The View from LL

Prior to the Referendum, local Conservative associations were barred from taking a position with regards to the European Referendum.

Now the vote has happened it is a case of getting down to work and making the best of a good or bad, depending upon your viewpoint, job.

For the record, and now that it is too late to have any impact, this is the personal opinion of the association chairman on a number of the reasons that were advanced for Brexit.

 

Countries outside the EU trade successfully with each other and with the EU, the EU is sclerotic, on its last legs and of declining importance. We should free ourselves from its shackles.

No company (for, by and large, it is companies, not countries that do the trading) needs a trade agreement to sell a product to a customer in another country, but it helps. Trade agreements, such as the Single Market, reduce the duties that might otherwise be applied and lower the barriers to trade by reducing or, in the case of the Single Market, eliminating the competitive disadvantage of the foreign supplier. In the case of the Single Market, currently the largest trading block in the world, there are no tariffs and therefore, by being inside it, UK suppliers of products and services are able to trade in the world’s largest market without any duties being levied and on more advantageous terms than suppliers from outside the Single Market. Leaving the Single Market, without negotiating some preferential access to it, will worsen the competitive position of those of our companies who export to it without any compensatory improvement in their access to other markets.

It is perfectly true that companies from countries outside the Single Market thrive but that is not the question. The question is whether leaving the Single Market will improve the trading position of our companies or worsen it.

In my view, leaving the Single Market throws away an advantage that we possess for no good reason.

 

The alternative view to the EU being sclerotic and in terminal decline is that it is undergoing some teething problems in the current phase of its development, that it will overcome these and emerge stronger. Parts of the EU, including our largest trading partner (Germany), have returned to growth. The EU’s share of global output and trade has declined (so has ours) but that it not so much because the EU is declining but that other countries/regions, most obviously China, are growing faster. The fact that China is growing faster than the EU is only to be expected. Rapid growth is the norm when you are starting from a small, backward economy, it is much more difficult when your economy is large and advanced. Put in very simplistic terms, China can grow rapidly because wages are low and everybody is buying their first washing machine and there are plenty of people who have yet to buy one, whereas in the EU everybody already has one and it is a case of replacing those that wear out or of persuading existing owners that the new model is so much better there is a pressing need to trade up. History tells us (of course the sun might not rise tomorrow) that fast growing economies eventually slow down. In the 60s and 70s Japan grew rapidly, industrialized, went from a low cost producer of cheap, shoddy knock offs to a highly advanced top of the range manufacturer with zero growth. Sooner or later, the same will happen to China.

 

The EU is bound to grant us access to the Single Market

The Brexiters argue that the UK has a trade deficit with the EU and that therefore it is in the EU’s interest to grant us reciprocal access to each other’s markets, since they will lose more than us by not doing so.

Leaving aside the question of how long it will take to negotiate such a deal and the possibility that the EU may not act rationally and will seek to deny us access to the Single Market and forgo access to ours out of pique or so as to discourage others from following our example, a crude analysis based on the overall balance of trade misses the point.

 

The EU27, as a much larger market than the UK, produces a much greater variety of products and does so in greater volumes. In a post-Brexit world of UK v EU27 there will be some products that the UK needs but doesn’t produce. There will be many fewer that the EU27 doesn’t produce but that the UK does and the EU27 will therefore need to source from the UK. An EU trade negotiator might play very hard ball and simply refuse any kind of reduced tariff access to the Single Market knowing that if the UK retaliated and imposed tariffs on EU exports to it, by and large, its companies and consumers would still need to import those products and the only loser would be the UK purchaser, who would have to pay higher prices (though UK government would of course gain the duty), EU companies and consumers, on the other hand, would switch their purchasing to sources within the EU27 tariff barrier. In short, we would not cut imports but would see our exports fall, worsening our balance of trade with the EU.

Why would an EU negotiator, who is in any case not particularly well disposed towards the UK, not take such a line?

Hollande is already talking about excluding the City from Euro trading. Now this may turn out to be bluster. We may negotiate a compromise but it’s a sign of what’s to come.

