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Flexit – The Market solution to leaving the EU

by Politicker

A view of the future from a Leaver.

Paper: Flexcit – The Market solution to leaving the EU

The purpose of this (online) book is to set out the mechanisms the UK might employ in leaving the European Union. It is a “roadmap” to demonstrate that an orderly exit is both plausible and practical and largely risk-free.

http://www.eureferendum.com/documents/flexcit.pdf (pdf)

A pamphlet has also been produced which summarises the online book

http://eureferendum.com/themarketsolution.pdf (pdf)

EU Referendum 2016 – Results

The referendum on continued membership of the European Union was held on June 23 2016 and the results were declared on June 24 2016.

The following figures were obtained from the Electoral Commission

http://www.electoralcommission.org.uk

The total electorate in the UK (the number of people registered to vote) was 46,500,001

England: 38,981,662 (83.832%)
Scotland: 3,987,112 (8.574%)
Wales: 2,270,272 (4.882%)
Northern Ireland: 1,260,955 (2.712%)

The total number of votes cast was

Remain – 16,141,241 (48.1%)

Leave – 17,410,742 (51.9%)

giving an overall turnout of 72.15%

There were 25,359 (0.06%) rejected ballot papers.

12,922,659 (27.79%) people did not use their vote

Further analysis of the figures shows how the individual countries voted, with England and Wales having majorities to LEAVE,  while Scotland and Northern Ireland having majorities to REMAIN

RegionResults

The actual EU Referendum results data (in CSV format) is available and provided by the Electoral Commission at

http://www.electoralcommission.org.uk/find-information-by-subject/elections-and-referendums/upcoming-elections-and-referendums/eu-referendum/electorate-and-count-information

Is the EU referendum legally binding ?

Referendums in the UK, in constitutional terms,  are not legally binding so the Government could (in theory) ignore the results although this is unlikely to happen. It is, however, necessary at some point for the UK Government  to repeal the 1972 European Communities Act, requiring a vote in parliament, in order to ultimately leave the EU.

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 EEC became the European Union (EU) in a later treaty 2 which was agreed to by the UK Government and politicians at the time. There are currently 28 members states. 3

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
  • Energy
  • Environmental Issues
  • Terrorism
  • Migration

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
  • etc

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.

 


 

Notes:

  1. http://politick.co.uk/the-1975-common-market-referendum/
  2. Consolidated Version of the Treaty on European Union
  3. http://politick.co.uk/what-is-the-eu/
  4. http://politick.co.uk/eu-referendum-june-23-2016/
  5. 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.
  6. http://politick.co.uk/the-european-council/
  7. http://politick.co.uk/the-european-parliament/
  8.  http://politick.co.uk/the-european-commission/ 
  9. http://politick.co.uk/workers-rights-in-the-eu/
  10. http://politick.co.uk/european-health-insurance-card-ehic/
  11. http://politick.co.uk/mobile-phone-roaming-charges/
  12. 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
  13. http://politick.co.uk/uk-beef-embargo/
  14. 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
  15. 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

  16. http://www.businesspost.ie/brexit-could-send-europe-shares-down-25-per-cent/
  17. https://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom

Principal EU-US trade disputes

by Politicker 0 Comments

An interesting paper which outlines trade disputes between the EU and the US

The prospect of transatlantic free trade talks has brought the EU-US trade relationship, the largest bilateral trading relationship in the world, into the spotlight. Trade disputes account for a small fraction of the total volume of this trade, around 2% according to the Commission, despite often receiving prominent media coverage. But a number of long-running disputes between the EU and the US are indicative of the challenges negotiators of a bilateral trade agreement face.

Read more at:
http://www.europarl.europa.eu/RegData/bibliotheque/briefing/2013/130518/LDM_BRI(2013)130518_REV1_EN.pdf

UK Beef Embargo

by Politicker 0 Comments

Bovine Spongiform Encephalopathy (BSE) is a disease that affects adult cattle and is commonly known as mad-cow Disease.

BSE attacks the brain and central nervous system of the animal and eventually causes death. It was first reported in cattle in the UK in 1986, but could have existed for longer without being detected. One theory about why BSE developed is that an older prion disease that affects sheep, called scrapie, may have mutated.

The prion was spread through cattle that were fed meat-and-bone mix containing traces of infected brains or spinal cords. The prion then ended up in processed meat products, such as beef burgers, and entered the human food chain. BSE is believed to be the cause of variant Creutzfeldt–Jakob disease, a fatal disease, in humans.

Because of the extent of the disease in cattle in the UK, the EU imposed a strict export ban in March 1996 on British beef and related products.

From 1st August 1999, the ban was amended to allow de-boned beef and beef products from the UK produced under the Date-based Export Scheme (DBES) to be exported. Under the DBES, the UK could export beef and products from cattle born after 1 August 1996, subject to a series of strict and limited conditions. These included requirements that the animal was between 6 and 30 months old, had been clearly traced and identified throughout its lifetime, its mother did not develop BSE, and that beef from cattle older than 9 months was de-boned.

Dispute between the UK and France

The French Government, however, continued to ban the import of beef and beef products from the UK.

In January 2000, the commission brought an action against France before the Court of Justice. In December 2001, the ban was ruled illegal by the European Court of Justice. The judges agreed with commission lawyers that no national law could justify a refusal to apply community law. France’s decision to maintain the embargo sparked a trade row, with British farmers threatening tit-for-tat bans on French goods.

The deadline for France to lift its ban on beef imports from Britain ran out at midnight on Thursday 11 July 2002, and the country faced the threat of fines by the European Commission.

On 25 October 2002 the French Government formally lifted its ban (in order to avoid any fines).

The Commission  withdrew its scheduled action in the ECJ on 13 November 2002 asking the Court to impose a penalty of £100,000 per day on France for failure to lift its ban in accordance with an earlier ECJ Judgment. It stated that it was satisfied that compliance with EU law had been achieved.

No fines were imposed and due to the European constitution, were not able to be backdated because they cannot be imposed retrospectively.

The Commission also stated that the action for costs against France would remain live and that following the case the Commission would review the provision under Article 228 of the treaty with a view to ensuring more effective mechanisms for applying sanctions to Member States who failed to obey EU law.

The UK Government regretted the decision by the European Commission not to pursue the case for penalties against France. The UK supported the Commission throughout and believed that pressing this case would have sent a firm message to Member States that no one country can avoid its obligations and responsibilities. Working through EU institutions was the best way to resolve this difficult issue, and it was thanks to the direct action by the Commission and the ECJ that the French Government lifted its illegal ban on British beef.

In 2006, the EU agreed to lift the embargo completely and the UK was allowed to resume exports of all live animals born after 1 August 1996.

References:

BSE: UK beef embargo to be lifted
http://europa.eu/rapid/press-release_IP-06-278_en.htm

Europe’s BSE crisis
http://news.bbc.co.uk/1/hi/world/europe/1142660.stm

British beef: Commission satisfied that EU law is now respected
http://europa.eu/rapid/press-release_IP-02-1671_en.htm

EU fine re British Beef
https://www.whatdotheyknow.com/request/eu_fine_re_british_beef

BSE: Lifting restrictions on the trade of cattle and beef from the UK
http://europa.eu/rapid/press-release_MEMO-06-108_en.htm

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