Peter Jones: Better off out of EU? It’s a fantasy

The British economy has done very well within Europe and would suffer if we were to leave, writes Peter Jones

By PETER JONES Monday, 19th May 2014, 11:32 pm

Ukip talk of red tape and a blizzard of rules but fail to see beyond them. Picture: Getty

According to the most recent opinion polls, the UK Independence Party (Ukip), the party that most obviously wants to get Britain out of the EU, will get a fairly derisory vote in Scotland at this week’s European parliamentary elections. But that will not mean Scots are as enthusiastically pro-EU as some parties, particularly the SNP, will attempt to claim.

Regular readers will know that last week I argued Ukip and the SNP were tapping into the same stream of opinion – doubt about Britain’s place and future role in the world and anxiety that national destiny is no longer in our own hands – and coming up with different cures for the angst: getting out of Britain, or getting out of the EU.

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Let’s leave aside the nasty complication of what might happen if Scotland votes No to independence but then the UK votes No to continued EU membership. Actually, I am inclined to think that in any in/out EU referendum, the verdict is more likely to be to stay in, especially if there is meaningful European reform.

The polls also suggest Scots favour staying in the EU by a margin of about six to four. That’s more pro-EU than polls taken in the UK as a whole which say, in the absence of any reform or renegotiation of British membership terms, that opinion is evenly divided. But it isn’t the overwhelming endorsement of EU membership that political debate in Scotland seems to imply.

Part of the problem, I think, is that to describe discussion about the EU as “debate” is to grossly exaggerate. With voting now just two days away, the European election is making negligible impact. People may be aware that a guy called Nigel Farage has been making a lot of noise and getting a lot of attention, but that’s probably as far as it goes.

In the mainstream and social media, the effect of the EU on immigration into Britain is probably the most hotly discussed topic. But whether EU membership is good for the economy, jobs and general wellbeing, which is where the heart of the debate ought to be, is barely talked about, save for complaints about an alleged tornado of EU regulation which is supposedly stifling our businesses.

If that were true, it is decidedly odd that in any poll of business folk that I have seen, especially of those that do any exporting or importing, opinion overwhelmingly favours staying in. I guess that to anyone running a corner shop or a painting and decorating business, EU membership makes little impact, but to any overseas trader, it is of huge importance.

Trade is, in fact, the big issue. “Out” supporters argue that EU membership does nothing for British trade. Look, they say, at Norway and Switzerland, both of which sell more exports in value terms per capita to the EU. This, they say, proves that Britain could carry on trading quite happily with the EU.

The examples are glib and simplistic. Norway has high EU export values because they are dominated by oil exports, which, unsurprisingly, the EU is desperate to have and imposes no tariff barriers against. Strip them out, and Norway-EU trade is not so impressive.

Switzerland is surrounded by the EU. It could hardly avoid trading with it, whereas Britain is an island with a sea to cross (two seas in the case of Northern Ireland) to get its goods and services into mainland Europe.

Neither are Norway and Switzerland EU-red-tape-free. Norway is in the European Economic Area, which some argue is what an independent Scotland should aim to join. To be in this area, you have to agree to abide by EU regulation, but you have no say in how it is drawn up – regulation without representation or government by e-mail diktat.

Switzerland isn’t in this area; it sells into the EU through a series of bilateral trade agreements. This sounds preferable, as it means a say in setting the terms of trade. But the broad principle behind these trade agreements is that the EU agrees to drop its tariff barriers provided the goods it is going to import conform to European standards – ie, regulations. So no escape from Brussels bureaucracy there either.

Indeed, the whole debate about red tape is actually a red herring. The whole point of it is to encourage trade, not to reduce it. When you have 28 sovereign countries, you have 28 sets of regulations designed to make sure that goods don’t injure people and do what they are supposed to.

These regulations are more correctly called non-tariff barriers to trade. Countries, though they are not supposed to do this, can design product and service standards in order to protect a domestic industry by making it more difficult for foreign competitors to get their products into the domestic market.

Much EU regulation is intended to do away with these internal barriers and make it easier to trade inside the union. The problem is that when you do arrive at a common set of regulations for, say, lawnmowers, 28 sets of regulations have to change.

And if you are a maker of lawnmowers who doesn’t sell them outside Britain, this would be an incomprehensible and totally unnecessary burden which might well make you vote “out”. That’s really the source of a lot of opposition to the EU, but it ignores those other lawnmower manufacturers which may well benefit from increased exports.

Those manufacturers in turn would probably become more competitive, making your lawnmowers expensive, putting you out of business. In which case, you would probably turn into a rabid Ukipper, utterly wrongly blaming the EU for your bankruptcy. It would be your bad business management that would be to blame.

Economic research shows that British trade has benefited from the EU. The Centre for European Reform studied British trade with EU countries, comparing that with the 30 largest trading partners that are not in the EU, allowed for differential growth rates and distance, and found that in the period between 1992 and 2010, British trade with the EU was 55 per cent higher than would be expected. Trade in goods was 30 per cent higher.