 

Even in the case of products where there is a UK source, we simply do not have the capacity to meet our demand. For example, even if we wanted to, do we have the production capacity to replace all the BMWs or Mercedes on our roads with Jaguars and still export to those markets that have not slammed their doors in our face? The buyers of up market German cars would therefore need to carry on buying such marques but at a higher price. Eventually, we might build up such capacity but it would take time, involve much rejigging and in the end we would simply get back to square one in terms of production volumes.

 

If we were shut out of the Single Market and European companies shut out of ours, this would be a boost for domestic manufacturing

Were we and the EU to retreat behind tariff barriers our industry might in time switch its focus from exporting to supplying local demand and what our manufacturers lost in terms of European markets they would gain by supplanting European products in the UK. Or maybe not.

To take the car industry as an example. Currently (but maybe not for much longer) the UK car industry is a rip roaring success. But, and it is a big but, it is almost entirely foreign owned, almost all of its output is exported and it produces a series of niche models and marques for which there is not enough demand in any national market to sustain the business but which globally can thrive. Conversely, most of the cars driven on British roads are imported. Most of the car factories in the UK are geared to producing cars for export to Europe. Retreating behind a tariff barrier would entail British manufacturing changing both its target markets and the kinds of models it produces, we would need to switch from niche models such as Jaguars or Range Rovers to mass market models to satisfy the domestic market and a domestic market that is considerably smaller than the EU27 domestic market. This in turn means that we would lose the economies of scale, making UK products more expensive than their European rivals to the detriment of the UK consumer and putting us at a competitive disadvantage in markets outside the EU.

Again and again, UK start-ups and high tech companies have sought to build on their success in the UK by expanding in the US and again and again they have been swept away by the local competition buoyed up by the cashflow generated by tapping into a much larger domestic market from the outset.

Analogous arguments apply industry after industry. It is therefore vital that we retain access to the Single Market (as pretty much every business involved in selling to Europe stated in no uncertain terms) but what will we have to concede in order to gain this?

 

 

The UK is the 5th Largest economy in the world. The world will be beating a path to our door in order to gain access to our incredibly attractive market

Yes and no. In nominal terms, maybe we’re 5th but actually we’re neck and neck with France and maybe we’re really 6th. In PPP terms we’re actually 9th. All of this misses the point. We’re a very, very distant 5th (even if we are 5th). The US economy is something like 7x the size of the UK’s and it has 5 x the population. The EU, minus the UK, is about 6 x the size of our economy and has 7 x our population, China has an economy about 4 x the size of ours (and racing ahead) and 20 x the population. Leaving aside all other countries in the world — India, Russia, Japan,… — those three countries/blocks on their own have an economy that is 17x the size of ours. Just who do you think will have more clout in negotiations and be more attractive? Plucky, punching above its weight ‘Great’ Britain or Uncle Sam?

Yes, we are a significant player. We’re bigger than Ruritania but we’re in a different league from the US and China, whereas, working in the EU, we are on a par.

Is pointing this out ‘talking Scotland — oops I meant Great Britain — down or is it being clear sighted and level headed.

It is not patriotic to talk about putting the Great back in Britain, it is patriotic to act in the country’s interests.

 

Leaving the EU will open up lots of new trading opportunities

Rubbish.

There is nothing in membership of the EU that precludes us from selling to countries outside the EU. Do you think BMW and Mercedes confine their export efforts to the EU; and yet they are subject to exactly the same rules and regulations and benefit (or otherwise) from precisely the same set of trade agreements as our boys do. If the Germans can sell cars to Mongolia, why can’t we? To say the EU is holding our manufacturers back is nonsense. it holds us back no more than it holds the Germans or the French.

If the argument is that once we are out of the EU we will be able to proceed with reaching trade agreements with other countries at a much faster pace than if we stayed in the EU, just how are we supposed to achieve this?

We have no trade negotiators, the EU has several hundred. Once we do have a team, they will have their work cut out replicating all the deals we’ve just trashed before they get round to any new ones.  

 

Leaving the EU will enable the UK to increase its global influence through a separate presence on numerous international bodies

Once again, rubbish.

