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Why U.K. exit from EU may now be a real possibility

by Clive Crook

Bloomberg

Visiting the United Kingdom recently, I realized for the first time that Britain might actually leave the European Union. Of course, it has talked about this eventuality, on and off, almost since it joined — but for years the constant whining could be dismissed as so much background noise. Things have changed. Attitudes are hardening, and by promising an “in or out” referendum on EU membership after the next election, Prime Minister David Cameron may have put the country on a course that will force it to choose.

If the referendum Cameron promises for 2017 were put to voters tomorrow, the U.K. would probably leave. According to polling by the Pew Global Attitudes Project, only 26 percent of Britons think Europe’s economic integration has helped the economy, and only 43 percent have a favorable opinion of the EU. Other recent polls show steady (though mostly slender) majorities in favor of exit.

Cameron will have to win another election to keep his referendum promise. His government is unpopular so that’s no sure thing. But the opposition Labour Party will probably have to promise a referendum, too, once the 2015 election comes into view — especially if the U.K. Independence Party, which is committed to an exit, keeps gathering strength. (UKIP already attracts more support than the pro-European Liberal Democrats.) It’s hard to run on a platform of denying voters a choice.

Cameron isn’t a Euroskeptic: He’s the pro-EU leader of a party that’s long been bitterly divided on the issue. To hold the Conservatives together and keep the country in the EU, he wants to draft a new European treaty that is more to Britain’s liking before a referendum occurs. The other EU leaders say they want nothing to do with this.

It’s a point that British advocates of exit have seized on. In an article in the Times, Nigel Lawson, a former Tory chancellor of the exchequer (and no knee-jerk Little Englander), said he expected nothing from the renegotiation and would be voting for exit. Several other former ministers have said the same.

Here’s the surprise: These interventions weren’t greeted as reckless or sensational, as they once would have been. Suddenly, exit is on the political agenda. Much of the City has turned Euroskeptic as a reaction to what many see as a vindictive regulatory assault from Brussels. U.K. businesses used to be strongly pro-EU, but that’s no longer so. What once might have seemed an idle or even absurd threat has become a real possibility.

I think the question of whether the U.K. should remain part of the EU is a closer call than either side wants to admit — and, just as Cameron says, it all depends on the terms. If the EU responds to the economic crisis with new strides toward a United States of Europe, the costs for the U.K. will surely outweigh the benefits: Britain just doesn’t want to be part of that enterprise. If EU membership will require eventual membership of the euro area — and that’s the prevailing model, as though the crisis had never happened — Britain should again say no thanks.

As free trade becomes the global norm, the benefits of open access to Europe’s markets are less and less confined to EU members. Cameron, visiting President Barack Obama in Washington this week, discussed the proposed U.S.-EU trade pact, among other things. The United States has signed free-trade agreements that span the globe. The U.K. could do the same.

At the very least, Britain’s pro-EU forces need better arguments. They say Cameron shouldn’t have raised the issue in the first place, implying it’s better to deny voters a say. What are voters to make of that? Pro-EU politicians keep repeating that exit is unthinkable — but never really say why. What makes Switzerland’s relationship with the EU unthinkable? They think Britain should be leading Europe, that it maximizes its global influence that way. Well, that’s just delusional. Why should Britain expect to lead a union of 27, soon to be 28, countries?

Let’s take Canada as a thought experiment. It’s a small economy next to a big economy. Its global influence is limited by its size, of course. Would it be better off as part of the U.S.? Would its influence in the world be greater? And wouldn’t Canadians be giving up something they value very highly? The pro-EU cause should find some answers to these questions.

For Europe’s sake, as much as it pains them, the other EU governments should acknowledge that Cameron is right about the need for a new constitutional settlement. The Pew survey shows that disaffection with the EU is by no means confined to the U.K. Grievances aren’t concentrated in the south, either. Support for the union in France — co-architect of the whole project — is actually lower than in Britain.

Can it seriously be maintained that Europe’s economic calamity raises no questions about the EU’s constitutional direction, that the commitment to “ever closer union” enshrined in the founding documents can’t ever be reviewed, and that the euro system, despite its recent difficulties, is fundamentally sound? That’s what the EU’s leaders are asking an increasingly dismayed European electorate to believe.

Cameron’s critics say he’s the trouble maker. I don’t think so. The real threat to the EU is the other leaders’ bizarre refusal to acknowledge what’s happening.

Clive Crook is a Bloomberg View columnist. The opinions expressed here are his own.

  • beat_the_bush

    This is not a very well written article, and seems to be from someone who himself wears his own Europhobic attitudes on his sleeves. Your failiure to grasp the real issues here is obvious when you say this: “What makes Switzerland’s relationship with the EU unthinkable?”

    You clearly have been reading too many press releases. In the real world of government and politics it is well known that Switzerland’s deal is not that great. Although, unlike Norway it is not part of the EEA, its agreements are broadly similar with some 230 signed protocols between Brussels and the Swiss. The EU may reopen these agreements at any time, and since it knows the Swiss are more dependent on the EU than the EU on the Swiss, Brussels always has the upperhand. This can be seen recently by Brussels’ refusal to negotiate on certain Single Market matters with the Swiss until they adopt a formal EEA membership where they begin to accept rules from the Single Market automatically.

