16 October 2015

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‘Britain Stronger in Europe’ campaign


Flawed 3 million jobs figure – It was disappointing to see Lord Rose return to this outdated and discredited statistic, although he did at least caveat it slightly phrasing it as 3m jobs “linked to” trade with the EU. Nevertheless, as Open Europe has explained at length, it is based on a simplistic methodology (equating value added to employment) which dates back over twelve years. It also lacks a clear counterfactual, since the implication is that all trade would stop with the EU if the UK left and these jobs would disappear, which is clearly untrue. The ‘Stronger In’ campaign will need to up its game and come up with fresh, credible arguments if it is to succeed and in particular appeal to swing voters in the EU referendum.

Does each UK household benefit to the tune of £3,000 from EU membership? – Another highly dubious figure mentioned several times during the launch of the campaign. It is based on a CBI assessment from 2013 which found that EU membership benefits the UK by between 4% and 5% of GDP (or £3k per household). Open Europe deconstructed the figures at the time and found them wanting. Firstly, the estimate is based on a small and selective literature review (5 papers), the most recent of which was published in 2008. The CBI also increase the overall figure from 2% – 3% of GDP to 4% – 5% of GDP without really explaining why. Secondly, there is also no assessment of how life might look for the UK outside the EU. The implication is that outside the EU, UK households would be £3k each worse off. However, what this world looks like (in terms of trade relationship between the UK and EU) is not clear and therefore we cannot tell if it is credible or not. Thirdly, the household figure suggests benefits are equally shared, when of course they are not, they accrue to certain parts of the economy more than others. As such, the overall percent of GDP figure would at least be a more honest way to present the supposed gains.

EU membership makes every Briton £450 a year better off due to lower prices – Another figure liberally bandied about by the Remain camp without a clear explanation of how this has been calculated or in fact any source at all. It is also not clear how this figure relates to the supposed £3,000 per household benefit figure cited above. The idea that we get “ten times more out of the EU than we put in” is not only undermined by the flaws in the £3k figure but also by the fact that it conflates the wider economic benefits with our direct financial contribution, and ignores things like regulatory costs. Overall, the use of flawed figures makes it easier to undermine the positive economic case which the In camp is trying to make.

Will an emotional argument work? – There was a lot of talk of both pragmatism and patriotism at the launch of the campaign, though with some members leaning more towards the former than the latter. Ultimately, as Open Europe has explained here, the Remain camp is in danger of learning the wrong lessons from the Scottish referendum. Pushing the case that the British people should feel a strong emotional connection to the EU institutions seems an almost impossible sell. Our view remains that the best positive case to make is that of reform and changes to the EU in the UK’s national interest.

Tainted by support for Euro membership? – To its credit, the campaign has tried to move away from many of the usual suspects but has not (yet) quite succeeded. Despite a couple of fresh faces, the explicit and public backing of people such as former Prime Minister Tony Blair, Richard Branson and Roland Rudd, all of whom supported the UK’s membership of the Euro, as well as many groups that did the same, makes it hard for the campaign to distance itself from historical support for Euro membership and the misplaced warnings of disaster if the UK did not join. (See Open Europe’s ‘They said it’ report for a rundown of who said what on the Euro).

What will their position on migration be? – There was not a huge amount of discussion at the launch, but different people presented slightly different views. Lord Rose presented an unashamed defence of EU migration saying that he does not believe it has “in any way been detrimental to the UK”. However, the campaign’s Director Will Straw took a more nuanced view, noting that people are “legitimately concerned” about migration and that access in terms of trade often comes with requirements in terms of free movement of people – a point Open Europe has made for some time. It remains unclear where the campaign will fall in terms of its official line, but if their hope is to avoid the issue it is unlikely to work. The more nuanced view and the fact that migration challenges won’t evaporate outside the EU would seem a more sensible approach.

How does the EU boost UK influence and security? – This looks to be a key point of the campaign, though beyond asserting it, the actual argument is yet to be made. Given that the UK is one of the two foreign policy powers in the EU and much of foreign policy remains protected by veto, as is military action (or done via NATO), this case is not as simple to make as it may seem. They also seem to be missing a trick. The key point may not be the UK’s influence in the wider world but its influence over and in Europe. This could well be hurt by leaving and the EU’s approach to foreign policy and security could well change without the UK inside. Certainly, it would become more eastward looking and possibly more submissive vis-à-vis Russia. As such, influence over these vital policy areas of your closest neighbours remains an important asset. The case in this area needs to be explained and made clearly, not just asserted.

Those that back EU reform have to be aware they are at risk of undermining it – Many of those on the Stronger In campaign rightly still back EU reform, including Lord Rose and Baroness Brady. However, the fact that they have already declared themselves for In regardless makes it harder for their statements on reform to be seen as credible. As such, they might see some value for businesses waiting to see how the reform programme turns out, though its not clear where they stand on this. Furthermore, many of the pro-EU people and organisations affiliated with the Stronger In campaign have spent a long time rubbishing the Government’s reform programme and the Conservatives’ approach to Europe (ignoring the substantial degree of cross-party consensus on the substance of reform). Some continue to do so, largely out of habit, and thereby risk undermining their own case and alienating many swing voters. They are of course welcome to pass judgement on the reform process but should avoid prejudging it.