It is true that the UK has vacated its presence on certain international organizations in favour of a common EU one. The WTO is one such organization that is often cited as an example.

Rather than discussing matters with our fellow members of the EU28, reaching a common position — which has been reached with input from us — it is argued that we will pack a bigger punch by having our own seat at the table. As pointed out in the previous point, our economy is much smaller than that of the other major trading countries/ and that though we might have our own seat at the table, those sitting around us might simply ignore what we have to say. Are the US, China and EU, accounting for 17/18 of world output (see above), really going to listen to the objections of us and our 1/18 share?

It is not a case that the EU has supplanted the UK and that the UK has been disenfranchised to any greater extent than any other European country. What is true for us is true for Germany, for France. We (or, in future) they have agreed to work together in order to be able to deal with the other major players on equal terms. Why is it only us who finds this so unpalatable? Why is it only us who sees this as a trick by our fellow EU members or the faceless Eurocrats to do us down? Why is Germany, with a much larger economy and manufacturing industry than ours, happy to be represented in the WTO by the EU, whereas we are not? Would regaining separate representation on such bodies be a long overdue return to our rightful position or simply reflect a delusional yearning for power and influence that has not been ours for half a century?

 

 

We are subject to a raft of EU regulations imposed on us from on high

The Brexiters frequently assert that some vast percentage of UK legislation is simply rubber stamped by Parliament and that we are no longer in charge of our own lawmaking.

The figures bandied around are very much dependent upon how you phrase your definitions, draw your boundaries but a crude ‘percentage’ misses the point.

The really important laws, the decisions that matter are taken by our Parliament. We decide how we organize our healthcare, how much we spend on it, how we run our schools, whether we will replace Trident or not. Brussels has little or no say in any of this.

Where Brussels does have an impact and what bumps up the percentage of our laws supposedly being promulgated by faceless Brussels bureaucrats is in the technical regulations. 

It is true that much of this comes from Brussels but, as Matthew Paris pointed out in The Spectator, if these regulations didn't come from Brussels they would have to come from London (or Edinburgh). So, after a post-Brexit bonfire of Brussels regulations, we would have to have an orgy of London or Edinburgh regulation writing, or maybe we’ll just adopt the Euro-regulations as our own (we’ll probably have to if we want access to the Single Market, see above).

Why is it acceptable that we are subjected to such Brussels diktats?

Well.

Firstly, as part of a Single Market you need common standards, a level playing field to prevent protectionism masquerading as a safety or quality standard. 

An example of this might be the way the German beer laws came to be seen as a means of keeping foreign beers out of the German market. In other words, a lack of a common standard makes a nonsense of an open market.

Since such standards and regulations are intended to apply across the whole of the Single Market they are promulgated centrally but that doesn’t mean there is no contribution from the various individual countries.

In one example that I have personal knowledge of, the German printing industry research institute is currently investigating barriers in cardboard packaging to prevent the migration of photoinitiators in UV inks from the outside printed surface of a package to the inside surface that is in contact with the contents. Since we might eat the contents and photoinitiators are not good for our health this is an important project and the intention is that its results should feed into an EU Directive. So, in one sense, this will be an EU regulation imposed on Westminster and a loss of UK sovereignty. Looked at another way, if we didn’t adopt the EU Directive we would, if we had any sense, have to introduce an equivalent regulation of our own but adopting the EU one has the advantage that we are sharing the cost of the research and also achieving a common, pan-European standard meaning that all can be confident of the safety of foodstuff packaging wherever within the EU it has been produced and it is not possible for one manufacturer to undercut another by producing substandard products or a manufacturer being unfairly excluded from a market by an unreasonably high quality demand.

Whilst the directive is drafted centrally, it is actually usually national institutions that do the research on which it is based and the UK has the potential to have an input into it just as does any other EU country both through its research institutions and its members of the EU bureaucracy.

