I spend many of my weekends visiting other European cities with my Italian wife. This year we have so far been to Munich (twice), Berlin, Dresden, Amsterdam, Den Bosch, Nuremburg, Venice and Forli’. We’ve also got plans to visit Vienna, Dublin, Naples, Verona and Milan. We love European art, culture and cuisine. We both have decent jobs and live in London. We are not little Englanders. I read economics at UCL and my wife works for an American investment bank so neither are we economically illiterate, despite Osborne’s claims! All in all we ought to be solid Remainers. That we are not says so much about the nature of our referendum debate.
I didn’t want to have to vote to leave. I genuinely wanted David Cameron to lead a major effort to reform the EU. I’ve seen first-hand how desperately it needs that reform. It’s not only in the British interest but the interests of the whole of Europe. I’ve seen first-hand my brotherinlaw, who is in his mid-twenties, struggling to find work even in his relatively prosperous part of northern Italy. Or my motherinlaw have to wait for other a year for the lump sum part of her pension to arrive because the Italian state is so short of cash. Italy isn’t Greece; it’s a large and significant economy. Britain isn’t in the disastrous Euro but its crisis hurts. We need it to be strong so we can sell our goods and services and both nations can prosper.
Sadly, the dire economic performance of Italy mirrors much of what’s wrong with the EU and the Eurozone in particular. That is why, for example, the Italian economy has shrunk by 1% since 2000, while the UK, like the US has grown by 30%. I’m not arguing that there has not been economic Growth in Europe, Germany is up by 18% in that time, as is France.
Economics is at the heart of this debate. I’ve no doubt that Brexit will be brutal at least over the next couple of years. Markets do not like uncertainty and Britain will have to wean itself off cheap unskilled labour as immigration is brought under control. The alternative is a new consent for mass migration but I doubt that many politicians are brave enough to lead that.
Profoundly complex policy problems are, in fact, rarely easily solved. But this isn’t a decision for the sort or even medium term. Like a new exercise regime we all know that however hard it is, it leaves us in better shape for the future. That’s exactly how I feel about Brexit.
‘The devil you know’ isn’t on the ballot paper, and there is plenty of uncertainty and potential risk to the UK in years to come if we remain. We don’t have the emotional attachment to Europe that many continentals do. We don’t get the ‘European project’. The British people were comfortable with a trading arrangement even if they were mistaken in thinking that was what they were signing up to.
The EU is now getting into areas which go beyond what I find acceptable. I believe that’s also true for most Brits. The Rubicon was crossed in Åklagaren v Fransson, a VAT tax evasion case in non-Euro Sweden. The dispute had nothing to do with the EU, but because of this ruling, the UK despite the express will of parliament and with the consent of all the major political parties gives large multi-nationals a rebate of £7bn pa. It’s little wonder therefore that large banks and others who pay no tax in the UK nevertheless support the UK remaining. Nothing gives the liberal free market economic ideas I support a bad name so much as the crony capitalism as the EU with its often high and invisible barriers to entry.
There are other areas which the EU itself through the 5 Presidents report – yes they really do have 5 Presidents – wishes to expand. Defence is one such area. Its shows how hollow the EU project is. The US spend 3.6% cent of their economic output on defence. The UK 2% of GDP, Germany a pathetic 1.2%. Nato has been the mainstay of European defence policy since WWII. When the US stumps up 72% of total Nato spending, there is little wonder the American’s are questioning why they are footing the bill. Rich nations like Germany effectively enjoy a free ride. If Germany can’t or chooses not to meet the 2% Nato fee how can it possibly stump up for an additional EU force? The EU has lost its sense of purpose and is now mired in mission creep.
Trade and the single market are the two strongest cards for Cameron & Co. If we leave the single market we will be at a disadvantage in having to pay the common external tariff, which now stands at a rate of something like 3-4% (circumstances vary its 10% on cars). The difference could easily be made up by a smallish drop in the value of the pound. Few if any economists think it will rise following Brexit.
We don’t send £350m per week but we did chip in £10.6bn net last year. That’s the equivalent of a tariff of about 7% our goods. As our economy grows the Eurozone remain anaemic and this will only increase. The U.K.’s net budget contribution jumped from £4.7 billion in 2009-10 to £8.9 billion in 2010-11.
Yes the EU economy is large with an internal marketplace of 500m plus people. You have to pay to be a member of the club. Like a gym though we have to ask ourselves: is the membership fee really value for money? UK exports to the rest of the EU have been on the decline for the last decade or more. Back in 2010 they accounted for 60%, today its 44% and when you adjust for the so called Rotterdam effect – i.e. large shipments via Holland which then go to world markets its just 39%. With the rest of the world growing, a good thing, they are expected to fall in the coming years to a mere 35%.
