UK Leaving EU. Really?
Posted by butalidnl on 6 November 2011
On 24 October, the British parliament voted on a resolution calling for a referendum on Britain’s membership in the EU. It lost 111-483. Nevertheless, it was an embarrassing blow on PM Cameron’s efforts to participate in the Euro discussions (French president Sarkozy refused his entry to a Eurogroup meeting, he told Cameron not to intervene). As a result of the eurosceptic rebellion, the already low reputation of the UK in the EU went down a couple of notches.
It seems that almost half of the people in Britain favor leaving the EU. For them, the EU is the source of all kinds of regulations that only make their lives more miserable. And with the present crisis in the Eurozone, it seems that the British are just waiting for the rest of the EU to implode. So, better get out now, while they still can save Britain from economic collapse, and from a loss of its identity. Or so they think.
But can the UK really leave the EU? Of course it can. It can opt to leave the EU and just be like Norway, Switzerland and Iceland. These countries choose the areas where they would cooperate with the EU. But, if the question is whether the UK will thrive outside the EU? Then the answer will have to be: most certainly not.
For the UK, leaving the EU will mean going out of the Single European Market. The consequences of this will not be immediate, since the UK’s present laws are still in harmony with those of the EU; trade will go on as usual for the time being.
But the EU is constantly revising the rules that govern the internal market. And when they change some rules, and the UK doesn’t, that specific area of trade will be affected. So, the UK will most likely keep its own economic rules in harmony with those of the EU, just to keep trade going as usual. But then, in contrast with the present, the UK will increasingly be following rules which it had not helped to formulate.
Many companies would have to reconsider decisions on having their offices and factories in the UK. After all, they had based these in the UK on the basis of the UK as part of the EU. Car manufacturers from Asia, the US, and even other parts of Europe had located their plants in the UK to benefit from its cheap labor AND its access to the EU market. Many of them will surely phase-out their factories and offices when the UK leaves the EU.
London’s role as a financial center will not necessarily suffer with an EU withdrawal. But, as in trade, the UK government will have to follow all EU regulations. Take for example the proposed Financial Transaction Tax now being discussed in the EU. If it is implemented, the UK will have to impose a similar tax, or it will create a barrier to the free flow of finances.
However, no matter how much the UK tries to harmonize its laws with that of the EU, it will still remain a foreign country to the EU. Government procurement, for example, is often open to all companies within the EU. The really big contracts may be open to bidders from the whole world; but the bulk of the contracts are restricted to EU companies. This means that EU companies will have a lot more contracts than UK companies.
UK, the ‘Great Exception’
If the UK leaves the EU, the EU will not only go on with business-as-usual; it will simplify and accelerate its process of integration. The UK has always been the EU’s great exception, opting out of many important agreements and forcing the others to find creative detours. Thus, the Schengen agreement on free travel of persons does not include the UK. The UK is not part of the Eurozone.
With the UK gone, EU decisions will increasingly be done by ‘qualified majority’ instead of ‘unanimity’. The EU will integrate more, and more intensively, with or without the UK. But if the UK were to leave the EU, the EU will just integrate much faster. For example, adoption of the Euro may be made a requirement for a country to fully participate in the EU. And the free travel of persons may also become standard.
If the UK were to decide that it wanted to return to the EU, after a number of disastrous years; it will be faced with a much different EU than it had left. No longer could the UK keep itself as the ‘great exception’. It would have to accept the Euro AND free travel for persons, as part of its EU accession negotiations.
Another function that the EU has, is that it serves as a useful bogeyman when national politicians want to push necessary but unpopular laws. They could always say that they were forced by ‘Brussels’ to do it. If the UK leaves the EU, its politicians could no longer blame Brussels.
To sum it up: stepping out of the EU will mean that there will be more (not less) EU rules that the UK needs to follow; but that the UK will have no say in formulating these rules. It will mean less access to the EU internal market, with international companies transferring to countries inside the EU. It will mean that British politicians have only themselves to blame for the UK’s problems. So, unless the British wish to damage their economy in the name of national pride, they should not leave the EU.