A UK exit from EU of­fers no prom­ise of bet­ter for­tunes

The Pak Banker - - Front Page - Clive Crook

BRI­TAIN has al­ways had mixed feel­ings about the Euro­pean project. From the start of the drive to "ever closer union," the U.K. feared be­ing left out, yet never quite wanted to get with the pro­gram. In some ways, it signed up mainly to slow the whole thing down. Lately its doubts have grown. Ac­cord­ing to a new opin­ion poll, a clear ma­jor­ity of the Bri­tish want to quit the Euro­pean Union al­to­gether.

In­creas­ingly the feel­ing is mu­tual. A part­ner­ship can tol­er­ate only so much re­luc­tance. In a tele­vi­sion in­ter­view this week, Ital­ian Prime Min­is­ter Mario Monti (more tol­er­ant of Bri­tish am­biva­lence than many other Euro­pean lead­ers) said he found that "the English man­age to be quite ex­as­per­at­ing when they ask, as a con­di­tion for re­main­ing aboard this great Euro­pean ship, par­tic­u­lar ex­cep­tions, par­tic­u­lar dis­pen­sa­tions, that could amount to mak­ing holes in the ship and mak­ing it sail less well, if not sink al­to­gether."

Those dis­pen­sa­tions never end. At the cre­ation of the euro, the U.K. re­cused it­self (a good move, it now thinks, de­spite an eco­nomic slow­down of im­pres­sive di­men­sions all its own). It wants noth­ing to do with parts of the EU's planned re­sponse to the eco­nomic cri­sis, in­clud­ing pro­pos­als for a bank­ing union and closer fis­cal in­te­gra­tion. Lon­don is un­will­ing, as al­ways, to make EU bud­getary con­tri­bu­tions ac­cord­ing to the same for­mula as other mem­ber states: Pro­tect­ing Bri­tain's so-called re­bate is ever the main goal of its pol­icy on Europe.

At some point, enough is enough. Maybe a sep­a­ra­tion on friendly terms would be bet­ter for all in­volved. Well, it might come to that, and it's wrong to dis­miss a Bri­tish de­ci­sion to leave as "un­think­able." Equally, though, since mov­ing the coun­try to a bet­ter lo­ca­tion would be dif­fi­cult, Bri­tain ought to think hard about what di­vorc­ing Europe would mean.

Con­tin­ued ac­cess on free-trade terms to the EU's sin­gle mar­ket would be cru­cial for the U.K.'s pros­per­ity. Bri­tish eu­roskep­tics like to point out that Nor­way and Switzer­land, two of Europe's rich­est coun­tries, have free-trade agree­ments with the EU with­out be­ing mem­bers of the union. True enough, but one shouldn't read too much into this.

As a mem­ber of the Euro­pean Eco­nomic Area, Nor­way is obliged, in ef­fect, to ac­cept EU obli­ga­tions as a mat­ter of course. Switzer­land, as a mem­ber of the Euro­pean Free Trade As­so­ci­a­tion but not the EEA, is freer to ne­go­ti­ate its terms -- but the value of this priv­i­lege is ques­tion­able, be­cause the ne­go­ti­a­tion is hardly be­tween equals. In work­ing out their deals, both out­siders have had to ac­cept EU norms on prod­uct stan­dards and other trad­ing rules with­out be­ing able to in­flu­ence their de­sign. Leav­ing the EU doesn't mean win­ning in­de­pen­dence from it.

In ad­di­tion, the U.K. couldn't take for granted mem­ber­ship in the EEA and/or EFTA. Both would have to be ne­go­ti­ated with the ex­ist­ing mem­bers -- mean­ing the EU plus Nor­way, Liecht­en­stein and Ice­land in the case of the EEA; and Nor­way, Switzer­land, Liecht­en­stein and Ice­land in the case of the EFTA. The U.K.'s ar­rival would trans­form th­ese pe­riph­eral trade pacts. The ex­ist­ing mem­bers might think twice be­fore let­ting that hap­pen. At best, the new ar­range­ments needed for Bri­tain to thrive as part of the Euro­pean econ­omy (though not of the EU) wouldn't fall in­stantly into place just be­cause it quit the union.

Granted, there would also be ben­e­fits. The U.K.'s bud­getary con­tri­bu­tion to its Euro­pean part­ners would fall. The obli­ga­tion to sup­port the EU's stupid farm poli­cies cer­tainly wouldn't be missed. And as a mem­ber of the EFTA, Bri­tain would be free to ne­go­ti­ate free-trade agree­ments with other coun­tries -- pos­si­bly in­clud­ing the U.S., again if prospec­tive part­ners were will­ing.

The main thing, though, is that the U.K. would stand aside from the EU's larger po­lit­i­cal and geopo­lit­i­cal am­bi­tions. For the most tren­chant eu­roskep­tics, this is really the point: Bri­tain's power of self­gov­ern­ment and its weight in the world, they say, are sur­ren­dered when it pools sovereignty with its EU part­ners. The other side ar­gues ex­actly the op­po­site: For a medium-sized coun­try alone on the edge of an in­te­grat­ing Europe, pool­ing sovereignty is the only way to pro­tect those as­sets. With­out that, self-government and in­ter­na­tional clout are mere delu­sions.

The choice is more finely balanced than ei­ther ad­mits. In or out of the EU, steadily ris­ing liv­ing stan­dards are pos­si­ble but not guar­an­teed. In or out, Bri­tain's global weight will di­min­ish, a func­tion of the coun­try's con­tin­u­ing and in­evitable rel­a­tive eco­nomic de­cline. The right an­swer -- and this goes not just for the U.K. -- isn't fixed one way or the other. It de­pends on the kind of union the EU strives to be.

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