jobs if Brexit occurs; some 3,000,000 is the popular figure. If on Brexit the EU refused any trade dealings with the UK at all, then such job losses might well become a reality, just as the loss of over 4,000,000 jobs within the rest of the EU would become a reality. We are the EU’s single largest customer. Our annual trade deficit with the EU (i.e. the excess of what we buy from them over what we sell to them) is now running at some £56 billion, pretty much double what it was in 2010. (The only EU member with whom we run a surplus is Luxembourg). Will the EU want to lose that market if the UK leaves? No more German, Italian or French cars, no more Cognac, Champagne, Rioja wines or Belgian chocolates? Pull the other one.
However, a significant reason for the growth of this deficit is that the UK’s own manufacturing has been allowed to decline by successive governments, thus necessitating increased trade with other countries to make up the loss. View this as you wish, but the Labour Peer, Lord Stoddart, remarked: “This massive trade imbalance graphically demonstrates that more than 40 years of EU membership has done nothing for our economy and for jobs. It also demonstrates that the situation in recent years has dramatically deteriorated with the deficit very nearly doubling in just four years. It is quite clear that EU membership is a millstone around our country’s economic neck.”
For me, a significant lost opportunity for British manufacturing was the failure of Wilson, Callaghan and Thatcher to implement manufacturing opportunities by retraining the thousands of miners when hundreds of coalmines were shut down. Another failure was the demise of the motor industry through abysmal management and dictatorial trade unions. A third failure is the stifling bureaucracy cast on small businesses by the EU’s red tape.
Linked to this theory of massive job losses in the event of a Brexit are the ideas that the UK will be excluded from EU trade by tariff barriers and would not survive in a world of trading blocs.
Well, the EU has set up Free Trade Agreements (FTA) with well over 40 countries and over 80 more are in the pipeline. Would the UK not be yet another? Duties on goods and services are almost a thing of the past anyway, with the UK now charging an average customs duty rate of less than one per cent on non-EU imports.
As to trading blocs, Japan, the world’s third largest economy, is not in a trading bloc. Besides, the EU GDP is declining and pretty rapidly at that. When the UK joined what was then the EEC, the EU had 38 per cent of the world’s GDP. In 1980 this had dropped to 36 per cent; in 2010 it was 24 per cent and by 2020 it is estimated that it will be no more than 15 per cent. Part of this decline is due to the rise of the likes of India and China, but if they can rise so much, why can’t the EU? Crass inefficiency? There’s a good dollop of that. Overblown bureaucracy? Massive.
The EU’s “laws” now run into well over 150,000 pages, and although not much more than eight per cent of the UK’s GDP is connected to the EU, every one of these “laws” apply to 100 per cent of the UK’s GDP. As far back as 2006, the former EU Competition Commissioner calculated that over-regulation in the EU was then costing some €600 billion annually. It has been estimated that due to the detailed directives and regulations the UK has to follow the annual cost to the UK is around £12 billion.
Some trading bloc!
Trading blocs can only be successful if the benefits outweigh the costs, but as stated above, the EU’s “bloc” is declining rapidly and the core Eurozone shows next to no growth.
The UK’s largest investor is the USA (companies like General Motors, Procter & Gamble, Coca Cola, Monsanto and Dow Chemical), with India and Japan following on. The USA is the top destination for UK foreign investment, and a very interesting survey by the accountants Ernst & Young in 2012 found that the UK was the first destination in Europe for Foreign Direct Investment (FDI) owing to the attractiveness of London and its close ties with the US. The survey’s findings went on to reveal that the UK is the top choice for Japan, while 72 per cent of US and two-thirds of Asian investors believe that the UK would be more attractive still if there was a looser relationship with the EU!
In the table of key factors within the survey as to the appeal of the UK, the EU was not mentioned at all! The UK’s culture, values and language came out top of the list.
The last fallacy I will cover this time around is the one which maintains that the UK will lose all influence in the world if it leaves the EU. The UK has less and less influence the longer it stays in. The tiresomely inept Chancellor of the Exchequer, George Osborne, believes it is good business to get China to invest vast sums of money in the UK. Under EU rules, however, I understand the UK is not allowed to negotiate investments in China. That apparently has to be done by the EU.
The UK has membership of the G8 and G20 nations, a permanent seat on the UN Security Council and seats on the IMF board of governors and the WTO. The UK heads up the 54 nations in the British Commonwealth whose combined economies outstrip the EU and have a total population of over 1.8 billion people. London is the financial capital of the world; the UK is the world’s sixth largest economy and is in the world’s top ten manufacturers. That seems a good enough base to start independence from the EU.
Brian Lait is a retired chartered accountant who lives in Cyprus and has lived and worked in five EU member states and conducted business in several others