Unfortunately, in the specific case of printing research, our equivalent of the German institute was sold to its managers some years back, they then sold themselves to a Swiss multinational, who sold them to US one, who sold them on and, in the course of these various sales and extractions of profit, the actual research facilities were disposed of. The UK institute, now little more than a brand owned by a US corporation, hires contract experts to write reports on the market prospects for this or that technology, which it then sells to the industry for a profit, but it does little or no actual basic scientific research of its own, The UK therefore lacks the scientific infrastructure to make a contribution to this particular project but it does so because of its own actions, not because of anything the EU did. Furthermore, the UK’s lack of facilities in this field makes the fact that it is a member of the EU and able to draw on the expertise of other member states and benefit from the resulting Directives all the more important.

In the event that the UK leaves the EU but seeks to have access to the Single Market, it will probably have to adopt most of the regulations that it is currently required to adopt, but will have even less say in their formulation.

We’ll have less say, less independence and less sovereignty than before. Is that really how to put the ‘Great’ back in Britain?

 

Central European Institutions (many of which are not based in Brussels) mean work is not unnecessarily duplicated

For example, nowadays, rather than a medicine having to go through trials and then approval in each individual EU member state — at great expense to the drug company and therefore the health service provider and, ultimately, the patient or taxpayer, drugs go through an approval in one member state and a much streamlined approval in all the others. This eliminates the duplication of work and saves money that could be more usefully used to treat patients. The agency that coordinates this is in London — for how much longer? What possible benefit is there to the UK in trashing this arrangement? So will we seek to be part of this arrangement once we leave the EU? Will the 27 let us? Will one of the 27 demand the agency be moved?

 

 

These regulations are pomulgated by faceless and unelected Eurocrats over whom we have no control

Eurocrats are not beings from another planet; some of them are even from an archipelago off the northwest corner of the European Main. We appoint the EU civil servants, commissioners etc. They are all drawn from the EU member states. The commissioners are appointed by national governments, all of which are democracies. By giving each member state a commissioner and allowing its government to appoint him or her, the EU ensures that each member country has some say without any one member country being dominant. The commissioners are appointed by national (democratically elected) governments not directly elected themselves but many powerful officials in the UK are appointed by our democratically elected government rather than voted for. The European Parliament is directly elected. European civil servants are paid employees who go through a recruitment process just like the civil servants of any national government.

 

As a subset of the previous point, these Eurocrats are a monolithic entity whose primary raison d’être is to boss the UK around

The UK press often presents the workings of Brussels as 27 member states — Europe — ganging up on the UK to make the UK do what it doesn’t want to do; but the reality is different. There are 28 member states. On any given issue there will be groups favouring one solution or another. In some cases the solution favoured by the group that the UK supports will win through, in some cases it will not. That’s the nature of a joint endeavour.

I read a great deal of European material and the perception in the UK that Brussels is hell bent on bossing the UK around is shared in France, Germany... with the difference that in France it is France that Brussels is determined to do down — hence the rise of the FN.

In any common endeavour there has to be give and take. Is this a loss of sovereignty or a pooling of sovereignty for a greater good?

The Brexiters think it is an affront to national sovereignty to have a car number plate with a GB on it. I think it is plain common sense.

 

As a consequence of the former point, our sovereignty is diminished, Parliament and the UK courts are no longer supreme. Time to take back control

Yes, on large numbers of technical issues, the UK does adopt Brussels Directives but it does so for the good reasons laid out above. In most cases, were the Brussels Directive not adopted then UK ones would have to be drafted — in most cases by unelected civil servants — and passed into UK law. The advantage of adopting a central, Brussels Directive is that the 28 member states avoid duplicating each others’ work and the adoption of a common standard is good for trade.

The ECJ only has jurisdiction in European matters.

 

The EU has been a political project right from the outset and there has always been a long-term master plan for political union

Even if there was/is a master plan being pursued by a secret cabal, which I don’t believe, cabals are composed of people. People can change their minds. Plans laid 50 or 60 years ago can be modified. Instead of leaving the EU because we don’t like the secret plans of a group of people who are now dead we need to engage with the people who are currently alive and running the EU’s member states and decide for ourselves what form we want the EU to take rather than slavishly following the alleged vision of the EU’s founding fathers. If the EU’s founding fathers had a vision of political union we are perfectly at liberty not to follow it.

If some of the current leaders of EU member states are keener on political union than we are, so be it. We have explicitly stated that we are not interested in political union and will not go further down that road. That has been accepted.

