Thursday, July 19, 2012

What Cameron should have told the Telegraph

David Cameron is quoted in today’s Telegraph saying that he wants to negotiate a “new settlement” with the EU with powers returned to Britain, but that he would never campaign for an “out” vote in a referendum. “If your vision of Britain was that we should just withdraw and become a sort of greater Switzerland, I think that would be a complete denial of our national interests”, he said.

The ‘never’ part doesn’t seem to be a direct quote so it’s not entirely clear how to interpret it. However, several commentators have already laid in to Cameron over ‘revealing his negotiation hand’. In order to make demands for renegotiation credible, so the argument goes, Cameron must be willing to keep the “out” option open, in order to have a fall-back plan should negotiations fail. Otherwise, other member states have nothing to fear and can just tell the UK to go and stuff itself. A couple of things:

  • As the Telegraph’s James Kirkup has pointed out, when he said he wants to stay in the EU, Cameron merely restated what was in the 2010 Tory manifesto, so it’s not as if he’s changed position 
  • There’s virtually no clean ‘out’ option to fall back on. Whether EEA, bilateral FTA or Turkey+, all alternative models also require renegotiation with, and approval by, the other 26 member states, meaning that the ‘what happens if they say no’ question still applies also under an ‘out’ scenario. The only way Cameron can get around that is by explicitly stating that he’s willing to fall back on WTO rules – which would not require anything – but which would instantly turn the entire UK business community, amongst others, against him. 
Having said that though, those who criticise Cameron have a point First, demands for Britain to leave are not a negotiation ploy but are real, and will intensify absent new EU membership terms. The UK government cannot be seen as defending EU membership at ‘any cost’. Secondly, as we’ve said before, if the EU becomes a political extension of the Eurozone, i.e. if directly or indirectly greater Eurozone integration spills over to Britain, for example via a banking union, Britain simply cannot remain inside – politically, democratically or economically. Finally, as we argue in our recent report on EU-UK trade, there are scenarios under which the exit door could suddenly look a lot more attractive, including if single market liberalisation stalls and if the Eurozone grows more protectionist internally and externally, preventing UK business from taking advantage of growth opportunities around the world.

Therefore, the smartest thing for Cameron to say would be: As we set out in the Tory manifesto, we remain committed to EU membership and will not seek an “Out” vote. However, we must also acknowledge that  the UK public is understandably growing more restless by the day. Absent new EU membership terms for Britain, while I personally would be against it, there may come a day, when it will no longer be possible to resist pressure for the UK leaving the EU, which would create a hugely unpredictable situation that would be in Berlin’s and Brussels’ interest to avoid.

David Cameron should frame the renegotiation of the UK’s membership terms as a bid to save the UK’s EU membership – that is a far more powerful negotiating tool than any short term threat for him to campaign to leave because, it could potentially gain support from some unexpected quarters, it is true and does not rely on the promise of a politician.

26 comments:

Rik said...

1. First of all, as it looks now the relation between EU and UK is always to be a special one. If out of the EU or remaining in it the relation will be different from Norway, Switzerland. Simply because of the size of the UK and likely the fact that other countries inside and outside the EU might 'rally' around the the UK for their relation with the EU as well.
2. having said that looking at what are the options.
a continuing the status quo;
b considerable reneg to freetrade and customsunion;
c exit but with strong links
d full exit and start from scratch.
3. Imho a and d donot look realistic. The UK voter simply finds a. not an option. Leaving and start from scratch is simply businesswise suicide. WTO not only means higher levies but also a truck load of other complications. The UK simply cannot afford that its exports, at least a huge oart of that, suffer 2,3,4 year great practical problems while its economy is in this stage.
You get an exit with a time period of say 5 years. Strong links probably freetrade and at least partially Customs union. Similar rules for health and safety stuff.
Cooperation on IPR etc.
Very similar how a EU membership light could look.
4. Scenario b and c are imho very close to each other. If you optimise both these scenarios from both sides, they could as said be nearly the same with the only main difference that in one the UK is an EU member in the other it is not.
5. Looking at the terrible state both are in likely also markets would like to keep the EU label on it. From the EU side that it is not falling apart in this critical time. From the UK side that no uncertain expiriments are tried.
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Rik said...

