In my previous instalment, I tried to address a few common misconceptions around the EU; in this one I’ll try and have a look at the three main scenarios that the UK could follow should it decide to secede from the EU in the forthcoming referendum.
If you don’t have time to read through the whole thing, here’s a pretty concise summary: Britain could copy either Switzerland or Norway, or leave the EU completely and become any other country with respect to it (like, for instance, Canada, or Russia, or China). Neither of the three make much sense or are an improvement over the current situation under three main points of view: access to the EU market and international trade, freedom from EU laws and movement of people.
The Swiss model
Switzerland, like Norway and Iceland and Liechtenstein, are part of the EFTA – it used to be the EU’s rival club – but, unlike the two Nordic countries, isn’t part of the EEA. Instead, Switzerland negotiated a free trade agreement with the EU, which is a model that some, in the Out side, see as a good one for Britain to follow. The fact is that it isn’t.
The Swiss free trade agreement doesn’t include, for instance, banking or other services such as legal advisory or accounting. Swiss banks have had to rely heavily on creating extensive branches in Europe – notably London – in order to operate within the EU. It’s easy to see how damaging this solution could prove for Britain, which exports almost £100bn a year to the EU in services (and, if services alone are to be considered, has a positive balance, i.e. exports more than it imports). In addition to that, there are other gaps and limits to agricultural products.
In order to export to Europe, Switzerland must adhere to the EU laws. This means that, every time that Brussels churns out a new law on, say, cheese or pharmaceuticals, Switzerland needs to incorporate it into its own legislation, lest it loses access to Europe for that particular market. Obviously, Switzerland has very little say, if any at all, in what gets decided in the European parliament. Additionally, Switzerland is mandated to contribute to several European initiatives, such as the funds for regional development. For the period 2007-2013, Switzerland participated with CHF 1bn, in the region of £700m.
Finally, people. Part of the free trade agreement involves respecting freedom of movement. In recent years, the phenomenon of the so-called trans-border workers had taken the central stage in Swiss politics, and a referendum in 2014 was won by those arguing for limits to the influx of EU workers – notably Italians, Germans and French – into the Confederation. The EU voiced its opposition, and things have since reached a stalemate.
The relationship between Switzerland and the EU is undoubtedly skewed in favour of the EU. By why is that? The reason, in my opinion, is quite simple and it’s all due to bargaining power. 65% of Switzerland’s trade goes to the EU, whilst less than 8% of the overall EU trade goes to Switzerland. In a nutshell, Switzerland needs the EU a lot more than the EU needs Switzerland and, as we’ve seen in Part I, the same is largely true for the UK.
The Norwegian model
This one is quite similar to the Swiss case, for Norway is another EFTA member; however, it doesn’t have a free trade agreement with the EU, relying instead on the EEA, the European Economic Area.
Norway isn’t part of the Common Agricultural Policy, but this means that Norwegian products can, and do, get taxed by the EU. Not long ago, salmon farmed in Norway was hit by anti-dumping tariffs, as Brussels perceived it to be sold at an artificially low price into the EU.
As for Switzerland, Norway needs to copy a lot of the EU laws if it wants to export over here. This situation used to be called “fax-democracy”; I suppose that, nowadays, it could be renamed “Dropbox-democracy”. Whatever its name, the bottom line is the same; to export in Europe, Norway needs to adhere to laws it didn’t contribute to, and didn’t have a chance to express an opinion on. Additionally, Norway devolved €1.8bn into EU grants (mainly aid to new member states) over a five year period, and €300m also go to scientific and academic research programmes.
Finally, migrants. Even here, there’s not much joy for those in the Out campaign: one of the founding principles of the EEA is the freedom of movement.
Just one of many: the out-for-good option.
This is the most radical one. The UK leaves, and slams the door behind. No EEA, no preferred routes, no special relationships; Britain becomes, to the EU, just another country, out there (and vice versa). This option’s validity, you might’ve guessed it, is based once again on a handful of factors that, by now, should be familiar: access to markets, EU laws and freedom of movement.
Critics of the EU say that a disenfranchised Britain would strike trade agreements with China and America quicker than the EU could, and they’re right: getting 28 heads to agree is always harder than one. But what terms would such an agreement have? On one side you’d have China, its 1.4 billion people and its $9 trillion of GDP; on the other is Britain, population 60 million and an economy three times smaller. Numbers like these, and some scholars, suggest that the bigger party would be the one better off. By being part of a larger bloc, the EU, Britain would definitely have a stronger with bargaining power.
Leaving the EU for good would also mean tariffs to trade. Sure, Britain has a trade deficit with the EU and, in the grand scheme of things, it’ll be Europe to be worse off. But let us not forget, as we’ve seen in part 1, that 44% of British trade is EU-bound, versus only 3% going the other way.
EU laws: same old, same old. If you want to export in Europe, you’ve got to adhere to EU regulations. And, yet again, Britain wouldn’t have any say whatsoever in the lawmaking process.
Finally, let’s talk about all those social aspects which should leave us feeling all warm and fuzzy but, actually, are anything but. An out-for-good Britain wouldn’t have to contribute to sustain those pesky French farmers or dodgy Spanish fishermen, but… It wouldn’t get the £4.4bn that it currently receives under the form of subsidies and regional aids. Additionally, the UK would be automatically left out from all those research grants that the EU launches every year and that British universities are so good at getting.
And what about the migrants? Well, if the UK is to become to the EU what Canada is now to Europe, then all European migrants should either get a work visa, or a British passport, or head for Dover and the ferry. Huzzah huzzah. But… for instance, EU migrants make up 22% of doctors in the NHS and 19% of the nurses. Can the nation’s hospitals cope without them? Additionally, don’t forget that what comes around goes around. It’s unrealistic to assume that, if Britain expels all the Spaniards or the French or the Italians, Spain, France and Italy won’t do exactly the same.
There are 1.8 million Brits living in Europe, and a large proportion is made of pensioners, with Spain estimating that more than half of the 1 million Brits residing in the Iberian peninsula are older than 50. These expats are, by all means, looked after by the local welfare systems, receiving jobseekers’ allowances and healthcare by the local NHSs. What would happen should they return en masse?
A waste of time.
There’s no denying that the EU needs reforming. Regardless of where you stand on European matters, there’s no denying that things need changing in Brussels. But the fact is that this talk about referendums, ins and outs, emergency breaks and Brussels’ yoke is not helping. In facts, it’s a distraction. Why isn’t anyone talking about reforming the voting system to make it less reliant on unanimity, or why isn’t anyone talking about that preposterous move to Strasbourg that happens every year?
Personally, I think this is all a big diversion. The Tory government is specialised in focussing people’s attention on marginal issues, blowing them out of proportion, whilst scooping under the carpets the real problems. George Osborne, in this month’s Budget, just admitted that the plans for containing the national debt he presented in November are already wrong by a staggering £38bn, but what everyone talks about is the sugar tax. The EU referendum is a nice diversion from the royal screw-up that is the government’s plan for the NHS, or the growing chasm of inequality that is emerging between the nation’s rich and the poor and disabled.