Would the UK really become a magnet for criminals post Brexit? – At the Stronger In launch, Sir Hugh Orde, the former head of the Association of Chief Police Officers, stressed the benefits of remaining part of the EU’s crime and justice laws, including the European Arrest Warrant, by arguing that, in the event of Brexit, “If I was a villain somewhere else in Europe and I’m escaping justice, I am going to be here because it is going to take a lot longer to get me back.” Such apocalyptic scenarios are hard to see as credible – the UK has far-reaching security co-operation with non-EU members, without the need for one-size-fits-all rules and a common court. It would be better to acknowledge that the majority of Britons want to cooperate on crime and justice issues but do not want to hand over democratic control to EU institutions and courts in these fields.

How do they see the world outside? – Or, in other words, what is their counterfactual? The implicit tone of the whole campaign is that there will be no “automatic access” outside and therefore no trading agreement between the UK and the EU. As we have pointed out, while there are no guarantees, this seems extreme. But as we have also pointed out, there is no off-the-peg model which works well for the UK outside the EU. Therefore, rather than implying that all the benefits will evaporate if the UK left, they should engage more specifically with how life might look outside (a big issue for the Out camp as we will explain below).

‘Vote Leave’ and Leave.EU campaigns


What model do they support for the UK outside the EU? – This is the crucial question for both factions of the Leave camp. As Open Europe explained in detail in our Brexit report, it is very hard to find a model which balances access for trade (particularly in services) and influence over the rules of the market on the one hand, with ultimate control over migration (i.e. not being subject to free movement) on the other. Achieving some, let alone all, of these objectives would involve a significant post-exit negotiation (most likely a more difficult negotiation than the current talks). Leaving is by no means the end of the world, as our report also showed, but the Leave side needs to face up to the challenges and explain how it might overcome them. If it cannot do this then it might have to accept the uncertainty involved in a Leave vote. Furthermore, as we explained, to prosper after Brexit the UK will likely have to take a very liberal and open trade approach and this may well include remaining open to migration. It is not clear that all or even many in the Leave camp are open to such an approach, for example with Labour for Britain and Leave.EU pushing strong opposition to the proposed EU-US free trade agreement (TTIP).

Would leaving significantly boost UK trading opportunities? – That the EU retains an outdated protectionist perspective which limits the UK’s access to global trading opportunities is one of the crucial arguments deployed by the internationalist wing of the Leave campaign. It is certainly true that negotiations with India have stalled and the EU is not even intending to negotiate a full trade agreement with China, but EU membership and the trade agreements the UK is party to via its EU membership currently cover around 59% of the UK’s global trade, and this could rise to 88% if the EU is successful in its current trade negotiations (much of which is accounted for by TTIP). This therefore begs the question of whether it is worth leaving – and potentially obtaining worse terms with the EU (which would remain our largest single trading partner) – in order to tap into this remaining 15%. The 28 trade treaties and preferential trading agreements covering 55 states which the UK has via the EU would not automatically apply – they may have to be renegotiated. Even if they are not, it means the UK is just accepting the terms gained by the EU not gaining any further influence. Of course, this may well change over time as other parts of the world grow more quickly and develop demand for what the UK specialises in (services) but that is an argument for leaving in 10 or 15 years, not now.

What to do about EU free movement? – While the Leave campaign will try to play down any risk to the UK’s access to the EU’s single market, stopping the free movement of people is the number one motivation for many Leave supporters. As noted above, there is no clear model which combines market access with ultimate control over migration. As the campaign heats up, the Leave camp will have to try to balance the views of voters motivated by migration with the concerns of businesses who would fear losing market access without an FTA, the price of which – as the Swiss model demonstrates – could well be continued free movement. Some Leave supporters may argue that scrapping free movement will allow for greater opportunities for migrants from outside of the EU, but with non-EU migration already standing at 196,000 last year – well above the Government’s ‘tens of thousands’ target without even factoring in EU migration – it is hard to see how there would be much scope for this.

The mechanism for leaving remains a liability – Triggering Article 50 of the Lisbon Treaty is the only way to formally leave the EU, but the dynamics of this are inherently biased against the country leaving. The UK would be excluded from discussions or decisions on its own withdrawal, with no guarantee that it would find the final terms acceptable. Without the UK’s participation in the negotiations, the centre of gravity would swing towards the French-led protectionist block and the deal would have to be approved by the European Parliament, both of which would likely affect the degree of EU market access the UK could secure and on what terms. Furthermore, the negotiations would have to be concluded within two years (absent unanimous agreement to extend them) or the UK leaves without anything. Looking at other FTA negotiations suggests more time could be needed – one of the quickest was the EU-South Korea deal which took four years, while the negotiation of the Swiss agreement took the best part of a decade. The Leave camps need to spell out which mechanism they would use to leave the EU and address how they will deal with its shortcomings.

