Making up your mind
Organisations and individuals for both sides of the argument appear to have been using strategies based on Fear, Uncertainty and Doubt (FUD). This makes it difficult in deciding which way to vote because it is hard to interpret the information and whether the data being presented is accurate or not.
So how can you decide? Here is a summary of some, hopefully useful, information.
The Common Market was designed to create a Free Trade area among its member states by removing trade barriers and establishing a common external trade policy with non members. The creation of a single European economic area based on a common market was the fundamental objective of the Treaty of Rome. The UK joined the Common Market (EEC) in 1973 and a referendum on membership in 1975 voted to remain as members. 1 A popular impression at the time was that the referendum was to decide whether the UK wanted to be a member of a Common Market providing Free Trade with and between other European countries.
The forthcoming referendum (23 June 2016) is the first opportunity, since the referendum in 1975, for the Electorate in the UK to support continued membership of the EU or to leave the EU altogether. 4 The Labour manifesto for the 2005 election promised a referendum but never delivered. 5
The UK is one of 28 “voices” in the EU. The EU will increase in size in the future with more countries joining. While individual countries have a voice at the EU negotiating table, their influence diminishes as more countries join the EU.
The European council defines the EU’s overall political direction and priorities and sets the EU’s policy agenda. The members of the European Council are the heads of state or government of the 28 EU member states, the European Council President and the President of the European Commission. 6
The EU parliament is made up of 751 members who are directly elected by member states every 5 years using proportional representation. The number of MEPs from each country are determined by the population of that country with the UK currently having 73 MEPs (just under 10% of the total). 7
The European Commission is the EU’s executive body 8. It represents the interests of the European Union as a whole (not the interests of individual countries).
- Propose legislation
- Enforce European law
- Set objectives and priorities for action
- Manage and implement EU policies and the budget
- Represent the Union outside Europe
A new team of 28 Commissioners (one from each EU Member State) is appointed every five years. Past members from the UK, chosen by the government of the time, include Leon Brittain, Neil Kinnock and Peter Mandelson.
The combined size of the EU gives it a major voice in the world where it represents its member countries on global issues such as
- Climate Change
- Environmental Issues
The EU has an interest and/or influence in many different areas affecting the UK, from Human Rights to Transport and Trade.
Areas of interest include, but are not limited to:
Agriculture, Audiovisual and media, Budget, Climate action, Competition, Consumers, Culture, Customs, Development and Cooperation, Digital economy & society, Economic and monetary affairs, Education, Employment and social affairs, Energy, Enlargement, Enterprise, Environment, EU citizenship, Food safety, Foreign and security policy, Fraud prevention, Health, Humanitarian aid and Civil Protection, Human rights, Institutional affairs, Justice and Home Affairs, Maritime affairs and fisheries, Multilingualism, Regional policy, Research and innovation, Single market, Space, Sport, Taxation, Trade, Transport
The EU Constitution guarantees the free movement of persons, goods, services and capital within the Union (the so called “four freedoms”) and strictly prohibits any discrimination on grounds of nationality.
The UK can trade freely with other members in the EU without tariffs, or other restrictions, in a combined market of more than 500 million people. The EU negotiates Trade Agreements with other countries on behalf of all member states providing a powerful worldwide negotiating position.
The EU has created a number of directives and regulations, relating to Workers’ Rights that have been enshrined in European Law, from minimum paid leave to increased pregnancy and maternity rights.
Every EU worker has certain minimum rights 9 relating to:
- health and safety at work: general rights and obligations, workplaces, work equipment, specific risks and vulnerable workers
- equal opportunities for women and men: equal treatment at work, pregnancy, maternity leave, parental leave
- protection against discrimination based on sex, race, religion, age, disability and sexual orientation
- labour law: part-time work, fixed-term contracts, working hours, employment of young people, informing and consulting employees
Citizens of Europe have the freedom to work study and travel within EU countries without restriction. Freedom of movement across the EU opens up job opportunities for UK workers willing to travel and enables UK companies to easily employ workers from other EU countries.
Benefits (minor) arising as a result of “freedom of movement” rules include
- The European Health Insurance Card (EHIC) 10
- Driving licences are valid across Europe
- Mobile phone roaming charges are being removed across the EU. 11
they demonstrate the ability of the EU to introduce common, universal benefits which are the same for all EU citizens.
Another side effect, from the freedom of movement rules, concerns social security payments. All countries have their own system, some more generous than others. Payments can be claimed by any EU citizen in the country where they are resident according to that countries rules not the rules of their home country. This is somewhat contentious in the UK (because of the perceived generosity of the UK ?) and possibly other countries which may have more generous payments than others.
There are also other financial differences between countries, e.g. in minimum wage payments and cost of living etc.
Could the EU impose the same minimum wage and the same social payments across all member states in the EU ? This could happen if there was closer fiscal integration between member states.
One of the fundamental principles, defined in the treaties, is the “ever closer union” of member states. The exact details of this principle are not defined but are likely to include closer fiscal and political union.
Closer fiscal integration would mean a central European authority would set spending and tax rates for all member countries.
Political union is where member countries transfer most, or all sovereignty, to a joint government which is recognised internationally and has common home and judicial policies, a common foreign policy and security policy.
One of the moves in this direction was the introduction of a common currency, the Euro, across member states. Although the UK opted out of joining the other countries using the Euro, joining the Eurozone has not been completely ruled out in the future.
The world financial problems circa 2007-2008 subsequently caused problems for a number of countries in the Eurozone, most noticeably Ireland, Greece and Portugal. The necessary process for their recovery was determined by the EU and austerity measures were imposed on these countries. 12
Remaining in the EU
It is unlikely that any radical changes would be made in the short term and it is pure speculation to try and guess what would happen in the future.
