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May 17, 2013 / politicsbitesize

EU – Trade and contributions

EUUKWhile the PM is away the MPs will play and this week in British politics has been no different.  David Cameron visited Washington to discuss Syria, trade and the G8 with President Obama.  But the talks came against a backdrop of Conservative EU-sceptics who are disgruntled over the lack of a referendum Bill in the Queen’s Speech last week.  They tabled an amendment to the speech that forced a Commons vote on the matter, which took place on Wednesday 15th May whilst the Prime Minster was still in the USA.

As predicted the amendment was opposed, with 277 MPs rejecting the proposal but 130 MPs backed it, which was more than was expected.  It is possible that the decision may well have been influenced by the diplomatic support President Obama gave to the reasons David Cameron presented in wanting to renegotiate Britain’s relationship with Europe.  At a press conference in the White House he stated that, ‘ultimately the people of the UK have to make decisions for themselves. But I will say this: the basic point is that you probably want to see if you can fix what is broken in a very important relationship before you break it off. It makes some sense to me.’

But what exactly does Mr Cameron want to ‘fix’ and why?  The main bone of contention is the billions of pounds that the UK pays to Brussels every year just to be a part of the European Union.   Figures show that in 2010 we paid £12.15 billion into EU coffers and it is this spending that the Prime Minister would like to try and reduce by reconfiguring our membership of the EU.

The contribution the UK makes to the EU provides the country with access to the Single Market and so shapes our ability to trade both with other member states and markets elsewhere across the globe.  It also ensures that employment legislation and product regulation is standardised across all countries in the EU.  For example, the EU working time directive has reduced working hours for most employees and ensures that all workers get at least four weeks of paid holiday per year.

At present the EU still remains by far the biggest destination for UK trade in goods.  One popular argument for staying in the EU is that around three million British jobs are dependent on exports to the continent.  This figure may be accurate, but, but it would be wrong to argue that those jobs might suddenly be lost if Britain were to exit the EU, primarily because British companies could go on selling their products to the EU.

However, trade and exports are only part of the equation when assessing the costs and benefits of EU membership.  According to a study published by Open Europe, ‘there is a value to the UK’s ability to influence not simply the terms of trade but also EU foreign policy and enlargement’. David Cameron recognises that trade and contributions are not the only things to consider when deciding how to renegotiate British membership of the EU. The other sticking point for the Conservatives is the ‘endless political integration’, such as the implementation of agricultural and fisheries policies and employment and financial regulation, that membership burdens us with.  The government feel that this closer integration with other EU member states has resulted in a loss of control to Brussels, and it is this ‘loss of control’ coupled with the contributions that we send that have caused the British public to think that they want a referendum on the matter.

However, there is a dilemma hiding behind the simple ‘in/out’ referendum.  Without membership of the EU we would lose our clout in the Single Market, which might damage our trade relationships with other countries both inside and outside of the European Economic Community.  If a ‘looser relationship’ with the EU could be negotiated, the UK could remain a full member of the Single Market, with all the trade benefits, but could be ‘allowed’ to opt out of some of the political integration.  This relationship has been dubbed the ‘two tier’ approach and could result in a reduction in the UK’s political influence.

Although the voices of Conservative EU-sceptics have been especially loud this week, there are few who think that a complete pull-out from the EU is undesirable.  For example, the Fresh Start Group agree with the Open Europe study, cited above, that a withdrawal would have more costs than benefits:

[F]rom purely a trade perspective, EU membership remains the best option for the UK. All the alternatives come with major drawbacks and would all require negotiation with and the agreement of the other member states, which would come with unpredictable political and economic risks. This means that negotiating a new UK relationship with Europe outside the EU Treaties, i.e. leaving the EU, would present similar difficulties as renegotiating membership terms while remaining a member of the EU. Therefore, there is not currently a compelling trade case for EU withdrawal.

Undoubtedly the subject of UK-EU relations will be discussed further and at length in the months to come.  Debate will probably peak again around the time of the next general election; after all, the Conservatives are hoping that this issue will fend off UKIP and get them back into power in 2015.

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