Some of these friends feel their hearts tell them to leave, yet their brains urge them to remain in the EU. Given the ludicrous claims, counter claims and accusations springing from the mouths of all manner of conflicted, and apparently ignorant UK politicians – sometimes foreign ones - I’m perhaps less surprised that they are desperate enough to ask me.
So, amongst all of this scaremongering; what is the view from the Smith-Meyer stronghold in Castle Luxembourg? My UK friends feel it is so complicated. I maintain that it isn’t; that there is simply too much “noise” around for many to see the wood for the trees. The short answer, for those who want to simplify things, is that if the future is, by definition, always uncertain, then that future for the UK is all the more uncertain outside the EU. If you accept this, then it is a question of how much uncertainty you are willing to bear, and what you require in terms of potential reward outcomes to justify taking the risk of uncertainty. Let us approach this point by point.
Migration: The most common emotion I hear from BBC interviewees, or see quoted in the papers, is the fear that the UK is being overrun by immigrants. Immigrants, who in passing, appear to have become a by-word in the popular press for social scroungers and destroyers of the British way of life.
- No-one seems to argue that existing immigrants should be sent away, but that flood gates must be raised to stop future flow. But leaving the EU in order to stop EU immigration, will only deal with half the “immigration problem” - at best. Most reports confirm that EU immigrants are less likely to be on social welfare than home grown British workers, and that they are a net, positive contributor to the Exchequer. So if there is a burden (and some argue there is none), it must surely be with non-EU immigrants. Add to this that Cameron has very “cleverly” negotiated that EU tax payers in the UK should be excluded from UK social welfare in the event of need (presumably therefore paying for UK workers on the continent experiencing social and financial distress in return), it flies in the face of reason that the burden of EU immigrants on the NHS et al is a reason to leave the EU. Would the UK government prevent productive skills and expertise being imported into the UK? Probably not. If a productive, tax paying migrant workforce were to be turned away, the British worker may benefit – but the pressure towards cheaper labour costs would encourage the outsourcing of jobs to cheaper locations abroad, such as Romania, or for industry to continue investing in capital intensive, non-labour processes. Either way, the British – indeed European worker – is not promised any significantly greater job security, unless the same, less flexible, more worker friendly market rules, such as those EU rules for which the UK government has secured multiple opt-outs, are introduced. But are these rules not part of the over-regulation that the Leave campaign wants to avoid?
- The argument that immigrants are destroying the British way of life, begs the question what that is. From a historic perspective, the UK has been proud of being a melting pot of refugees of all types, and has greatly benefitted from the creativity and innovation that has ensued. A 2-hour walking tour of East London will provide all the history needed to confirm this. So, are we at a point where “Britishness”, seemingly for the first time since 1066, is now defined as maintaining the status quo? And what is that status quo? If it means keeping jobs for home-grown talent, avoiding small businesses run by immigrants from taking over the high street, saving the likes of BHS, then we should examine the root cause of the concern. We live in a world of global brands. “Britishness”, like “Frenchness” or “Germanness” are all under threat. We have our national, global brand champions, but these are becoming fewer and more niche oriented. The England that was once known for its shop keepers, is becoming reborn by immigrants.Is the energy required to take on the risk and hard work of running a corner shop business the choice of home grown talent, living on the time and comfort lent them by built up parent wealth, capital and welfare rights, or by immigrants who have made a sacrifice and aspire for a better life, and will make every effort to make the disruption to their life a worthwhile investment? If it is a lack of integration by these immigrants that “we” fear; if it is that traditional values will be overtaken by zealous, foreign influences that "we" fear; then is the real challenge not to ensure that these traditional values are strong enough to withstand the onslaught? Do we really believe that worthy, and strongly held “domestic values”, properly nurtured by the majority, will so easily be undermined by minority views? Britain, the land of free speech and expression is surely stronger than that. If it is not, does anyone seriously believe that leaving the relatively harmonious confines of the EU will change anything? Will the fight to maintain national identity be easier when standing alone? Is the British spirit now defined by conservatism, and not entrepreneurism?
- The Single Market, even for the Leave campaigners, is one of those aspects of the EU that is worth something. Leave argues that the UK is too important a market for the EU to leave the UK on the side-lines – access would be assured as a result of economic reality. To a point this is true. No-one in the EU wants to leave the UK adrift in the Atlantic – but neither do they wish to say that Club rules may be ignored. A Single Market is built on the concept of a level playing field, allowing a player onto the pitch who wants to ignore those rules simply cannot happen. So the regulations on cucumber shapes will remain. Then again, why does the Leave campaigner think this rule exists in the first place? It was not the “eureka” moment inspiration of a Belgian philosopher that gave rise to it, but the desire of business to reduce transportation costs – which it did to the benefit of UK consumers, amongst others. I recently visited a local food market in Liguria, Italy. The shapes of the locally produced cucumbers were something our younger generation of consumers would find hard to believe. EU regulations are not created to obstruct, but to open up and consolidate the gains of a Single Market. Leaving the EU will either not change anything in respect of complying with Single Market rules, including large chunks of “meaningless” rules, or will result in a huge uncertainty, or trade tariffs, without obvious replacement of business opportunity or benefit.
- The financial sector complains about over-regulation from Brussels. What seems to be missed is the fact that the UK regulators are amongst the most ardent fans of gold-plating EU regulation: the art of adding to,not simplifying basic EU directives. What also seems to be missed, by would-be British regulation-free traders, is that much of the regulatory debate and agenda is driven by the UK regulatory establishment. There is a significant risk that once no longer at the EU table, the UK regulatory drive for rules may continue in a UK / US axis, but be eased in the EU markets where some of the worst excesses of risk appetite are not perceived to be present at the same scale as has been the case in the UK and US financial sectors. Leaving the UK may disadvantage the UK financial sector in terms of relative regulatory excess, certainly not reduce the burden.