So here’s my pure speculation.
There are a number of indicators of how the EU wants to proceed in the future.
In the longer term the EU is likely to want to explore the possibility of closer fiscal and political union as mentioned in the existing treaties. Whether this would mean the EU becoming the “United States of Europe” or the “Federated States of Europe” is unknown, but is a concept worth considering as a future aim.
It is difficult to know how this would affect the UK and how committed the UK would be to closer integration although a referendum vote to remain could be viewed as the UK providing their approval for the EU to continue on its way.
As the size of the EU increases, the ability of the UK to influence decisions may be diminished simply because the proportion of their voting power is reduced. It is also uncertain whether it would be necessary for majority voting to be used more often in order to get the business done, but any changes to the voting process could require treaty change.
From a financial point of view, items such as the EU Budget rebate, currently granted to the UK, could come under closer scrutiny and be reduced or even removed completely.
A question mark remains over the ability of the EU being able to effectively handle crises which may occur. The recent, and continuing, refugee crisis highlights the dis-united nature of member states in coming up with an acceptable resolution or plan for resolution.
Another issue may be the ability of the EU to ensure mechanisms for applying sanctions, such as fines etc. to member states who fail to obey EU law. 13
Leaving the EU
If the UK were to leave the EU, the process for leaving is defined by Treaty (Article 50) and the UK should begin a period of negotiation to decide on its terms for leaving and its initial relationship with the EU post exit. 14 This allows for a maximum period of 2 years (unless extended) in which to negotiate suitable terms for separation.
Leaving the EU is likely to be a staged process and will have significant geopolitical and economic consequences trying to unravel forty years of integration in a single step. There is an interesting document, Flexcit which describes a possible multi-phase approach to exit. 15
For other aspects of leaving the EU, it is difficult to predict what would happen in the short term but uncertainty can breed fear and it is possible for some disruption in the world financial markets.
A vote to leave is likely to throw global markets into turmoil and undermine confidence in the 28-nation trading bloc.
In the currency markets, Sterling appears to weaken as polls show an increase in the support to Leave although stock markets have remained relatively calm in the run-up to the referendum
US investors may also be vulnerable to a fall-out from a vote to exit. They have increased their allocation to British equities since May of last year, according to a separate report by Nasdaq OMX Group’s advisory-services unit. Those in Britain, on the other hand, have been the biggest sellers, it showed.
The euro weakened against the dollar on concern an exit would damage trade and encourage other members to renegotiate their relationships with the EU. 16
The long term future of the EU could also be threatened following the withdrawal of the UK but while some additional member countries may decide to hold similar referendums and vote to leave, there would likely always be a core of countries remaining to carry on the European dream.
In terms of its future trading position, while difficult to predict what would happen, the UK has an impressive résumé which may help 17
- The UK has the fifth-largest national economy (and second-largest in the EU) measured by nominal GDP.
- The ninth-largest in the world (and second-largest in the EU) measured by purchasing power parity (PPP).
- The UK economy currently makes up 4% of world GDP.
- The UK has been the fastest growing economy in the G7 for four consecutive years with 2.1% year on year growth in Q1 2016.
- In 2014 the UK was the ninth-largest exporter in the world and the fifth-largest importer, had the second largest stock of inward foreign direct investment and the second-largest stock of outward foreign direct investment.
- The UK is one of the world’s most globalized economies.
- http://politick.co.uk/the-1975-common-market-referendum/ ↩
- Consolidated Version of the Treaty on European Union ↩
- http://politick.co.uk/what-is-the-eu/ ↩
- http://politick.co.uk/eu-referendum-june-23-2016/ ↩
- Extract from the 2005 Labour party manifesto: The new Constitutional Treaty ensures the new Europe can work effectively, and that Britain keeps control of key national interests like foreign policy, taxation, social security and defence.The Treaty sets out what the EU can do and what it cannot. It strengthens the voice of national parliaments and governments in EU affairs. It is a good treaty for Britain and for the new Europe. We will put it to the British people in a referendum and campaign whole-heartedly for a ‘Yes’ vote to keep Britain a leading nation in Europe. ↩
- http://politick.co.uk/the-european-council/ ↩
- http://politick.co.uk/the-european-parliament/ ↩
- http://politick.co.uk/the-european-commission/ ↩
- http://politick.co.uk/workers-rights-in-the-eu/ ↩
- http://politick.co.uk/european-health-insurance-card-ehic/ ↩
- http://politick.co.uk/mobile-phone-roaming-charges/ ↩
- An interesting article that examines the austerity measures imposed on Ireland claims that the Irish recovery was built on human rights violations and undermined long term social and economic development. http://www.irishexaminer.com/viewpoints/analysis/irelands-austerity-success-is-no-model-for-greece-340662.html ↩
- http://politick.co.uk/uk-beef-embargo/ ↩
- Although no other member state has left the EU, Greenland voted in a referendum in 1985 to leave the EEC, following disputes over fishing rights. Greenland was originally part of Denmark which joined the Common Market / EEC together with the UK in 1973. Greenland gained their independence from Denmark in 1979 and subsequently held a referendum on their continued membership of the EEC ↩
- Flexcit – The Market solution to leaving the EU http://www.eureferendum.com/documents/flexcit.pdfThis is not to say that this process would be followed but is an example of how the exit process could be achieved.
A possible obstacle to the exit process could be The European Communities Act 1972 legislation. This is an Act of Parliament providing for the incorporation of European Union law into the domestic law of the UK. In the event of a vote to leave, would it may be necessary to repeal the Act and would MPs vote accordingly ? 18http://www.legislation.gov.uk/ukpga/1972/68 ↩
- http://www.businesspost.ie/brexit-could-send-europe-shares-down-25-per-cent/ ↩
- https://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom ↩