    Failiure to meet the rules set by the EU implies trade sanctions on the Swiss, yet they have NO vote in how these rules are designed. None. Zero. That’s a pretty big mess up as far as sovereignty goes.

    In addition, the EU has essentially forced the Swiss to signing the Schengen open border agreement (something the UK has not signed up to) and the EU must pay for access to the Single Market with an annual fee.

    In summary, the author misses the point compeltly, and has gone a long way to helping to promote the kind of useless arguments that UKIP uses, compeltly devoid of facts or figures.

    • CharlesHB

      Clearly an ill thought response.

      No one from UKIP or indeed the Thather-ite as opposed to Heath-ite wing of the Conservative Party, for example MEP Daniel Hannan proposes the UK adopts the Swiss or Norwegian model.

      The Swiss chose to join Schengen, they’re not an island. That said the Swiss still manage to export to the EU four times as much per capita than the UK.

      Which brings the point of dependence. The UK is the (rest of the) EU’s biggest single export market, larger than the second and third combined ( USA & Japan ) the EU needs the UK more than the UK needs the UK – if push came to shove, and the EU even imposed trade barriers ( on the small proportion of trade not covered by GATT ) it would be the EU that would suffer more.

      As far as not having a say in Brussels silly notions such as “Plant Reproductive Material Law” which would make the British tradition of trading in Conkers illegal is hardly a loss.

      Seriously – does not having a say in the local regulations of Japan, or the USA present a terrible problem that requires the UK to pool its Sovereignty? Heck no, it’s just marketing 101 where the product is tailored to the niche – the local demands.

      In any event with the EU shrinking – it has year on year since the UK joined – as a portion of the World market, the UK shouldn’t be looking to still in recession Eurozone, but rather to the parts of the world that are growing strongly, like the Commonwealth of Nations, as a group being a bigger Market than the EU, and of course China. An independent UK would be free to make trade agreements without waiting for, and being shackled to the protectionist EU.

      • beat_the_bush

        No, you propose that the UK invent another model. There isn’t one. This line of reasoning comes from those who simply cannot understand what’s on the table. The EEA is composed of 3 of the 4 EFTA states and is itself a formal supranational agreement. Switzerland is bound by the ties that EFTA has with the EU but has made up its own protocols – something that the EU Council is increasingly frustrated with and has recently frozen a bunch of negotiations on deals the Swiss want reopened unless the Swiss sign up to an automatic recognition of EU laws. Also, how convenient of you not to mention what I said about the Swiss having to pay an annual fee to the EU as well as being mandated to pay for infrastructure and civil projects in Eastern Europe. By the definition of what the UK “Thather-ite as opposed to Heath-ite wing of the Conservative Party, for example MEP Daniel Hannan” want they can only go with the Swiss model. It’s absolutely baffling to see how you could come up with an alternative – this is in reality a case of Eurosceptics trying to kick the can down the road.

        As for dependency, the EU will trade with a UK outside the Union, absolutely, we are a considerable export market for them. However, you have committed an incredible economic fallacy, if the EU were to put import barriers on UK goods entering the market, they could be certain that it would be very hard for the UK to retaliate, this is because there are no perfect substitutes for the goods we import from the EU, particularly the agricultural ones. Transportation costs and logistics would invariably make the price of goods rise. In addition, whilst we import a significant amount from them, they import less from us.

        There are certain things that can be done almost immediately upon our exit from the EU as well – a tightening of the rules of clearing euro denominated trades, requiring them to be domiciled in Eurozone countries – this was struck down by the ECJ recently due to the need to protect the Single Market of which the UK is a member, but say good bye to that instantly when we are gone. Pretending that the EU would allow its main financial hub to sit outside the Eurozone, would be like having the US’ main financial hub in Toronto, Canada, absurd – the moment we leave, there are some very credible legal moves they enact to prevent this.

        Lastly, you miss out how sovereignty works, a trait of UKIPPERs. Sovereignty is affected by your dependency on an economy. Obviously in a globalised world, perfect sovereignty is an illusion. However, the two things that affect the level of dependency is the size of the economy you are related to, and its geographical proximity. This is known as the New Economic Geography theory, and explains much of the power relations of the world. Basically, for reasons I’ve outlined already, geographical ties combined with the fact that the EU is the largest single market in the world makes us invariably dependent on them. If they come together, in a tighter union this will make us more dependent. Forgoing our influence in decision making by leaving the EU is thus ridiculous.

  • Elton Noyd

    It takes someone who comes from another island to understand the UK’s attitude towards the EU. The British people value their independence as much as the Japanese. The sooner we leave the EU the better.

  • Zool

    Everything changed for Britain when the Euro leaders lead by Merkel attempted a power play by introducing the Tobin Tax or the save the Euro by stealing £60Bn a year from Britain Tax as it really should have been called. They tried to save the EURO by throwing Britain under a bus but it didn’t work. Now those that implemented the TAX are calling it a spectacular failure & warning of the severe damage its causing to Businesses in the Euro zone.