Britain and the EU

Though Ireland and the UK joined at the same time, the UK always remained semi-detached from the EU. Brussels affairs received barely a mention in the Blair-era diaries of British government ministers and advisors. That this was not even noticed by British reviewers is telling. London regarded itself as more significant on the world stage than Brussels. And, strange as this might sound to Irish ears, until German reunification it had perhaps good reason to do so.

The “supra-national” nature of the EU was designed by France to limit German post-war independence. As Ernest Bevin, Britain’s post-war Labour Foreign Secretary, commented: “when you open that Pandora’s box you’ll find it full of Trojan horses”. Britain felt neither the need nor the desire to have its independence limited in this way. For centuries it had stood secure in its island fortress, holding the balance of power between competing continental states. In the immediate post-war period it looked as much to the US and the Commonwealth as to Europe. The US was of much greater military importance. And as the world’s first industrial nation Britain had long pursued a ‘cheap food’ policy: the agricultural protectionism of the Common Market held little appeal.

Britain’s interest in Europe is as a free trade area. It viewed the creation of the single currency as a federalist step “far too far”, a position with which very many economists agreed.

Post-referendum Britain is not the only polity in existential crisis. The EU itself is clearly in the same position. The eurozone crisis side-lined the European Commission as member states looked to their own interests first. As a leading academic wrote recently, “supranational agents’ ability to take autonomous decisions can only be sustained in matters where the extent of disagreement among national governments over policy outcomes is relatively low”. The European elite thinks that the only way forward is through further integration: “more Europe”. But there is almost zero support across the European electorate for this.

The reaction to the referendum outcome has thrown a sharp light on clashing cultures. British political culture has always been suspicious of grandiose schemes and popular culture has always been irritated by layers upon layers of bureaucracy. (Ireland bears some responsibility for the latter, in that “a Commissioner from every member state” was given to us as a concession after one of our ‘no’ votes. Every commissioner views as their legacy the amount of legislation that they leave behind on the statute books.) The other side of the culture clash is reflected in the furious reaction of the European elite to the British vote, and the apparent desire to get the British out the door as quickly as possible. Twice the Irish voted no, and twice we were asked to vote again. Why did Europe react so differently to us, when there was so much less at stake?

The British vote is also clearly an inchoate reaction to globalisation, or perhaps more accurately to its “collateral damage”. In this it seems as one with the political support for the Trump campaign in the US.

Surely European leaders would be better advised to take a long hard look at how such widespread concerns might be addressed rather than rush to accept a British withdrawal? The latter may well lead to the break-up not just of the UK but to the withdrawal of other EU member states over time. It will entail years of negotiation on future relationships – at the bare minimum between the UK and Europe, and between the UK and Ireland. More worrying perhaps – given the class, age and geographic fault lines reflected in the referendum vote – is the legacy of bitterness and, quite possibly, civil strife that it will bequeath to Britain.

There is no need to rush Britain to withdraw, other than as a threat to other potential waverers. But this is hardly what the European project was supposed to be about. A year or two of uncertainty, particularly given the fragility of the global economy, is clearly undesirable. But the next general election in Britain is likely to offer the electorate an opportunity to visit the issue anew. Europe can use the hiatus to consider how the concerns of so many of its electorates can be addressed. A substantial electorate has spoken. Is Europe prepared to listen?

Comments

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19 thoughts on “Britain and the EU”

  1. Excellent contribution.

    As we have seen before, the reaction of the institution is to secure its own position as priority. It is threatened and if it can bounce a confused UK political community into quickly invoking Article 50 then it can impose any exit terms it likes on the UK because the negotiations can only be extended beyond 2 years be unanimous agreement of EU states – which is very unlikely. Britain will have therefore left after 2 years no matter how duff the deal is.

    The punishment squad know this and distracted politicians in London might be too distracted with leadership elections etc to focus on this key point.

