It is a European institution, known for its excess and undemocratic nature. In Britain it provokes a mixture of exasperation and contempt. While this has always been true of the Eurovision song contest, a similar feeling towards the European Union has been growing for a number of years. This antipathy, once held only by backbench rebels and fringe parties, is now coming to the fore of mainstream British politics. However, it often feels as if the concerns of Eurosceptics can be better resolved by remaining in than out.
One of the biggest criticism of the EU is that its myriad of regulations pose a hindrance towards businesses. Yet over the past few decades the EU has actually done a lot of good for competition in British industry. Indeed, the perception of it as a leftish vanity project is difficult to justify. EU competition law is geared towards the proper operation of free markets (some might say excessively so) and historically has been stronger than that of Britain’s. Since the creation of the single market brought Britain’s laws closer to those of the EU, the cartel culture of some UK industries has been broken. Additionally, the increased competition that comes with being part of a large free trade area makes it more difficult for firms to successfully form cartels.
One of the key reasons given for leaving would be freedom from regulation from Brussels. Even proceeding with the theory that EU regulation is harmful (and in most cases they almost certainly are not), Britain would not be able to completely escape all of them if it left. In a publication for Open Europe (a Eurosceptic think tank that calls for reform within the single market) Stephen Booth and Christopher Howarth suggest: ‘The EU has one set of legislated product regulations and, in principle, once these are met, goods can move freely within the single market. This reduces costs for companies that wish to take advantage of the single market. If it was not in the EU, the UK would either have to follow the EU’s regulations for domestic production or its manufacturers would have to bear the cost of multiple standards.’ As part of the club, Britain might be able to shape these regulations. Outside of it, they would simply have to be accepted.
Furthermore, it is often intimated that Britain leaving the EU would allow the country to reposition itself and start exporting into rapidly expanding markets such as South-East Asia or South America. It could follow in Switzerland’s footsteps by negotiating a trade agreement with China, in contrast with the EU which refuses to accept it as a market economy. Such a repositioning is not as easily achievable as prominent Eurosceptics would seem to believe. Britain’s main exporting woes result from a lack of a coherent industrial strategy, relatively low levels of R&D spending, and the failure to address the historic ‘productivity gap’ that exists between Britain and other major developed economies. Leaving the EU would not provide the answer to these problems.
In fact, it would probably exacerbate them. Of course, if Britain cut all its ties with Europe, it would be subjected to the Common External Tariff, imposing additional costs upon exporters. Making it harder for the majority of exporters to remain competitive is not going to help foster Britain’s trade realignment to emerging markets. Most agree that this has to take place in the long term. Furthermore, there is no reason why such a realignment could not happen with Britain still part of the EU.
Britain would be likely to experience higher barriers to trade outside of the single market. Most successful trade negotiations come when countries align themselves in blocs, as only then does the appeal of access to a large market outweigh the downside of making concessions. The country would be better off negotiating as a member of the EU, rather than by itself – the recent discussions between the Union and the US are a case in point. It is hard to imagine a scenario where Britain could negotiate a better trade outcome with the US by itself. Even in talks with, for instance, ASEAN or MERCOSUR, on its own Britain would not offer such an attractive proposition. The net effect would be to reduce the country’s power in trade talks and leave its exporters at a disadvantage.
Many Eurosceptics, including Nigel Farage, suggest that following the precedent set by Norway and Switzerland in being half-in, half-out, would be a reasonable solution. However, neither of these is likely to give genuine Eurosceptics the freedom they desire. While it is true that Norway seems to be reasonably happy with its agreement, Britain is in a completely different situation. Norway has vast oil reserves, is not as bothered about a lack of a voice within Europe, accepts a significant amount of regulation (including ones that concern working time) and still pays into the EU. Britain, on the other hand, would have the added problem of having a large financial sector likely to fear looser ties with Europe. Switzerland, which operates through bilateral deals with the EU, has suffered from this lack of representation. Ironically, it has had to ally with Britain in order to get its voice across on the matter of financial regulation.
The Norwegian and Swiss models are simply examples, and a potential British path outside the EU does not have to be entirely copied from either country. Yet if these are not credible alternatives, then what is? The real problem here is that there is no solution that answers the criticisms Eurosceptics aim at the single market. While talk of excessive regulation is overdone and arguments about immigration heavy handed, there are legitimate concerns that one might have with the EU (not to be confused with concerns about the Eurozone, which are not relevant in this debate). However, Britain’s best path is to remain on the inside, shaping the decisions that will affect the country whichever path it chooses. Much like the power ballads of Eurovision, the actions of the EU are something Britain will have to suffer whether it remains in or out the club.
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