In six weeks’ time, millions of voters go to the polls across the European Union to elect MEPs for the period 2014-2019. For the UK, European Election Day will take place on Thursday 22nd May. Recent polling shows that two thirds of the UK think the European Parliament has “a great deal” or “quite a lot” of impact on Britain. At the same time, three quarters of these people said they know “not very much” or “hardly anything” about the European Parliament. Further to this only one in ten say they could name an MEP in their area (see ‘Europe on Trial Public opinion and Britain’s relationship with the EU’, March 2014, Lord Ashcroft).
Traditionally, these elections are normally hijacked by national issues, as they were in the UK in 2009 with the problems which arose with the expenses furore which hit the House of Commons, but oddly not the European Parliament. Could it be different this time, with lead candidates being chosen by the main parties across the continent when the focus on issues could be stronger? Probably yes, but not in the UK where the Labour Party does not want to invite the Socialist candidate Martin Schulz to speak and where the Conservative Party, for ideological reasons, has chosen not to put forward a candidate to campaign for its’ views on EU reform.
Furthermore, at this juncture, the British debate is more focused on the issue In or Out rather than the debate of what kind of Europe we would like to build. The recent televised debates between the ‘In’ camp of Nick Clegg and the ‘Out’ camp of Nigel Farage have brought attention to the arguments on both sides…what were the principal issues raised and what has been left out of the debate so far?
What are the principal issues?
Three central issues raised during the debates are set out below. I summarise the key arguments made by both sides and give my own view of where we are today:
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The Economy
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United Kingdom Trade (excluding Invisibles) & United Kingdom Trade in Services (Source: Office of National Statistics – Pink Book 2013)
Those campaigning to withdraw the UK from the EU consistently state that our economy has been damaged by EU membership. In the view of Nigel Farage, UK businesses are being strangled by the red tape from Brussels and therefore losing the ability to create growth within our economy. Furthermore, foreign direct investment in the UK could be higher if we were no longer in the Single Market. In contrast, Nick Clegg argues that, owing to our increasingly interlinked economies, we have to work closer together. The EU offers a market of over 500 million consumers, and many large businesses believe we are better off inside for developing our prosperity. A membership fee of just 1% of UK GDP or £300 per household is worth this economic benefit.
Who is making the correct assessment? The UK is still recovering from a deep economic recession and looking to promote jobs and growth. The Single Market, the largest free trade area in the world, offers the UK the ability to do this. Worth £11 trillion, the Single Market accounts for 15% of UK GDP through goods and service exports (see British Influence). The chart above, courtesy of my colleague Richard Ashworth MEP, shows the depth of our reliance on continental markets in comparison to China and other export destinations.
Many major British businesses have already clearly stated their fears about the consequences of a UK withdrawal from the EU. At the end of last year car giant Nissan said that they “would be forced to reconsider future investments in the UK if it were to leave the EU” (see Financial Times, 8th November 2013). Then multinational investment bank Goldman Sachs explained that they will “drastically reduce” operations in London, diverting jobs towards Frankfurt and Paris if the UK was to cease being an EU member (see the Times, 5th December 2013). In a new year’s blog post, British businessman, Richard Branson explained that “an exit would be very bad for British business and the economy as a whole” (see Financial Times, 3rd January 2014).
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Immigration
Immigration is an emotive part of the European debate. Nigel Farage stated his belief that the UK has been forced to open its borders to anyone due to EU membership and that coupling free movement of people and enlargement has caused mass uncontrollable immigration to the UK putting a strain on services and infrastructure. What is more, this has forced lower income workers to take pay cuts or leave their jobs due to an influx of EU immigrants who are prepared to work for less. In contrast, Nick Clegg argued that the principle of freedom of movement is vital to UK jobs. Currently, around 1.5 million British people live and work elsewhere in the EU. The benefits of this freedom of movement are felt also at home. In total, those migrating into the UK actually pay more in than they take out, contributing close to £22 billion to UK finances between 2001-11. But immigration for purposes of finding work should not be confused with those entering the UK seeking benefits: an issue for the UK and not the EU.
The issues raised by Nigel Farage touch a raw nerve in British politics. While the UK has always been a pragmatic outward looking nation, the levels of immigration resulting from Eastern enlargement of the EU in 2004 caught many people totally unawares. The European Treaties provide the basis for the Single Market to achieve the free movement of goods, services, people and capital across the European Union. They also provided the possibility for Member States to introduce transitional arrangements to limit the numbers, provisions which the Labour Government at the time regrettably did not take up. Consequently, instead of 13,000 people coming as expected, more than 500,000 people came to our shores.
No wonder it was easy for populists to generate a huge public outcry when the barriers were lifted in January 2014 allowing Romanians and Bulgarians to come to the UK. But so far there has been no massive influx from these countries. Probably many already lived in the UK, coming to work for a few years, paying off their mortgages and returning to their home countries (see blog of 14th February 2014). As our economy emerges from a deep recession, we should expect a return to a more outward-looking approach. The figures speak for themselves. Our fiscal position has actually been strengthened by immigrants paying more into our country than they take out (see the Huffington Post, 4th November 2013). The UK is also becoming an ageing population that could profit from a younger immigrant workforce such as the one emerging in Eastern Europe (see the Times, 2nd January 2014).