    The hostile attitude of the French government may seem odd to academics, but it is self-interest. Paris is generally regarded as most likely to benefit from the City of London’s demise – if that can be ensured. Perhaps 25% of City business is up for grabs because after the Ecb lost in court over Euro area settlement, it set about insisting that Euro counterparties had to be EU based. Paris is determined to get this business as it is big enough (Dublin is not) and Frankfurt is thought too dull to host the staff.

    The big win for Paris would be if the UK can be alienated so much that its electorate goes for WTO trade status rather than EEA status, because then ‘passporting’ and Equivalence of regulation go out of the window, and Paris might hit the jackpot.

    1. Grumpy
      I cannot believe the City is going to accept the will of a deluded people who were lied to by people who thought they would lose and had no post vote plan. The brexit fiasco is delightfully English.

  2. This is, frankly, a rather naive reading of what the governing class in the UK have been about since the war in matters relating to Europe. Peter Sutherland’s reading of the situation is IMHO much nearer the mark.

    http://www.irishtimes.com/opinion/peter-sutherland-little-reason-to-delay-talks-on-britain-s-eu-exit-1.2701875

    As is his conclusion; “The protection of our interests, however, must recognise that the real focus of our negotiations has to be fundamentally around the survival of the EU and this means any compromise cannot threaten that survival.”

    Martin Sandbu of the FT put the situation well in the following excoriating comment; ” No matter what the leading Leave campaigners have said, let alone what they now say, the arguments that won the vote were arguments against foreigners — against sitting around a table with foreigners and making decisions in common that would be binding on all; and against letting foreigners work, contribute taxes and more than pay their way in the UK.”

    That is how the situation is viewed in Europe. And rightly so.

    Sandbu titles his most recent comment aptly; “UK takes control over which foot to shoot itself in”. Navigating around not being seen to assist it in this endeavour is going to be an exceptionally difficult task. The central plank of any approach must be recognition that it is negotiation between states, all hell-bent on protecting their interests. While it is not a morality play, there is a broader and worthy objective of keeping the EU together. Farage, at least, has had the honesty to admit that its destruction was, and remains, his objective.

    1. My reading of your analysis of the Brexit result, and that of the people whom you quote, is that the Brexit was essentially about immigration only, and that the immediate priority of the EU should be to save itself, as its survival is now at stake!

      This analysis does not stack up. Brexit was much more about the negative effects of globalization than about immigration, but both effect do conflate in the UK, in particular. And If the EU needs to be ‘saved’, who does it need to be saved from, and who is to pay the price of the saving? Ireland and Scotland?

      As far as I can detect, the EU, EC, and ECB, have been ardent supporters of globalization, free trade, the financial and banking elites, and structural adjustments for less-well off. In many ways the EU has become more British than the British themselves in that regard.

      As far as free trade goes, to my knowledge, all home produced goods from both Turkey (and Israel) enter the EU free from customs duty (since 2005?), on production of a completed ATR1 Cert (a one sheet piece of paper), so what is the big deal about free trade in goods, as it is already available to countries not in the EU at all.

      The trade is services, read- banking and financial ‘services’ mostly, is clearly restricted to EU countries. Surprise, surprise that the bankers managed that for themselves. It is regrettable that the French shenanigans, in attempting to throw the UK out the door as quickly as possible, is motivated by poaching banking jobs from the UK, and has nothing whatever do with ‘the survival of the EU’.

      If the EU wants to save it workers and its citizens from the effects of full-speed-ahead globalization, and from having its pockets rifled by bankers, those would be laudable objectives, but ‘saving’ the EU so that Paris can poach high paid banking jobs from London (see Grumpy, comment above), would be a bit of an ask for ordinary citizens.

      1. The subject is the departure of the UK from the EU. Period! It has said that it is going but refuses to get out of its chair and actually proceed to the door. Ireland could join the EU solely if and when the UK did. The unspoken question is; can the country remain now that the UK is leaving?

        On the euro clearing issue, one can quote from the FT article the following.