1. Cameron is moving one step at the time an not making a 180 to remain credible. Imho a logical strategy.
2. Whatever his real views are we donot know exact as he is still in the adjustment process.
My guess would be not far from Open Europe's view, but rather would have avoided having to tackle it.
However the latter doesnot seem an option.
3. He will anyway have to fight a war at 2 fronts minimum. The EU one, but also with the UK public (and possibbly with the coalition partner). This will happen largely in the public eye by the nature of things. Which simply means that he will have to state things over the relation with the public, while negotiating with the EU, things that might weaken his negotiation position. And the other way around.
4. His advantage is that he can take over the 'good guy' role with the EU trying to find a solution. While the UK public acts de facto as the bad guy principal.
Natural role for him as well.
Basically not a bad position.
At the end of the day his point will always be that: it has to be sold at home and only a change in the widget directive is simply not acceptable . And very likely there will be a referendum. So it is: come to a solution the UK public likes or face an EU exit. Which the EU can use as little as the UK may be even less. No other options on the table.
5. He also should start to communicate to the UK public that an EU exit is much more difficult as it looks at first glance and has considerable risks. The EU side is getting the message at this moment. That it is may be not nice to have another big issue but unfortunately for them it is simply unavoidable. And only changing the widget-directive simply means for them a very negative scenario. UK referendum and very likely exit at for them the worst possible time.
5. Also from the EU side there is some pressure. The cabinet in the UK doesnot look really stable and could fall way before 2015. Now they have basically the best, for them, people on the table.
Clegg in the goverment most pro-EU (party).
Cameron very likely the most pro-EU Conservative. Likely a successor will be voted in on a EU exit programm and could get a majority on that.
It doesnot come much better than that. From their point of view.
6. However because of the referendum a situation as with the EZ crisis now in Germany is there. Politicians cannot make the decision, at the end it will be the voter that decide. In Germany as its Constitution says that major changes in its parliamentarian budget right need to be done by referendum (de facto). In the UK as within 1,2,3 years there will be a referendum on the UK's relation with the EU.

John E Payne said...

It is quite simple really. If Britain decides to stay in the EU then we are agreeing sometime in the future we will become part of the united states of Europe ruled by Brussels. It is quite obvious to me that Cameron is saying will be in the interest of the British public.
Fine for him as an individual, but why doesn’t he think the British people should make that decision? Is he GOD or something!

Rik said...

A point never really well discussed but imho very relevant in this particular discussion.
A massive change of the rules (for import and export).
Just give you my experience in this respect.
Probably good to see what a larger UK company does as a combination of several tradeflows both in an out.

1. In.
No (not service) company of a somewhat larger scale is not having several of its basic products imported.
What you would see is that roughly 50% of total imports/ foreign inflows(in case of an exit) would have different rules applicable. And this is just for the EU part. Probably more than 50% of the tradeflows as the closer by you get the smaller the transaction/tradevolume will be.

2. Basically if you have a new tradeflow or the legal and/or business frame work therof changes you have to organise it properly first before it runs and when it starts running it most of the time will remain doing that.
Within the EU this will be relatively easy. But if the UK would leave very likely several of its suppliers will still have to adjust.
It is mainly a problem of the supplier, however the UK company will have a lot of extra work on it simply by having to make the whole thing work. Procedures (UK cie's, EU cie's, extra Customs) will have to be readjusted to the new situation.

3. The problem with a full scale exit is that this will be for basically all EU trade flows and at the same time. Very likely the department dealing with this will be heavily understaffed for this work. Furthermore you likely will be confronted with suppliers that simply cannot handle it and alternatives might have to be sought.

4. This is the by far easiest part.

5. Other country imports (non-EU) will be confronted with completely new rules, as EU rules will no longer be applicable. And these trade relations have to settle in the new legal/trade framework.
With the same problems but bigger than with the EU suppliers.
Again all at the same time. And all at the same time as the EU imports as well.

6. You simply dump a workload with the departments dealing with it that is much larger than they can handle.

7. With exports it is even bigger. Usually it is a buyer's market you work in (like most markets).
Your export department and international sales department will be confronted with issues like: certificates required; higher prices because of importduties; just the paperwork in general. Just to keep customers happy. Could be very simple things that the foreign Customs donot understand how to handle this and just put it on hold. Customers simply donot like that and likely several of them will simply look for alternatives. alternatives. It might be legally the customer's problem but economically it is largely yours. If the paperwork gets too much next time they will look for another supplier. Most export-relations are longer term ones. It is simply not worthwhile to invest in a one trade relation with someone at the other side of the world.

