ECONOMIC PERSPECTIVES – 28
EUROPEAN UNION – WHAT MEMBERSHIP ENTAILS
The responses to my last essay in this series prompts me to develop and clarify some of the questions it raised.
It addressed the way in which important Brexit issues have been clouded by uncertainty, exacerbated by predictably negative forecasting by supposedly neutral authorities, generating a totally unwarranted fear that has paralysed the resolve of even those upon whom we most rely for clear thought and direction.
EU’s complementary fear
Yet a complementary fear clearly exists within the EU’s continuing members, and, above all, their leaders, who are already laying plans to prevent “regulatory dumping” by Britain after it leaves. A presentation last month to 27 member states included the possibility of “blacklisting” the UK if it becomes an “uncooperative tax jurisdiction” or otherwise relaxes regulations. It also included “robust provisions on state aid to ensure a level playing field”. Other proposals in its “menu of options” range from financial sanctions, injunctions against companies and “cross-retaliation” measures that suspend UK trading rights.
Nothing could show more clearly the lengths to which our so-called “partners” are prepared to go to (i) scupper the possibility that Britain might actually benefit from a successful Brexit; and (ii) demonstrate to any other potential leavers what will befall them if they dare declare, “We’ve also had enough of you!”
Single market in practice
The idea of a “single market” appears to be harmless enough. It is referred to endlessly, and “rolls trippingly off the tongue” (to misquote Hamlet). It appears to connote the wholesome idea of universal free trade, whereas it actually means trade that is free only within the limited arena of a defined club of nations – with the following additional conditions:
To stay in the single market when not a member of the EU is quite possible, as in the cases of Norway, Liechtenstein and Iceland – but only if you permit free movement of goods, services, capital and people. Maybe Icelanders, Liechtensteiners and Norwegians feel slightly less precious about that last stipulation, but many in the UK will recognise that immigration would then be virtually impossible to control – which just happens to be one of the reasons they voted to leave in the first place.
(ii) Annual payments & subjugation to the ECJ
Membership of the single market also requires making substantial annual payments towards the EU’s budget, and accepting the blanket jurisdiction of the European Court of Justice.
(iii) Non-tariff barriers
Then there is the host of “non-tariff barriers” that the EU has pledged to dismantle – but somehow has not managed to do so. These include regulations on packaging and safety standards, as well as inevitable trivia such as the minimum level of alcohol in a drink before you can label it a cocktail, or the maximum noise level permitted to a lawnmower – matters that would more sensibly fall within “any other business” on the agenda of the local parish council meeting, and are hardly the stuff of international concern.
All this is intended to create that “ level playing field”. What it seeks in practice is to impose full-scale regulatory uniformity, effectively eliminating competitive advantage, whether arising from technological innovation, inventiveness or simply economies of scale.
A newly invented hip replacement part, for example, requires a “certificate of conformity” [that word again] before it can be put on sale in the single market. This condition attaches to every policy area from taxation and welfare to banking, trade and product design.
(iv) Trade “negotiations”
The grand illusion is that the negotiators themselves have magically acquired the power to trade, despite the fact that neither they, nor the governments they represent, are trading entities. They themselves cannot trade, and therefore cannot effectively enter into trade deals – which is why, by now, citizens on both sides of the debate are sick of all the meaningless horse-trading between Barnier, Juncker, Verhofstadt, Davis, Gove, Fox, Johnston and the rest, involving offers, counter-offers, “red lines”, provisos and conditions, day after day ad nauseam. These tedious squabbles are not about trade at all; they are really negotiating obstacles to trade.
Trade, after all, requires nothing more than a product, a willing buyer, and a willing seller. These are the traders, and the last thing they need is a government quango to “help” them!
Customs union – the most pernicious feature
In many ways this is the most pernicious feature of EU membership, since it requires all member countries to club together to agree, and apply, a common level of tariffs applicable to all goods entering the EU from non-member countries.
Could there be anything more antithetical to the opening-up of pathways to international trade than the jingoistic zealotry that now masquerades as patriotic protection?
The reason I labelled it “most pernicious” is because of the high tariff barriers it sets against imports into the EU of food, clothing, raw materials, minerals, components and many other goods from the developing world. As pointed out by colleague Sidney Bright, these damaging trade barriers effectively prevent thousands of producers, growers and ordinary workers in Africa, South America and Asia from escaping the shackles of poverty – escaping not by revolution, but by trading with European customers willing to pay reasonable prices for their products.
Instead, people in these developing countries have to be sustained by the inefficient and corrupt foreign aid programmes we have been hearing so much about lately. As we know, much of this money, sequestered from UK taxpayers and given to aid agencies, finds its unsavoury way into the private coffers of feckless elites in countries consistently pillaged by their own rulers.
Barriers against trade are two-edged
And, as with all impediments to trade, this is double-edged: people in the EU, whose governments erect these barriers, are also big-time losers. Not only do they have to shell out billions in aid that their own domestic institutions – health, infrastructure, education – are crying out for, but their membership of the customs union also prevents them from enjoying the cheaper raw materials and products that developing countries are desperate to sell them.
difference between disaster aid and development aid
Unlike genuine emergency aid that ameliorates the pain of natural disasters such as hurricanes or tidal waves, these trade barriers are basically a tax on the citizens of donor countries that few of them would ever have voted for.
Who would approve of non-emergency dispensations to countries such as Pakistan, the largest recipient of UK aid at almost £400 million, when it is spending over £2 billion on nuclear arms development? Or Nigeria, known to be one of the most corrupt countries in the world?
According to a leading Zambian global economist, lessons taught over more than 50 years have shown that (i) the more development aid a country receives, the less likely it is to achieve economic success; (ii) excessive largesse tends to undermine the recipient country’s own food and agricultural industry, making famine more rather than less likely; and (iii) it can never take the place of self-reliance.
“Development aid” has never created a single job.
[EMILE WOOLF, FEBRUARY 2018]