The minnow and the whale – Britain doesn’t need EU “clout”

Jonathan Lindsell, 8 April 2013

In the EU’s Council of Ministers there has been a longstanding “gentlemen’s agreement” between Britain, France and Germany that the majority would not collude to force through regulations which are clearly against the minority’s key interests. Germany and Britain let France lead on the Common Agricultural Policy. Britain and France follow the Germans when it comes to manufacturing directives.

In the last few months, however, this trust has been broken. Regarding bankers’ bonuses, and later the bonuses of fund managers (who deal in private individuals’ money and contributed very little to the financial crisis), European countries allied to pass legislation clearly detrimental to Britain’s key financial sector.

Bonuses are capped at 100% of salary for bankers (up to 200% with a supermajority of shareholders) and 100% for fund managers. Industry commentators suspect these rules will hit the City hard, driving jobs to Hong Kong or Wall Street. There’s no evidence that a cap would reduce the risk of ‘casino banking’. Those at the top will simply see their salaries expand to make up the difference. This isn’t just a problem for London’s élite – the financial sector employs tens of thousands, and its tax contribution is over 10% of government income.

Should we leave?

Many argue that alone, Britain wouldn’t have the international ‘clout’ to close trade deals with heavyweight economies. I argue that any Free Trade Agreement between the USA and the EU is unlikely to conclude, or would be compromised and cumbersome. Going solo, Britian would be nimble, able to promote its own interests rather than those of EU26. But what of our clout?

Iceland’s population is roughly 300,000. Its GDP is just $13 billion. It has no standing army. Its principal exports are fish, raw aluminium and Björk. Iceland is very much minnow.

Yet today Iceland agreed on a Free Trade Agreement with China. It will be signed within two weeks by PM Johanna Sigurdardottir when she visits Beijing with her wife. This follows a visit of ex-Premier Wen Jiabao to Reykjavik in 2012.

If Iceland can do it, who is seriously suggesting Britain cannot?

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