Dubious EU budget savings claims – Vote Leave claims the UK sends £350m a week to the EU and an extra £20bn could be saved if the UK were to leave due to its EU budget contribution. Leaving aside the fact that £350m per week is £18.2bn and not £20bn, this refers to the UK’s gross budget contribution before accounting for its rebate and money it receives back. In reality the UK would save £9bn net (based on 2014 figures). It is perfectly legitimate to argue that much of this money is wasted (as we have done frequently) and would be much better allocated by the UK post Brexit. However, this also means it needs to be admitted if the UK is going to spend the money that currently goes to farmers and regions via the EU budget on other things. Would they scrap regional subsidies and agricultural support altogether? If not, then they should only speak about the net figure. To the credit of the Leave.EU campaign they attempt to do this, but use a net figure of £12bn. It is not entirely clear where this comes from, but it may be before the UK rebate is applied. Both sides will also have to engage with the fact that trade access may also require some budget contribution and there are limits to what the money can be spent on – so far it seems to have been spent many times over on the NHS, defence and innovation.

Incorrect figure on the UK’s share of votes at the Council of Ministers – Another dubious claim by the Vote Leave campaign which refers to the old system of voting in the Council of Ministers under which the UK had 29 out of 352 votes, or 8.2%. However, since the Council moved to a population-weighted voting system in November 2014, the UK has 12.6% of the votes. The old voting system can still be invoked on a case-by-case basis until March 2017 but this has not happened yet and it is disingenuous to imply this is the default. There is of course a debate to be had about how much influence the UK has in the Council and how it can counteract the Eurozone’s inbuilt voting majority – a consequence of the new voting weights and point which Vote Leave itself has flagged up. It seems incompatible to say the UK has 8% of the votes and the Eurozone has a caucus, as such it needs to make its position clear on this.

How will UK influence be boosted outside the EU? – As we noted above, the Remain camp’s argument on influence and security is a bit weak, but then so is the Leave side’s. It may not lose as much as some claim, but it is not clear exactly how the UK’s influence would be boosted by being outside. The primary example seems to be gaining a seat at the WTO, though it is not clear how much this is worth giving the size of the WTO and the fact that trade will be dictated by what we can negotiate bilaterally with other countries. As noted above, the EU and its FTAs already covers a majority of our trade and may well cover almost all of it in the not too distant future. Another argument could be the UK gaining independent seats on international standard setting bodies. However, this suffers from the fact that the real influence of these bodies is often minimal (enforcement is still done at EU or national level and the rules often change substantially) while the UK actually already has individual seats on many of them (especially in the important areas of financial services).

Be cautious about dismissing reform entirely – While many on the Leave side are happy to quickly and loudly dismiss the reform process and suggest we should all just give up, they should be careful what they wish for. Regardless of what we or they say, the UK may still decide to vote to remain in the EU. If there is no case for reform or process of reform, the UK would be stuck in an unreformed EU – probably the worst of all worlds. Are the Leave camps so entirely confident of winning that they are willing to risk getting stuck in an unreformed EU by dismissing reform entirely?

Supremacy of EU law vs primacy of UK law? – While this sounds like a common-sense argument it is very nebulous – what does the primacy of UK law actually mean? Firstly, EU law is only supreme in certain areas, while the UK maintains vetoes on certain issues. Concern over the European Court of Justice driving integration is valid, but this is why Cameron is seeking reform. Secondly, and more importantly, any trade agreement or international deal involves giving up some level of ‘primacy of UK law’. Nearly all international trade agreements involve the use of independent arbiters and require keeping sectors opened to other countries and restrictions on the regulations which can be imposed. Therefore any trade agreement struck with the EU and with other states would likely still involve sacrificing some primacy of UK law in practice. In all cases it is a balance of giving up some level of control in exchange for access and trade on better terms which delivers economic benefits.

Europe is changing – The Leave camp is right to point out the uncertainty around the future development of the EU. Vote Leave’s line, “There is no status quo”, is something Open Europe has long stressed since it became one of our slogans in 2013. However, while this is a risk, it is also a clear opportunity. For the first time in 40 years there is an acceptance that the UK will not join the Euro and not be part of ever closer union (see the June 2014 European Council conclusions). The Leave campaign will have a hard time selling the line that all change is bad. No-one yet knows how it will pan out. The use of the Five Presidents’ report also seems misplaced. It is entirely focused on the Eurozone and is far from a comprehensive vision of the future, it certainly is not dragging the UK into a super state and, if combined with safeguards for non-Eurozone states (as the government is pushing for) it could actually help improve the UK’s position in the EU.