It’s great that UK car manufacturing has rapidly expanded in recent years. The city of Sunderland now produces more cars than Italy. But it’s not where our comparative advantage lies. Last year we bought 820,000 German cars. The Single Market construct favours goods as opposed to services, yet 88% of the UK economy comprises services. Cameron’s veneer or a renegotiation has done little to see the completion of the single market for services or advances in areas, like the digital economy, which will lead to future growth and our comparative advantage.
We will have to be on a steep learning curve to renegotiate trade deals, that’s true. As of January 2014, the EU had agreements with 55 countries whose aggregate GDP was $7.7 trillion. By way of comparison, the aggregate GDP of all the countries with which Switzerland had comparable deals was $39.8 trillion. That’s similar to Singapore with agreements worth $38.7 trillion. Ah, well they are financial service driven, I’m sure would be the repost. Ok fair point, so how about Chile, with agreements of $58.3 trillion or South Korea with $40.8 trillion. Even when you eliminate the EU, which has a GDP of $16.7 trillion from the external figures the numbers on trade speak volumes. Crucially most of the agreements of these independent countries cover services, whereas only two thirds of the EU’s trade agreements do so. The EU has opened services markets of nearly $5 trillion to UK exporters, whereas the Swiss have opened services markets worth $35 trillion.
It’s true that our exporters must meet EU standards when they sell into the EU, just as they must meet Japanese standards when they sell to Japan, American standards when exporting to the US. Even outside the EU the UK would benefit from these single set of standards when exporting back into the EU as a block. That’s true for the whole world.
Trade deals with the EU are slow because it’s hard if not impossible to get all the 28 nation states to agree policies; we see that with the Common Agricultural Policy or the Common Fisheries Policy. The Greeks want protections on olive oil, the French on wine etc… neither of those are significant to the UK. It’s hard to make the case that the EU is pro free trade. Various national government have a fiercely protectionist outlook for which France is just the most obvious example. Crucially if the UK can’t agree a deal or doesn’t get things right, our politicians, the people we elect and not the unelected EU commission, will be held accountable.
Will we be isolated? No, it’s not just the UK which is questioning the status quo. The Dutch also delivered a resounding no to the EU in its proxy war on the trade deal with the Ukraine. I don’t share the politics of many of them but anti-establishment and anti EU parties are flourishing as the EU proves itself unable to cope with ever more crises. Immigration is foremost amongst the concerns of ordinary people across Europe.
I’m not anti-immigrant – I after all married one. We have benefited enormously from the skills they bring. But the present situation has destroyed popular consent. I’m not a populist but I am a democrat. If this issue is not addressed it will only continue to be a sore from which more savoury elements will draw sucker. As of 9th June only 2,195 refugees had been relocated from Italy and Greece yet Frau Merkel’s open door policy (a classic example of Germany only playing by the rules when it suits them) means thousands have arrived.
Whatever happens on 23rd June, the U.K. is now a firmly Eurosceptic country. Just as we have seen with Scotland that will mean a recalibration. Whilst I’m starting to dream that Leave might just do it. It’s almost a win-win either way for those with views like mine. This debate has opened new fault lines.
The divisions amongst Conservative supporters are more apparent as the media highlights the personal and philosophical differences amongst the likes of Boris, Gove, and the leavers on one side and Cameron and Osborne supported in large part by the payroll vote against the wishes of two thirds of the Conservative Party. The PM’s position is a minority view even in his own party.
I grew up in a strong Labour town which has experienced its fair share of deindustrialisation with traditional industries like shipbuilding falling by the wayside. So it doesn’t surprise me that a large chunk of the people I grew up with – blue collar Labour voters will vote out. What’s saddest of all is that they have no one to represent them. They don’t share UKIPs wider outlook. They need a strong and effective Labour Party. A strong opposition would be better for the country and the Conservative cause I care about. Yet, whilst roughly 40% of Labours core vote back Brexit, it’s largely middle class, London dominated and out of touch MPs that are 96% for Remain.
I won’t be here on the 24th June to watch the results come in. My proxy will be cast by an active Leave Campaigner. I’ll be on holiday for my wedding anniversary. I hope to be sipping a fine Italian wine and raising a toast to a new chapter. Yes to international cooperation and free trade and an end to supranational protectionist meddling from Brussels!