Anyway your logistics, import, export, foreign sales etc will likely be faced by truckloads of work for which they donot have the staff. And likely this will affect the operation of your whole company and considerably. And again all at the same time.
Something the UK simply cannot afford at the moment.

Just as an exercise take an imagenary company look at what they would buy from abroad and what they sell and to which countries. You will see that you will drown the company because of the workload if this would happen (an exit without time for proper preparation). As a rule of thumb departments can deal with say 10% new cases/problems/changed situations (my experience). Now you confront them with a 100%.

Rollo said...

I am a member of "British Business Community", and I do take exception to Open Europe speaking, nay shouting, in my name. My company exports 80% of our product, virtually none of it to the EU; BECAUSE THERE IS NO OPEN MARKET. We simply cannot build our aircraft hangars in France, for example, though we can in Santiago or Ulan Batoor. EU regulations will destroy our abitlity to export to the world, a big and growing market. We do not want to be shackled to the sinking EU ship.
google "aircraft hangars" and see our work.

Rollo said...

What Cameron should have said is: "I gave my cast iron pledge that we would have a referendum on Europe. I Lied. I will tell any lie to stay get into power, and once in, will carry on the Tory Agenda of giving our sovereignty to Brussels". Then everyone would understand his position.

Rollo said...

I am part of the "British Business Community". We export 80% of our product world wide, but virtually none to the EU. There is no open market and there is rampant protectionism in Europe. EU regulation will kill our ability to export to the big, real world while shackling us to the sinking ship of Europe. My little bit of the "BBC" would cheer getting OUT.

Rik said...

@Rollo
The point is I think that the UK businesscommunity exists of more sectors than builders of hangars. It looks like OE simply looks at what is exported and to which countries and starting from there a lot of companies will face considerable problems.
Which seems to me basically the only possible way to look at it from a more macro level.

For your line of business it might be useful to check if exporting the materials to Ulan Bator this culd be done as easily (better not more difficult) as it is now. probably also if for the work part not more formalities have to be met. Especially with these kind of countries you could end up with a lot of unpleasant surprises when rules change.

I donot think OE says that the EU is perfect or even anything remote to that. The free market is a lot less free than it supposed to be (and you give a good example thereof).
Another issue if the UK government should not act more 'Medish'/'Latin' in this respect. Quid pro quo. Especially the Latin/Med part of the EU has a well deserved reputation as you indicate for creating all sorts of hurdles. Imho the UK should take more a similar approach until the issue is dealt with in a proper way. Simply make it extremely difficult to export to the UK for say French companies (one of the main culpitts, just let them drown in paper work for instance).

One of the advantages of the EU is a Common market/Freetrade. It is partly there but there is also still a long way to go to get there. And in my experience airtravel in the widest sense is one of the sectors that is the biggest mess. Huge state interverence, often state owned companies, semi or defacto monopolies, airport, flagcarriers often heavily connected etc. I know the sector and it simply stinks (as far as freetrade is concerned) even in Northern/Western European countries, very dodgy to outsiders.

Open Europe blog team said...

@Rollo
Thank you for your comment – always good to hear your thoughts and as active businessman and exporter, your opinion no doubt carries a lot of weight. All we were saying is that as things stand, only 12% of SMEs in the BCC’s recent survey said they favoured outright withdrawal – the most popular option with 49% was a renegotiated package, as we argue for. So even though the business community does not speak with one voice, we suspect it would, at this stage, be quite nervous about the prospect of UK withdrawal.

You make very good points about the exporting patterns of your particular business. Out of interest what would you judge to be the most important operational barriers to operating in the EU?

Edward Spalton said...

As an EU member, Mr Cameron can no more "renegotiate" a relationship with the EU than my foot can do with my head. The treaties are set up to require UNANIMITY and he hasn't the wherewithal to bribe or threaten everybody.

However under Article 50 of the Lisbon treaty he can really negotiate a new relationship by leaving. If the EU cannot agree to terms (only QMV required) within two years, he can then proceed under the Vienna Convention.

Not simple but the most straightforward method - devoutly to be wished. As for being like Switzerland where politicians' powers are limited by frequent referendums - roll on the day!

Bugsy said...

Interesting to here OE views and business views on various states of membership or not of the EU. I'm sure that jo public realises that there would need to be a long period of adjustment if we left or changed our relationship with the EU. Your surveys provide a fluctuating insight into the views of the public, what is their view of membership of a Untied States of Europe. How does this play with the public since it is the obvious outcome of continuing as we are?

