Not sure what DR readers have done to deserve this.
Not only have you been subject to several days of Europhile-speak, you’ve now got the dubious pleasure of my ranting the opposite view.
I am, of course, talking about Britain’s upcoming European Union (EU) referendum and how our prime minister is starting the pre-vote negotiations.
In fact, I’m not going to take much issue with all the DR’s recent column inches on Mr Cameron. That’s partly due to not having much time for politicians of any persuasion. If our PM has got himself into a bit of a bind, that’s his problem.
To be honest, right at the moment I’m finding it hard enough working out what’s happening in the City, let alone Westminster!
I’m not even going to have a major pop at the EU itself (apart from it being a flawed super-state that’s paid for by the Germans and run by the French – please excuse this bit – and one that I reckon will disintegrate eventually in any case).
Here’s the main reason that I won’t be getting involved in a political spat about Britain’s pre-vote negotiations.
I don’t believe, in the long run, that they’ll matter too much. Can you remember all the details of the last General Election campaigns? Neither can I – fortunately.
My key point is that whatever happens will be a win-win situation for Britain.
Mr Cameron has set out four demands, sorry goals, for reforming the UK’s membership of the EU.
- Protection of the single market for Britain and other non-euro countries
- Boosting competitiveness by setting a target for the reduction of the “burden” of red tape
- Exempting Britain from “ever-closer union” and bolstering national parliaments, and
- Restricting EU migrants’ access to in-work benefits such as tax credits
Sure, they’re just sound bites. They’re suitably ultra-vague. They may be agreed in principle but may never happen. But I believe that, in theory, they’ll be in Britain’s interests if we stay in the EU. The latter may not improve very much – as I say, I still reckon that it will implode at some point in the future – but at least the UK will get a better membership deal than it has now.
But what if there is a ‘Brexit’ from the EU? Won’t that be a national disaster? Can’t we expect to see a sterling collapse, mass UK poverty and penniless families having to send their children to school without shoes, etc. etc.?
I’ve no doubt the spectre of some of these fears will be raised by the ‘stay in’ campaign. After all, the foreign exchange market is watching negotiations carefully.
And as I write, present uncertainty is supposed to be crushing the pound against the euro….er, except that it’s not. In fact, sterling is within 3% of its highest print against the single currency since 2007. So we can put that particular panic on hold for now.
Let’s now look at some of the other fallacies about Brexit. I’ve no doubt that we’ll be revisiting some of these in the coming weeks, so I’ll keep this part brief.
Fears have been expressed that the UK economy would get smashed by a Brexit. In fact it could well be the opposite.
Sure, most of the biggest issues are impossible to quantify or will depend on what’s ultimately negotiated, notes Capital Economics (to whom many thanks for their help on this). That’s why estimates of the economic impact vary so much. Indeed, it’s highly likely that both the possible gains and losses from a Brexit are overstated.
But way back in 1973, joining the EU was a big deal for the UK. Since then, though, a lot has changed. And the UK economy could now do very well over the next few years outside the single market.
Take trade. “Claims that millions of jobs are reliant on membership of the EU are highly misleading”, notes Vicki Redwood at Capital Economics, “as they assume that all the UK’s trade with the EU would vanish if the UK left the EU. In fact, we think that trade with Europe could end up relatively unaffected”.
Even in a worst-case scenario in which the EU imposed tariffs on UK exports, I believe that such costs would be fairly easily absorbed. And if the UK’s trade with Europe were to suffer, these losses could be offset over the long-term by extra opportunities to boost trade with emerging economies.
As for investment, the UK might lose out on some inward investment from abroad.
But international firms choose to invest in Britain for many reasons, not just its access to the single market. Meanwhile, business investment is currently strong, even though a referendum has been on the cards since 2013. In the World Bank’s Ease of Doing Business Survey, the UK ranks highly in areas such as attaining credit, dealing with construction permits and protecting minority investors.
Meanwhile the UK would save on near-£10bn of contributions to the EU. That would be a very nice slice off the country’s budget deficit.
Sure, a British exit from the EU would probably hurt the City in the short term. But it wouldn’t spell disaster. The City has a lot more going for it – like domination of global foreign exchange – than just open access to the single market. And again, an EU exit would enable the UK to negotiate trade deals with emerging markets that could pay dividends for the financial services sector in the long run.
This debate will run and run. But don’t get too hooked on all the negotiation ‘noise’ that’s currently doing the rounds. Either way, Britain could prove to be the winner.