In the run up to the Referendum, there were rumours about plans for an EU Army. These plans are ideas of one EU appointee, they have not been officially adopted, they are not binding and we have given no undertaking to contribute any part of our armed forces to such a project.

 

Free movement and the resulting immigration to the UK is bad and we cannot control it without leaving the EU 

The free movement of people was one of the founding tenets of the EU (or EEC) and, to date, the people with whom we will have to negotiate our exit from the EU state that if we want full access to the Single Market then we will have to accept free movement. It remains to be seen how such negotiations pan out but it may well be the case that in order to gain access to the Single Market we do have to accept free movement.

Most migrants from the EU are here to work; most are doing jobs UK nationals don’t want to do. Provided minimum wage legislation is enforced on those employing migrants, there is a limit to the extent that migrants can undercut local labour.  Over recent years, the total number of people in employment in the UK has risen whilst unemployment has fallen. Therefore the rise in employment is not simply due to immigrants taking all the new jobs, locals are also finding work. Most studies show that migrants contribute more to the economy than they take out. Yes, in some parts of the country they are placing a stress on services, but rather than stopping migrants should we not have focused on providing the services to deal with them (paid for with the taxes migrants contribute).

Roughly half of net migration is from non-EU countries and so will be unaffected by our departure. 

Free movement of labour, of course, cuts both ways. British people going to work for European companies with operations in a number of countries may now find the ease with which they once moved from a facility in Stevenage, to one in Paris is not what it was.

Many of those favouring Brexit and Britain’s return to Greatness seem unaware that most of the missiles our navy would fire in support of our regained status are manufactured by European multinationals for whom the free movement of technicians is a vital as that of sub-assemblies.

 

The EU is needlessly squeezing the life out of the economies of southern Europe

If true, so what? What’s that to us? Will our leaving help these economies? Are we walking away in disgust? Are we leaving because we think it will be our turn next? Are we leaving because we fear we will be called on to bale them out? We’ve already said we will not. Why this sudden concern for the [arguably] feckless [former] Greek government when, if the medicine was not being administered by the EU we would be calling it much needed financial discipline? First and foremost, I would argue that the Greeks (and the Italians and Spanish) are in a mess not because of the beastly Germans but because they over-borrowed to prop up uncontrolled government spending (therein a lesson for us). Our sudden outpouring of sympathy for the poor Greeks has less to do with a feeling that they have been hard done by and much more with a desire to paint the EU in a bad light.

 

Turkey will be fast tracked into the EU

Nonsense. Turkey has been a candidate member of the EU (or EEC as it then was) for almost as long as I can remember. It still hasn’t made it into the club and if it did, so what? What’s so terrible about Turkey? Is it because they are dusky hued? Muslim? It’s simply another potential member. If and as it makes further progress towards membership (which all current members have to agree to), so it will have to comply with more and more of the jointly adopted EU positions and standards and come more and more into line with the ‘Europe’ that it is joining; but, in all probability, not any time soon.

 

We pay a vast amount into the EU and putting a stop to these payments will yield a pot of gold for domestic spending.

We pay (net) around 0.5% of GDP into the EU, rather less than we spend on international development, for example. 

Some of it goes to the net beneficiaries, who are, by and large the poorer countries of Europe. If a relatively small amount of our money goes to these countries to develop their infrastructure and bring their level of development closer to ours to the benefit of their citizens (who will perhaps stay and work at home) and our exporters, so much to the good. Some part of our net contribution goes to fund the Eurocrats but then, as I have outlined above, much of what they do would have to be done by us if we left the EU and we would have to spend a large chunk of the money we currently send to Brussels on doing it.

Contrary to the picture painted by the press, the UK is not the EU’s biggest cash cow, Germany is. I think we are not even the second larger provider of largesse. That honour I believe falls to France. So, we are a major contributor but not the only one, not the largest and not uniquely singled out for exploitation.

 

All in all, in my view, the case for departure was decidedly underwhelming; but the die is cast and we will now have to make the best of what I consider, as is probably clear by now from the above, to be a very bad job.