- The discussion around human rights in the UK is confusing. On the one hand, the British are proud protectors of human rights, yet they despise the European “interference” on the topic. The EU Charter of Fundamental Rights was a document created in 2009. It was hardly revolutionary. It merely brought all the human rights elements of past directives into one document. There is little in it to disagree with (from a UK values standpoint) and it interferes little with nation state legislation on the subject. The European Convention on Human Rights however, is not part of the EU, was strongly advocated by Winston Churchill and does in fact hold jurisdictional rights on its adherents – UK included. The Court of Human Rights is not an EU institution – leaving the UK will have no impact on this (to me, still incomprehensible) debate.
- Worker rights, however, admittedly is a separate matter. Social pact / worker solidarity policies emanating from the Continent with their “socialist / welfare state” obsessions have since long been opted out of by the UK. Cases of worker abuse such as those recently heard in Parliamentary Select Committees on Sports Direct would be illegal elsewhere in the EU – but the UK is already free of them … for better or worse. Leaving the EU would, of course, relieve any pressure to improve the lot of the British worker.
- The UK and many other EU states resist the transference of power to Brussels – the structure and voting powers of the EU Council, where all EU governments gather to seek consensus agreement, guarantee this will continue to be the case for the foreseeable future. Indeed, much of the bureaucracy and inefficiencies referred to by the leave campaigners are the direct result of this continuous need to negotiate and reach common agreement. The EU can exercise "sovereignty" only on terms the EU Council, including the UK government, agree to.
- Outside the EU, the UK would be sovereign to ignore such discussions: True. However, if the UK wishes to have access to the Single Market, then the Norway solution will have to be adopted. In essence, the UK would be subject to decisions taken at a table where the UK is no longer present.
- Furthermore, the UK may now independently negotiate terms of trade with third nations, or seek to influence other powers to act in accordance with UK values or interest – but does anyone seriously believe such influence will be greater than if acting as part of the largest trade block in the world? If the EU Council and its constituent governments decide to pursue a common policy, or to resist foreign pressure – there is little doubt in my mind as to who will hold greater influence.
- It may be gratifying that the UK has placed itself in this position by exercising its sovereignty, but at what price? And, again, for what gain?
- Is the Commonwealth supportive of the UK because of its colonial history and the Queen, or is part of the story the influence it gives them in the EU? Realpolitik is no different after a UK exit.
- The UK can pursue markets in the East and West! To be honest, if this isn’t happening already, then it is because British exporters and importers prefer to work with a more stable, uniform and predictable EU. Forcing British commerce to look away from Europe sounds expensive, risky and more complex. Don’t forget, British industry are free to pursue and prioritise these “lucrative” markets already – they just choose not to? Why, I wonder?
The Expense: Net of rebates and transfers to the UK, the reported cost to the UK of membership of this trading block and EU Single Market is minimal, £8,4 billion in 2014, about 0.4% of UK GDP. Is this repaid in increased trade and commerce?
- In Norway, despite its access agreements, processing industries in fishing (for example) are subject to trade tariffs. The result is lower profits, the closure of fish processing plants in Norway and the transfer of capital and jobs to Sweden, Denmark, etc. Smoked salmon from Norway? No, not really. Norwegian fished salmon is exported and smoked in Sweden, folks! … so disappointing!
- Is the expense really so high? And will leaving the EU not risk existing benefits and incur higher known and unknown costs? How will industry be impacted? All we know is that the outcome is uncertain.
Economic Outlook: Many have issued dire warnings about the consequences of leaving, many have promised great growth if we leave, and everyone has rubbished the arguments of the opposing side. I say again: It is a matter of risk.
- As far as recession goes, some of the damage is already done. According to the BBC, there has been less permanent employment contracts signed in the UK this year, replaced by more flexible temporary contracts. Any business considering non-essential investments will not have done so this year – why should they? Investors hate uncertainty and want to minimise risk. Furthermore, the nature, sectors and calculated internal rates of return on such investments will probably vary depending on an “in” or “out” vote. I certainly would not invest in a fish processing plant at the moment, would you?
- As for the future – within Europe, investment decisions will be based on the assumption of a continuation of the past, with stable political and economic environments, even if not at emerging market rates. Outside Europe, the UK has to reconfigure what the future holds in terms of opportunity. Short term investments with quick payback will be fine and establishing bridgeheads in the EU proper will be popular, but until we see the emerging reality of future trade flows and partners – most investors will be cautious. This uncertainty, this risk, will slow investment. Will the new freedom from the EU and dash for new markets provide a wealthier future for the UK? We do not know. Until further notice, expect Sterling to continue to decline – good for exporters, but bad for imports … remind me, is the UK not a big importer of physical goods?
Conclusion: So, with apologies to those who do not like my opinions, here is my opinion and answer to the question as to what my (European perspective) view is on the Brexit question. The future of our societies lies, not in isolation, but in forming a community of interest. The undemocratic aspects of the EU are entirely the making of the member state governments themselves - it is the elected governments in the Council who decline to give the authority to the commission to take effective and streamlined action. If Brexit does happen, will the next stop be NAFTA? The UK will need a new framework within which to survive and prosper. Electing to “free” the UK from the shackles of the EU is an adventure. Is the UK ready to take the risks that come with adventure, and even more importantly, is this the future that the younger generations aspire to, or is it a nostalgic, emotional lurch by those nearing retirement? The demographics of the polls might lead you to suspect so; it does me!
Finally, whatever you decide dear friends and cousins – rest assured we will still love you, watch your football and enjoy holidays in your country – who knows, it might even be more affordable?
Good luck. Bon voyage?