        “It may also spur tension within Europe. The ECB clearing house policy of four years ago — that London successfully countered — was largely pushed by France, and many German representatives were privately at best lukewarm in their support. One unknown is whether that raises issues about competition. One could not also rule out American banks and exchanges (especially the CME Group) setting out a legal challenge to a policy that tilts the playing field towards particular European corporations. The CME, for one, has form in this area — it took the CDS market to antitrust authorities.”

        In short, the UK is proposing to rely in future in the area of competition on the US Justice Department and the Competition Directorate of the Commission having withdrawn from its judge from the ECJ, the body that ruled in its favour! That IMHO is totally bonkers and the only explanation one can find is that the governing class in the UK, in matters relating to Europe at least, can only be in a meeting room if they are directing what is happening in it.

        As Peter Sutherland points out; “History will judge what has happened as a monumental mistake. It cannot be dismissed with a wry grin and as a temporary little matter. It puts the mistake of Suez in the halfpenny place.”

        That is the background against which a national policy stance has to be worked out.

        1. “The subject is the departure of the UK from the EU. Period! It has said that it is going but refuses to get out of its chair and actually proceed to the door. Ireland could join the EU solely if and when the UK did. The unspoken question is; can the country remain now that the UK is leaving?”

          The UK has had a non-binding referendum. Parliament has not voted to go yet, nor has the UK invoked Article 50. That is the legal position, as I understand it.

          “The unspoken question is; can the country remain now that the UK is leaving?”
          I am not aware of that question being posed. Has somebody threatened to throw Ireland out of the EU, even before the UK has invoked Article 50.
          Will the EU require that a barbed wire fence be erected, running from Muff, in Donegal to Omeath in Louth, and that it is built at Irish expense?

          It is in Ireland’s interest to remain a member of the EU, and any EU action that seeks to put ‘an iron curtin’ between Ireland and the EU, setting aside legal arrangements that predate the formation of the EU itself, would be utterly illegal and unconscionable.

          A little bit of common sense and calm is needed at this point.

          The EU, it appears, considers free movement of labour as one of the guiding principles, not to be discarded. But what moves have we seen from well pensioned EUcrats about the pensions of such ‘free-moving’ migrant labour, or what country they are paid from and under whose laws, (eg Malta), while working in the wealthier countries.

          I could not resist, this evening, looking up the trade and travel arrangements for Monaco. Not an EU member, as I understand it, but with free trade and movement of goods within the EU, free movement of people etc.

          [I was a 100% supporter of the EU prior to its taking sides against the working classes from 2008 on, and would be a 100% supporter of the EU again, if it reverted to a union that paid dividends for all its citizens, rather than the wealthier elite that seem to have captured and now control it. ]

    2. DOCM – I hate to rain on your FT and IT parade, but. In 1993 Sir James Goldsmith published a monograph – ‘The Trap’. Why I wonder did he feel compelled to write it? I opine that if he were alive today it is probable that he would have supported the ‘Leave’ side. [See especially Chapter 2: GATT and Global Free Trade’.] He ‘saw’ what was coming, and spoke out fiercely against it. Makes Sandbu and Sutherland (and their ilk) look like the political pygmies they are.

  3. Bit of history on the courtship:

    On 7 January 1958 Walter Hallstein was appointed first president of the Commission of the European Economic Community (now the European Commission) in Brussels, a post he was to retain until 1967.[2]

    In 1961 he was awarded the Charlemagne prize (Karlspreis) by the City of Aachen for his efforts in the cause of European federation.[2]

    In 1962, when the United Kingdom and Ireland were applying to join the European Economic Community, he startled an Irish journalist by saying that he had not thought it necessary even to open, let alone read Ireland’s application. He then memorably summed up Ireland’s dilemma “If the UK goes in, you go also; if not you too will stay out. Britain can possibly come in without Ireland but Ireland cannot come in without Britain ” He was proved entirely right: the French veto on the United Kingdom made it effectively impossible for Ireland to join until the removal of the French veto made it possible for both to join in 1972.[3]

    http://en.wikipedia.org/wiki/Walter_Hallstein

  4. Excellent and level-headed analysis.

    Regrettably the European institutions have dusted down the Greek treatment plan, and seem determined to attempt to apply it to the UK.