Denis Cooper said...

Why would any patriotic national leader campaign to keep his country in an international organisation based on treaties which commit its member states to an inexorable never-ending process of "ever closer union", until his country would cease to exist as a separate country?

Because he knew that the people of his country had considered the matter, and had decided that they actually wanted to surrender their national sovereignty and embrace a new future as part of some kind of federation?

Well, Cameron knows very well that the British people do not will the extinction of their country as an independent sovereign state, but then he is not a patriot but a closet euro-federalist determined to pursue his end through deceit and political manipulation.

The mystery is that so many Tory party members still refuse to accept that the man they chose as their leader in 2005 is not at all the patriot he pretended to be during the leadership contest.

Bugsy said...

@ Rik
Currently the UK does more trade outside the EU than in.
Is there any difference in the level and type of regulation, tariff or procedure between the two?

christina Speight said...

As `at 16oo hours Friday there are 12 postings above - 4 are from Rik and with his verbosity dfominates with 72% of the lineage. he makes the idea of posting here seem futile.

CVan management PLEASE persuade to be more modest or suggest that if he has so much to say he starts his own blog?

Average Englishman said...

Christina, do not despair; people actually read the short posts.

Open Europe, Rik, Cameron and others can say what they like about the potential difficulties of the UK leaving the EU but the tide has turned. The UK population do not want to be part of a United States of Europe and no amount of fudging by politicians will stop us from leaving sooner or later; I pray for sooner.

Gosporttory said...

I fully agree with Christina. Furthermre, as a lifelong (over 45 years)Tory I would advise that my conscience is clear because I voted for David Davis as our leader and not Cameron who has certainly shown his true colours after sucking up to the liberal socialists.

There is only one reason that we cannot get the referendum that we all wish for so dearly and that is that the result is a foregone conclusion. The majority of the British people are sick to the teeth at subsidising the profligate EU Gravy Train as shown in opinion poll after opinion poll.

I only wish that the whole Gravy Train eurozone implodes soonest so as we can start again on our own without all the Gravy Train shackles.

Rik said...

@Bugsy
The rules in EU after the UK would have left are likely easier to deal with. They are basically the same for the whole EU. So even if one country would make a problem (did anybody say France) it can relatively easily be avoided via Belgium or Holland. If it is in one EU country it is effectively in all.
Furthermore almost directly even by a direct UK exit procedures will be discussed and put in place. And it is unlikely that say Dutch or German Customs will move to dodgy schemes.
There could however be levies that would de facto increase the price of British produce and certainly there will be more paperwork. That has to be organised also more structurally. These are the 2 main longer term problems higher price for several products and the paperwork and costs attached to that. Shorter term all has to be reorganised. Possibly the logistic company has to be changed you might end up with customers that allthough may be legally obliged to do the import, simply are technically not able to do it. So you do it for them or you loose a client. The main problem being it is 50% roughly of the UKs external trade and everything will have to be adjusted at the same time. In my experience departments in a lot of companies will simply be drowned in the extra work.

For the non-EU part basically everything could happen. Countries are so different. But in general there will be more problems. It might in the end after a few years be relatively easy. But try to find out what will change if the UK leaves the EU for imports in say Chili or Laos or DRC. Nearly impossible to do. Especially as all would come at the same time.

That is why I think that any scenario will never lead to a exit per that same day. You get either a thorough revision so the UK population can live with it or an exit in say 5 year from signing, so everything can be well prepared both in UK companies but also in EU companies that export to the UK. They donot have the problems with non-EU countries (assuming that the EU still exists).

It is wise for the UK to look at other markets anyway. The EU could end up as a sort of zombie-no growth continent even when the UK would remain in the EU. However nearly 50% is still essential for the UK economy. If half of that would be lost (a rather extreme percentage) the current crisis will be a small one.
Also not growing or declining markets need a lot of attention and are often highly competitive (as everybody simply tries to survive). Make doing business difficult for say even a few months and it likely causes a lot of structural damage to the UK economy. Competition is ready to step in and not easily new customers are found to fill up gaps caused by the problems.

Edward Spalton said...

Gossporttory,

I believe Mr. Cameron will eventually offer a phony referendum - just like Harold Wilson, who pretended that he had conducted a "fundamental renegotiation". The government pamphlet of 1975 was headed "Britain's New Deal in Europe". It was nothing of the sort.

