Wednesday, January 2, 2013

Scenarios of a British exit from the EU.


During the past few months certain debates have gained momentum in Europe. Catalonia seceding from Spain, Scotland from the UK and the UK leaving from he EU altogether. 

The United Kingdom has had an uneasy relationship with Europe ever since the creation of the European Communities. To them, Europe should never proceed to a full political union, they prefer to keep things as they are and keep the EU just a large market. 

I guess the interests of the political and leading economic elites are better served if things remain as such. Britain outside the EU could do well, in fact if any member state decided to leave would not be the end of the world for them. But are the citizens interests best served in the EU or outside?

Britain always wanted to safeguard the interests of the City of London and its financial services sector. They have invested hugely in creating the sector that dominates their economy and allowing it to be subdued to any interference from outside could prove costly. 

But they did reform their economy in the past to the detriment of the ordinary workers and their unions. It happened during the "Thatcherite" years when Britain's financial sector was established and the country's economy shifted dramatically. 

Then the ordinary workers suffered and the country went through some very difficult years socially and financially. So why can't they do it again? Is it because the rights or interests of the workers are not as important as those of the Bankers? Is protecting the banks and ensuring the favor of the markets far more important than having access to the European Single Market and influencing European affairs? 

Of course it is not about only protecting the financial sector of the City of London. It is also a reflection of different mentalities or a cultural issue. The British elite and the press always believed that Britain should remain outside a European "superstate" and pursue a more global economic, political and cultural influence or even dominion, through their cooperation with the US and the Commonwealth. That is why the majority of the British press was not very friendly to the European project for many years now. 

The question is, will the other Commonwealth countries be willing to always be part of this "British" club? India for example has grand aspirations of its own. And what about the other aspirations of the British "euro-sceptics" for their country, that want to be just like Norway and Switzerland? 

Norway is an oil rich country but is also part of the EEA (European Economic Area) having access to the European single Market without being an EU member. It is through all the treaties it has signed to be part of EEA, three quarters member of EU. They have to follow and adopt most of EU legislation and even pay into the EU's budget.  

Oslo gives around €350m annually to fund capital projects in the newest EU states like Poland and Romania. They recently helped build a smart new maritime museum in Gdansk, Poland.

But they do not have a voice in the EU, as they do not have a seat in the EU Parliament. Of course being a rich country very few bother or complain about it. But if Britain left the EU, they would lose their seats too and they would also have to find alternative ways to deal with the rest of Europe. 

They would most probably seek to remain in the EU Single Market as Norway or even Switzerland have done. It would be certainly be catastrophic if they chose to leave the EU totally and not be even part of the EEA/EFTA. In theory they would do so, only to cut the ties totally with the rest of Europe, a move that would be unwise.

But unlike Norway, Britain is a large country. And they do not have the resources that Norway has. Can such an important country just follow regulation that has been decided elsewhere but have no chance of influencing? If Britain wants to play a far more important role in the world politics and economy, can they lose their voice and influence in the continent on their doorstep? How can they assert themselves in the rest of the world if they ignore Europe? 

And what will happen if Scotland decides to leave the UK too and join the EU as an independent state? Then the oil in the North Sea will most likely be claimed by the newly formed Scottish state. Can the United Kingdom adapt to all these changes at once?

Even their relationship with Ireland will change. The two countries have signed numerous agreements that have made the two countries very close partners. The Common Travel Area, the Good Friday Agreement and many others between the two countries could be forced to be revisited. 

That would make it more awkward for Ireland to be fully integrated into a more federal EU and keep intact its agreements with Britain. Because of the Common Travel Area, there are no borders between the Republic of Ireland and Northern Ireland. Irish citizens also do not require passports to travel to the UK, just like in the Schengen Agreement Area. 

If Britain withdraws from the EU that will mean that Ireland can never join the Schengen unless it agrees to reinstall its borders with Northern Ireland; something that no side would want. And if Britain decides to withdraw totally from the EU and the EEA or EFTA, this situation could become even more complicated. 

The people of Northern Ireland can have under the Good Friday Agreement any nationality they want (Irish or British) and hold any of the two, or both passports. If the UK leaves the EU and decides that it does not want to be part of EEA and Schengen like Norway has, will the N. Irish people chose to keep their British passports or rush to get an Irish one? Can this have an effect in the change of status quo in Northern Ireland? 

Ireland will have to rethink its relationship with the EU too, but I do not think that it has much choice. Most multinational companies that have settled in the country have done so because Ireland is an EU member and an English speaking country. The multinational companies want to have access to the EU Market, plus enjoying the benefits of Ireland's lower corporate tax rates. 

Should Ireland be forced to leave the EU too after the UK, it won't have the above advantage. 
Britain is one of the most important business partners of Ireland. Britain is Ireland's biggest export market, while Ireland is Britain's 5th biggest export market. Most British retail companies have also branches in the Republic of Ireland and vice versa. A complete British withdrawal from the Single Market would be awkward for both sides. 

So the UK has two options, either to join EEA or stay in the EU for good. By staying in the EEA they will lose their influence in Europe and they will allow France and Germany to fulfill their vision for the continent. The British will still have to abide to 3/4 of EU law but they will have no voice or no influence on it. This situation in my opinion is not ideal if you wish to have a greater say and influence in the world. You still have to follow EU law that was decided by any other country in Europe, but not you. 

Preferably I would like them to stay in but become more active, committed and leading members of EU. They can achieve far more if they share the lead of the Union than being increasingly isolated in Europe. If only they could understand that and see that instead of always being the awkward member, they have more to gain if they became an active one. 

Europe needs Britain too and perhaps might eventually make it easier for them to feel more comfortable in the Union. A bit more cherry picking like the Swiss are doing and they will be happier. The truth is that neither Switzerland nor the EU are happy with their bilateral relations and both seek a revision. The EU is looking to corner Switzerland and pull it closer, while the Swiss are not happy with the lack of representation of their interests. 

They always rely on Britain in representing their interests in the EU, as they both have a large financial services industry. If Britain also leaves, will this alliance last and who will represent those two countries then? 

How can we build a functioning union if every state picks only what suits them and opts out from what it doesn’t? There will be no "union" if this happens, we will have to revert back to EEA or EFTA . Many "euro-skeptics" of course will be delighted for this, but not me. I want to have a vote on what is being decided for me on a European level, I do not want to end up being a Norwegian or an Icelander. 

And if the UK is allowed to get all the opt outs and still remain in the union, then why not every country do the same and only accept laws that do not interfere with their sovereignty? But if you want to keep your sovereignty then why join a union in the first place! I do not want a free trade agreement only because there will be no European Parliament (EP) and the laws of the Single Market will be decided for me, but without me. 

In the end of the day you can not keep them in by force and it is becoming annoying for everyone to have one country constantly complaining and moaning about everything. Perhaps we should let them be out for a while. Sometimes when we wish for something for too long, when we eventually get it we realize it was not what we wanted in the first place!


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