    “Jean-Claude Juncker had warned that ‘deserters will not be welcomed with open arms’
    It looks like the UK may need those Martello towers again.

  5. I have seen globalisation blamed in the FT, the Guardian, Le Temps, le Monde, the NZZ and the IT. As if nothing can be done. Take the UK. GDP has never been higher. Globalisation helped grow it. The problem is the distribution of wealth. The BHS pension scheme vs Philip Green for example. The economic system is breaking down. Eurozone incoherence is part of the mess.

    A tiny cohort of motherf#ckers is driving deflation because it increases their wealth because of how markets value bonds . And the results are chaotic.
    Cameron was destroyed by forces beyond his control.

    It is hard to beat the lyrics of Ian Curtis who also had a UK/Euro crisis in his personal life

    When routine bites hard
    And ambitions are low
    And resentment rides high
    And emotions won’t grow
    And we’re changing our ways
    Taking different roads
    Love will tear us apart again

  6. The European project has stalled. The Euro
    is a failure. It doesn’t work. Doesn’t have a LoLR or bank resolution or deposit insurance . Can’t generate inflation or growth cos the mêmes are nuts. Politics have atrophied. Germans won’t reform the Euro because of moral hazard fears. The single market and free movement don’t make sense in this context.
    Neoliberalism is FUBR when Deutsche Bank struggles to generate 10%, half of the Squad’s pathetic earnings go on fines and Credit Suisse is valued at less than 60% of book value. We also have $10 TN in sov bonds at negative yield, destroying corporate finance theory and Black Scholes.

    Things can get a lot worse before they get worse. Fund values can fall as well as plummet.

    1. Correct. I believe I wrote that this would be the behavioural response.

      The European project was designed as (and is being maintained as) a single-lane, monodirectional, (with a loosely gravelled hard-shoulder) autoroute. It has a one-way entry ramp, no interchange nodes, no service areas, no exit ramps (other than gaps in the safety barrier) and crucially, it terminates in a regularly flooded landscape. Has no one noticed this yet? I think that someones have. Martyn Turner has a nifty cartoon showing a bunch of sheep (sporting the appropriate national flags) rushing over the edge of a cliff – with a single contrarian heading in the reverse direction. There is always one silly sod, insn’t there?

      On a more nerdy note. The ‘free movement of persons, goods and services’ – which is asserted as an essential article of economic (theory) cannot be correct. It violates key attributes of physical law; that is, its performance characteristics (as assumed) lead inexorably to a comprehensive systems failure. Think about this – its not intuitively obvious. (Hint; Osmotic pressure).

  7. This article, by Jonathan Powell, one-time Tony Blair’s chief-of-staff (and involved at top level in achieving agreement on NI) hits every possible nail on the head.

    https://www.theguardian.com/commentisfree/2016/jun/30/not-too-late-negotiate-way-out-disaster-take-courage

    However, big powers like the UK are akin to a super-tanker, difficult if not impossible to turn around, it being in their DNA to demand that lesser craft simply give way. However, as the old joke goes, they have mistaken the EU for such a craft when it is, in fact, a lighthouse.

  8. BoE governor seemed to suggest QE might be on the cards. On previous QE programmes, I’ve been comfortable that markets would accept the underlying strength of the economy and not lose faith.

    However a future British QE looks more vulnerable. 1. Their previous programmes took place when they were in the EU. 2. Britain doesn’t have a plan for Brexit.

    I think there’s a real risk that a new British QE programme will be the first such exercise to backfire. Potential for capital flight and floppy pound.

    Any thoughts?

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