The Pro EU Case – Smoke and Mirrors?
Jonathan Lindsell, 4 February 2013
In the wake of David Cameron’s referendum announcement, a new pro-EU group launched last Wednesday (30th Jan) to considerable media fanfare. The Centre for British Influence Through Europe (CBIE) sports figureheads including Kenneth Clarke, (Minister without Portfolio), Danny Alexander (Chief Secretary to the Treasury), and Lord Mandelson.
Their goal is to keep the UK in the European Union. Here is an excerpt from their mission statement:
“We will now move forward with a series of events and campaigns to bring the people’s attention to the positive case for staying in rather than opting out.”
This seems a little odd, since the Prime Minister promised renegotiation before any vote would take place – which means CBIE will be bringing people’s attention to a case which doesn’t exist yet. Perhaps they have a crystal ball.
I fear not. Indeed, from the content of two posts their new website hosts, I’m not sure they have much substance at all, crystal or otherwise.
In ‘Lost in a statistical wonderland’, David Gow seeks to attack the Eurosceptic position on the economic benefit of leaving. His specific target is a short quote from John Baron MP:
“The EU exports more to the UK than to the US and China combined. They know they need us more than we need them, and so logic suggests the EU will offer flexibility.”
Gow shows that the EU exports £446 billion to China and America, but that EU-26 exports only £199.4 billion to the UK. I don’t dispute that. What I dispute is that Gow has said anything important at all.
Gow’s problems here are numerous:
1. He takes John Baron’s views as representative of the general Eurosceptic position, even though he himself admits Baron is atypical, since he is the first Tory to call for legislation ensuring a referendum before the next general election. As Baron is a politician outside the Eurosceptic mainstream, defeating one of Baron’s arguments is irrelevant.
2. He takes two lines from Baron’s extended argument and claims to have defeated the whole argument. He hasn’t. Most of Baron’s piece instead argues that legislating for the referendum now is important to show the government won’t break its promise. The China/USA claim was a caveat – Gow is attacking a “Straw Man”.
3. Gow has to admit that Britain has a large trade deficit with the EU-26, a huge £41 billion in 2011 according to HMRC. This is the real crux of many Eurosceptic arguments, since it shows Europe has a sizeable incentive to keep free trade with the UK, thus giving Cameron a strong negotiation position.
In short, whilst Gow patronises John Baron for his imprecise use of “logic”, his own piece is little more than rhetorical posturing.
CBIE’s other economic argument comes from Malcolm Levitt, “a former Treasury, European Commission and OECD official and Barclays senior executive”. This doesn’t sound like the sort of man to make serious logical errors. However his article, “Threat to British exports after EU exit”, manages to echo Gow’s mistakes. Indeed, in his very opening salvo he either deploys a Straw Man or shows a woeful ignorance of international trade laws:
“Those who want the UK to leave the EU claim that if it did it would benefit from untold-of export opportunities in the rest of the world. They cannot explain why those opportunities do not currently exist anyway, when the UK is a EU member.“
Whilst I cannot speak for all who want the UK to leave, I think I can clear this up. As an EU member, the UK has to maintain the ‘Common External Tariff’. This means that non-EU states trading with the UK are stuck with protectionist EU rates on agriculture, machinery (e.g. cars) and textiles. It also means the UK is unable to negotiate preferential trade agreements or free trade agreements (FTAs) with non-EU parties, unless the whole EU agrees to them, a process which takes years since each country has its own sensitive sectors and reservations. If the UK were independent, all future trade negotiations would be between two countries, not 28.
Levitt goes on to suggest that, without the negotiating power of the EU behind it, our government would never be able to win decent trade agreements with established or emerging markets such as Canada or South Korea. This is in ignorance of the fact that both of those states, with economies far smaller than the UK’s, were able to negotiate FTAs with the EU and other leading powers.
Canada’s Gross Domestic Product was $1.40 trillion in 2011.* Canada has FTAs with the world’s only superpower, America, plus Mexico, Israel, Jordan, Colombia, Chile, Costa Rica, Panama and EFTA – the non-EU free trade area which includes Switzerland and Norway. Moreover, Canada is currently negotiating FTAs with China, India, Japan, Singapore and the Andean states.
South Korea (GDP PPP $1.55 trillion in 2011) likewise has agreements not only with the EU, but also with America, and preferential relations with EFTA and ASEAN.
Truly, various smaller states have been able to gain preferential trade deals with the EU, China and/or the USA:
Mexico (GDP PPP $1.67 tn) with the EU, NAFTA (USA, Canada) and Japan.
ASEAN (combined GDP PPP $1.80 tn) with China, Japan and India.
Australia (GDP PPP $0.92 tn) with the USA and ASEAN.
South Africa (GDP PPP $0.55 tn) with the EU and USA.
Switzerland (GDP PPP $0.35 tn) with the EU and China.
New Zealand (GDP PPP $0.12 tn) with China, ASEAN.
The UK remains a member of the UN Security Council, the third largest economy on the European continent and eighth largest in the world. After a successful Jubilee and Olympics, it’s ranked global leader in ‘soft power’. For Levitt to suggest that the United Kingdom, with a GDP of $ 2.28 trillion, would fail to negotiate where smaller countries have triumphed is deeply pessimistic.
This scaremongering goes on. Looking at the FTAs the EU has with Mexico and Singapore, he writes, “On leaving the EU the UK would cease to benefit from those agreements”.
Mr Levitt must have either inherited his colleagues’ crystal ball, or know someone I don’t; I spent weeks talking to the European Commission, World Trade Organisation and EFTA-EEA, and the only conclusion seems to be that no-one knows what might happen to the UK’s trade agreements. In pragmatic terms, since both parties benefit from each trade agreement and since the UK’s economy won’t be any different, a replacement deal would be easily reached in the unlikely case the agreements do lapse.
Levitt makes more mistakes. He decries the loss of trade with the EU itself. As demonstrated above, whether inside or outside the EU, the UK’s free trade is almost guaranteed, and nobody from either side wants to endanger it. However difficult and painful the renegotiations, this basic economic imperative is assured.
In their introduction page, CBIE describe themselves as “hard-headed EU pragmatists” keen to put forward the pro-European case. It would appear that ‘pragmatism’ consists of dodging arguments and fudging figures.
*All GDP statistics quoted from the International Monetary Fund, adjusted for Purchasing Power Parity (PPP).