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Democracy
The argument put forward by Nigel Farage is that the UK has no control over EU decision-making. There is, in his view, no democracy in the European Union, being run by unelected bureaucrats with a European Parliament that is unable to initiate laws. Over half our laws are made in Brussels over which we have no control. What’s more, many EU states do not play by the rules while we continue to do so. Our country that invented Parliamentary democracy has given it away. In contrast, Nick Clegg argues that the EU is a democratic institution through the European Parliament. In a large union, we need common rules to govern instead of 28 different versions. Central institutions are required to maintain these rules. The UK cannot reap the benefits of the EU without full engagement in these institutions. The signing of the Lisbon Treaty has granted new competences and powers to the European Parliament in order to influence EU decision-making.
Where does the truth lie? Understanding the system of democracy in place is half the battle. The EU’s system is different from that in the UK and other Member States. It has a greater proximity to that in the United States (a representative Presidential democracy) due to separation of powers between the executive and legislature (see blog of 6th December 2013). As in the US, the EU’s institutions are held accountable through a system of checks and balances. The European Parliament (legislature) holds the European Commission (executive) accountable. An MEPs role in making the Commission an accountable body can be exercised in a number of ways: Members elect the Commission President, approve Commissioners through hearings, submit parliamentary questions, they can censure the European Commission for wrongdoing or proactively request policy initiatives to be made.
Not surprisingly, UKIP makes no effort to participate within the EU institutions as their whole objective is to leave the EU. The evidence shows that they make little or no use of powers available to them. Many have poor attendance records and some, such as their leader, Nigel Farage, have not tabled a single parliamentary report in their career. Dissenting voices are vital to have a rewarding debate, even if incorrect (see the Times, 5th April 2014), but purposeful inaction to carry out the most basic duties as an elected MEP is the most undemocratic example the EU has to display. In spite of this, UKIP members continue to draw large allowances and salaries.
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What has been left out of the debate so far?
From ongoing work on the long-term trends, there are three issues which deserve more attention in these debates as they unfold in the months ahead…
>The Importance of the Digital Economy:
See Table above for work to be made on the Digital Economy
Digital technologies have become more affordable and accessible than ever before. The digital economy is becoming THE economy. We are living through a digital revolution where it is becoming increasingly clear that those who invest the most in this field will be tomorrow’s leaders. Digital infrastructure is an important means to boost jobs and growth (see blog of 21st March 2014). South Korea is already on the way to realising the importance of these new technologies with roll out of 5G expected in 2020 and 1000mb speeds by 2017, the Korean government expect to generate around $300 billion in revenue between 2015 and 2021 (see EIF Document: the Digital World in 2030: What place for Europe?). But the EU is lagging behind in the global race, the UK included. For the UK to harness the potential of the digital economy, it needs cooperate with its neighbours in order to fulfil the task of creating a connected continent that will boost growth and employment, particularly among the young…Completing the Digital Single Market. The table above illustrates the level of European market integration by sector, showing how little action has so far been taken in the ICT/Digital area;
>The Transatlantic Market:
The EU and the US are now negotiating to establish the Transatlantic Trade and Investment Partnership (T-TIP), an agreement that has the ability to boost growth and jobs on both sides of the Atlantic. Current trade between the two largest economies in the world is valued at £393 billion. A successful negotiation removing tariffs and barriers has the ability to generate a further £115 billion within 5 years (see blog of 15th February 2013). It will maximise EU GDP by 0.5% stimulating growth and ultimately jobs on the continent (see T-TIP Paper, European Commission, September 2013). With recent events in the Ukraine, both sides are keen to complete a successful deal that could spread wider than just trade and investment to other areas such as energy, although this may not interest the likes of Nigel Farage. Eurosceptics believe it is possible for the UK to make its own deal with the US and trade as a single entity, but this analysis is misplaced. The Obama administration has already warned the UK that the US is negotiating specifically with the EU. Washington is very unlikely to open up a separate trade deal with the UK if a ‘Brexit’ was to take place (see the Guardian, 27th May 2013).
>The Rise of China:
As new powers rise over the years ahead, global governance will be in a state of flux. By 2050, it is forecast that Asia could nearly double its share of global Gross Domestic Product (GDP) to 52% (see blog of 7th February 2014). By 2030, it is expected that the three major economic global power bases will be the US, the EU and China. EU cooperation with the US through T-TIP will help ensure a sustainable structure of global governance through better regulatory convergence. The central idea is that rising powers will then be integrated into the global system creating a fair playing field for all that want to abide by the rules. Through its EU membership, the UK can benefit its own interests by leading the EU on the global stage through the ability the EU offers to act as a ‘force multiplier’ (see European Voice, 14 November 2013). UK membership of the EU will help rather than hinder its battle in the Global Race ahead. This is a strategic interest worth fighting for so the UK can compete in the global race.
Concluding remark
As the European election campaign opens out after Easter, it would be good to think that debates will address the issues central to the future of our country, and not just arguments about statistics. What the arguments in these debates so far illustrate is that Farage raises issues of populist concern which attract many to support his views, appealing to emotions. But, when analysed carefully, it is more to do with romantic idealism of a world which has long since disappeared where he would like to take us. What is needed in contrast is hard-headed pragmatism which will get the best deal for our country in the decades ahead, taking account what exists.
This is my final blog before the European Election which will take place in the UK on Thursday 22 May.
