Fear at last stalks Whitehall on EU issues. We hear that they are crisis gaming what to do if Euroland plunges rapidly towards more integration. Officials seem to see this as some kind of threat rather than an opportunity for the UK. They are worried that the UK will be excluded from meetings which have an impact on the single market. They seem to worry lest our “partners” use new EU powers to damage UK trade with the continent.
It has been blindingly obvious to some of us for years that the single market project was more about centralising government and less about free trade. Continental politicians used the promise of more trade access to markets as the carrot to lead an ever reluctant and slow UK into more laws and binding government arrangements. The issue before the UK now is not what will some future more centralised EU do to damage UK trade, but what can the present government do to stop the damage already done, and about to be done, in the name of more centralised regulation and taxation?
The UK establishment needs to bury its own misleading rhetoric about the importance of EU trade. Our trade in services is primarily conducted with the rest of the world, thriving most in common law and english speaking jurisdictions. Most of the inward investment into the UK comes from outside the EU. Only in physical goods trade is the EU more important, and even there it is only around 40% after adjusting for the entrepot effects.
Government needs to grasp that as we are in heavy deficit on the goods trade with the EU there is more at risk for them than for us. I do not think we should take seriously any threat which boils down to Germany refusing to sell us more BMWs. The World Trade Organisation also gives us various guarantees about access to continental markets, whatever the EU tries to do. Non EU members manage to trade with the EU without belonging to the legislative club.
The UK is vulnerable by virtue of being in the current EU structure. It is vulnerable to regulations and directives which do especial damage to sectors the UK is strong in, like finance. We are vulnerable to general anti enterprise laws which the EU specialises in. If being a member on current terms entails having to fight endless rearguard actions against taxes and regulations designed to make business in our finance sector more difficult, we need a change of relationship. If our much heralded industrial revivial encounters uncompetitive energy prices owing to EU regulation we need to change things.
That is why I made my modest proposal that in this crisis the UK allows Euroland to press on to single economic government in return for having an opt out from anything we do not like, past or future. If even this modest proposal is too much for the government, they may find the more radical option of seeking to pull out altogether gains more support in the country (currently 29%), widening the divide between people and politicians on this most funadamental of matters. The polling shows there is a strong majority for much less EU interference in our lives. Many more people in the UK want a relationship which enhances trade and freedom. They do not like what they see as the gloom gathers over Euroland. If Euroland seriously thinks the UK should pay more of the bills for the Euro’s failure, they may merely succeed in radicalising the UK against them.
The Uk establishment needs to wake up to the reality that the EU is doing damage to the Uk economy by many of its rules and taxes. They need to grasp that we do not need to accept the current level of interference, let alone sign up for more, just so France and Germany can carry on selling us things.
Some of us have been urging a UK clause when the Euroland members go ahead with their proposed change to Article 136 of the Treaty to allow a Stability Mechanism. We regard this as a big change, involving the Commission, and would like a change of the UK’s arrangements at the same time. The government sees the Treaty amendment as an advance for the UK, as the planned ESM will replace the EFSF and EFSM, so removing future risk of the Uk having to help with Euro area bail outs after 2013. For this reason they do not seem willing at the moment to demand more in return for consent to this Treaty Amendment, which was agreed in principle on 25 March 2011.
The dire situation is underlined today. We learn of another sovereign bond downgrade for Italy. Greece is on strike. It is unlikely that more strikes will persuade the Germans to send more money to Greece. The strikes will simply make the problems worse, cutting Greek output and tax revenues further. They are striking against themselves. Finance Ministers are working on plans to support Euroland banks, but the weaker sovereigns have limits on what they can afford. David Cameron is right that the way out of a debt crisis is to borrow less, not more. The UK public sector has to speed its work in this area as well.