The Economist is getting rattled. It is concerned that the “out” case is beginning to sound convincing and needs to be answered. It believes that “If Britain is to avoid Brexit, the time has come to expose the contradictions in the Eurosceptic case for leaving.”
The Utopia of globally minded Eurosceptics is a British economy set free from burdensome Brussels regulation, retaining access to Europe’s single market, no longer paying into the EU budget, trading freely with the rest of the world and setting its own limits on immigration. Yet .. every part of this ideal is either questionable or misleading.
But in fact the Economist’s answers are themselves questionable and misleading.
The Economist claims that most of our most damaging regulations are self-inflicted and do not come from Brussels at all; and it is true that British government has proved itself perfectly capable of generating its own home-grown regulations. Of course Brexit won’t get rid of over-regulation completely. We need to reduce the burden of excessive regulation and paperwork, whatever its origin. To claim that Brexit will only remove part of our over-regulation problem is not an argument against Brexit.
But, claims the Economist,
If Britain wanted full access to the European single market, it would have to observe almost all the EU’s rules. That is the case in Norway and Switzerland, non-members that both also pay into the EU budget (in Norway’s case, roughly 90% of Britain’s net contribution per head). Eurosceptics who dream of reclaiming lost sovereignty need to explain how they advance their aims by advocating an alternative that would require Britain to apply rules it has no say in making—and to pay for the privilege. If, instead, Britain wishes to escape the EU’s rules, it will lose full access to the single market.
In fact, we would not have to do anything but we would no doubt agree to make concessions in return for concessions on the other side. The analogies of Norway and Switzerland are quite inappropriate. Norway is a small and very specialised country with a lot of oil. Switzerland is an isolated enclave in the middle of Europe. Each has done their own deal with the EU. No doubt they have had to make some concessions to the EU in return for some concessions made by the EU. We also will do our own deal and we will be in a much stronger bargaining position than either Norway or Switzerland.
The Balance of Trade
The argument that, because Britain imports more from the EU than the other way round, it is in a strong bargaining position is unconvincing: the EU takes almost half of British exports, whereas Britain takes less than 10% of the EU’s.
This is juggling statistics and The Economist should know better: The percentages merely indicate what we know already – that the EU is a bigger economy than Britain is. In money values, Britain sells less to the EU that the EU sells to us. The actual figures for 2014 are EU exports to the UK: £289B; British exports to the EU: £227B. Therefore, in economic terms, the EU needs us a bit more than we need the EU. And actually, the proportion of British exports going to the EU is gradually declining as (despite the barriers imposed by our EU membership) we trade more and more with the rest of the world. After Brexit, this trend will undoubtedly accelerate and any business lost in Europe will be compensated for by sales to the rest of the world.
The Economist admits that a free-trade deal in goods might be negotiable, but thinks that it would not cover services (including financial services), which, as it says, make up a rising share of British exports. But tariffs are not a big problem with services anyway, so a free-trade deal is not likely to be needed. What is essential that the EU should be prevented from crippling our services industries by the wrong kinds of regulation.
Trading with the World
The Economist does not believe that we could develop trade with”the dynamic economies beyond Europe”:
Britain in search of free-trade deals with these giants would lose the negotiating clout of belonging to the world’s biggest single market. A prime example is the Transatlantic Trade and Investment Partnership being negotiated by America and the EU A post-Brexit Britain would be excluded from TTIP.
We may reply that many people are very sceptical about the likely benefits of TTIP (which is starting to look like another EU on a grander scale). And if Iceland can negotiate a trade agreement with China (which the EU has not yet done) so can we.
We have a very great advantage over other major European economies – we have innumerable links of language, laws and culture with many countries outside Europe, notable of course the countries of the the Commonwealth, which include some of the world’s fastest growing economies – countries like India, Canada and Australia, as well as smaller ones such as Singapore and of course a very big one – America. These links count for a lot in business – it’s always easier to do business with people who speak the same language and to sign a contract with a company based in a country that has a similar legal system. Our EU membership currently prevents British businesses from taking full advantage of these natural links, which derive from our history.
The writer observes, in a rather superior way, that “If Britain leaves the EU it will be precisely because a lot of voters mistrust foreigners and globalisation.” Our doorstep discussions confirm that immigration is indeed the most important issue in voters’ minds and the polls confirm that. Free movement of labour is one of the cardinal principles of the EU and for that reason alone, if for no other, we need to leave the EU. The second part of my article will spell out, for the benefit of the Economist, why the voters are right. It’s not prejudice – it’s basic economics.