Tuesday, 29 March 2016

Reasons to stay in the European Union, #1: you can't have your cake and eat it

So it's time, now, to turn to the question that will dominate British public life for the next twelve weeks or so: should this country leave the European Union?

The answer is simple: no. And for the next three months we're going to be looking, semi-regularly, at the reasons why that is such a bad idea. A catastrophic idea, in fact - a concept so harmful and so fallacious that it amounts to voting to chop off your own arm. With a spoon.

The first, and perhaps most important, reason is this: you can't have your cake and eat it. Now, we know that the utter fraud and mendacious self-publicist that is 'Boris Johnson' has said that you can even while remaining in the EU, and he was certainly in favour of just that having and eating until a few weeks ago. But you can't if you leave. You can't. What do mean by this? Again, simple: you can't have all the advantages of being in the EU without being a member. You can't be in the Single Market without paying for it, voting for it, fighting for it, agreeing to its rules, accepting its disciplines. You might just as well pitch up at a party empty-handed, drink all the booze, refuse to make a contribution, and then cut up rough about being asked to leave. Never. Going. To. Happen.

We know this, because what the British have always wanted is a free trade area without a Common External Tariff (we'll get to the technicalities in a minute) - a 'hard core' of the EU's full members, surrounded by a 'soft' outer core of associates who are perhaps not so keen on the Ever Closer Union so memorably evoked by the EU's founding treaties. That's why we've been down all these byways so many times before. That's why UK Ministers tried to build a wide free trade area around the emergent EEC in 1956-59, in the UK's so-called 'Plan G' that eventually turned into the European Free Trade Area (EFTA). The reaction? France and West Germany blocked the idea, for the exact reason that Britain will never get Single Market access from the outside: that it would punch a massive hole in the Single Market's protective tax-and-duty rules on behalf of a outward-looking and open trading nation, thus negating the whole point of building a Single Market in the first place. If everything that Britain bought and sold in the world could then just pour in and out of the EU itself, the very idea of a Single Market operating under one set of rules would turn to dust.

Let's turn to theory. A Single Market is not just a free trade area. It is a market of rules - rules on (say) product safety and testing, labeling, the language of commercial guidance and rules, on hiring and firing, outsourcing and contracting, financial transfers and the treatment of agricultural livestock, vehicle emissions and energy use... One could go on forever, which is why many EU rules do seem to. The UK has until now accepted these, especially in the Single European Act that Mrs Thatcher accepted in 1986, because it is by far and away the power that gets the most out of all this. Because it exports a great deal of services, and partly people (including expert people), the large corpus of already-existing European rules vastly reduce the non-tariff barriers to trade that could be raised to UK goods if we were not in the EU.

And don't give us all that stuff about World Trade Organisation rules forbidding new tariffs. They don't apply to services, for a start - a relatively small (but still very important) part of our export sector. Don't raise with us all that nonsense about how the EU relies on the UK as its biggest market and will have to do a really good deal with us if we do leave. Yes, the UK is its biggest single market, but in an entirely asymmetric manner: put simply, the share of UK trade with the remaining EU countries taken individually is far, far higher than theirs with the UK. Any trade deal with the EU if we left, and did not then just apply to semi-remain on an EFTA-style basis, would be a tough, tough old slog for just this reason. It's clear: we need them much more than they need us. French farmers and Frankfurt bankers would have absolutely no incentive to help us: indeed, as their lowest-cost and most skilful competitors, Britain's employers would risk being shut out of the markets that matter the most. All that guff that Boris began his Brexit 'campaign' with, about how we could emulate Canada and do our own deal with Europe? He's just dropped it all, having a little bit of a giggle about it on the way, because it would take many years (like Canada's deal) and - again - wouldn't cover services. Our experience in the late 1950s, which prompted the UK after all to try to enter the then-EEC, shows us that a total go-it-alone is exactly where this would land us: on the outside looking in. What a truly distasteful fake he really is.

By far the most likely outcome of a Brexit would be Britain continuing as a member of the European Economic Area - EFTA's successor organisation. If we left entirely and tried to negotiate a free trade deal, after the two years it would take to expel the UK under Article 50 of the Nice Treaty we'd face many years trying to bargain down the four per cent or so tariffs we might expect on our physical manufactured goods, let alone all those non-tariff barriers to trade that could go up: all a very difficult ask given that defence of the Common External Tariff and the Single Market is the sine qua non of 'Europe' existing at all. Nor should anyone be confident that, given the complexities, Whitehall and Westminster would even be capable of coming out - especially as they struggled with the Prime Minister's likely resignation, a new-old government, a likely sharp recession, a possible snap General Election and the build-up to a second Scottish independence referendum.

So we'd almost certainly be left going for the deal Norway has, in which they have to accept the majority of EU rules and have to pay over 80% of the requisite budget contributions, but have absolutely no say whatsoever over those rules. Or the Swiss deal, which sees them paying about 40% per person of what the UK pays in, but doesn't give them any services access to the Single Market at all. Oh, and it would still very likely involve the free movement of EU citizens to work and live in the UK: Norway, for instance, is even an 'associated' member of the Schengen free movement area (as the UK is not, and will never have to be - unless we open up everything to yet another 'renegotiation'). Anyone here want to pay billions to have no seat at the table, and have a load of rules that are against the UK's interests imposed on us? No? Thought not. Even on this least disruptive and best-case scenario, the London School of Economics' Centre for Economic Performance reckons that the effects of trade diversion would be such that every single household in the land would be £850 a year worse off in the early years of a Brexit.

So: vote for Brexit, if you wish. But you will be choosing to make everyone in the UK significantly poorer, with less say over our economic future than we have now. You will be voting for not having your cake, and not being able to eat it. That's not a prospectus we can back. Neither should you.