It is highly likely that most people (either being not then born or having short memories) will fall for it.

Essentially it is the same as Hague's lying slogan "In Europe but not run by Europe"- a total impossibility, if by "Europe" you mean the EU.

Cameron has nailed his colours to the mast and said that never must we leave.
I think you do not grasp the subtlety of the party leadership - and that goes for all three of the main parties.

David Barneby said...

Rik,
Your Humble opinion looks at too much minutiae . David Cameron is sitting on the fence , not knowing what to do , as with everything else he does , he and his cabinet are out of their depth , whether on home or foreign affairs .
The EU since 1992 has been the biggest mistake and will in my opinion eventually break up . John Major should never have signed Maastricht . British premiers are always talking about Britain's influence in the EU , but it seldom if ever happens .
It is wrong to lump the population of Britain together with banks and some industries , to say whether the British people want IN or OUT of the EU . David Cameron has 3yrs to sit on the fence , before being voted out in favour Labour or UKIP .
I believe it would be best for Britain and the EU if Britain makes a complete break . The EU has more to lose than Britain , of the 40% trade within the EU , Britain imports more than she exports ; Britain will not be paying one of the largest net contributions . Britain will have many billions of extra money to pay off debts and put into the British economy . Britain leaving the EU would give its whole structure such a blow , that it might bring the rest of them to their senses , rather than let the whole rotten edifice collapse .
I do not believe that mere repatriation of EU laws and regulation will convince or satisfy the British public . I see it as running with the fox and hunting with the hounds .

David Barneby said...

Rik ,
You're " Bogged " down in paper work !!!
A renegotiate referendum will not get the conservative party re-elected , only a straight In/Out referendum . David Cameron and his cabinet are not governing Britain at all ; they are merely going through the motions , foreign policy is dictated by the US .
The British government is going to regulate banks in Britain , my foot . London is used by foreign banks and it seems British banks too , to do fraudulent deals .
( MF Global , Barclay's )
If Britain leaves the EU , sanctions are going to be put on Britain , EU members cannot trade with Britain ? I don't think so , it will be business as usual .
I could see an alliance between Britain and some northern states , such as Holland , Denmark ,Sweden , Norway , Poland and the Czech republic , but without any political ties .
I think David Cameron is afraid to hold a referendum now , because it would cause a split with the Lib/Dems , necessitating a general election . An IN/OUT referendum now would assure the conservatives a win and to govern without Clegg .
Could Britain really suffer another 5yrs with David Cameron as leader ? I think the answer is NO !

Rik said...

@Most of the above
LS
Transition is probably the keyword.

You would have me (for what it is worth), probably OE as well (my guess and much more useful of course) if you can give a clear explanation how you see that done, without harming the UK economy badly.
It is fine that the EU exports more than it imports from the UK.
But that doesnot mean more than that they will be hurt as badly.
How you are going to assure (within reasonability of course) that the City is not confronted with legislation that will kill 10-20% of its business. Or UK exporters will be confronted with truckloads of extra red tape and all sorts of extra levies that makes selling abroad much more difficult.

And again the fact that the EU exports more than it imports doesnot count. The boys in uniform at the borders simply want the right papers for the new situation and the levies mentioned in their big book. And not only in the EU but all around the world. If not they simply donot let your goods in and they first change that if they are instructed accoordingly by their bosses.

How can the UK, already on a close to 10% deficit, cope with the say 1 year it will costs for businesses to get everything running again and likely say the 5 years (probably more) that it will take to have rules that are more or less similar to the ones that there are now (via the EU)?

Give aproper answer to these questions and you will convince a lot of people who are now for a 'renegotiation' solution, you certainly will convince me (again for what that is worth (not much as said earlier)).

Gosporttory said...

I agree in total with everything said by David Barneby and Edward Spalton. Furthermore let me assure you both that very many of us lifelong Tories are sick to the teeth with Cameron and the true loyalists still left cannot wait to see him deposed and replaced with a proper Tory who both represents the views of our Party and indeed the wider British public.

I simply cannot understand why on earth we didn't run with a minority Government and challenge Clegg and his liberal socialists to bring us down thus creating another general election.

I never ever thought that I would see the day when we joined with the liberal socialists of all people....we have more in common with the 2 red Eds...at least they have consistent policies and don't run with the hares and hunt with the hounds, nor do they want more immigration (after they let in over 3 million mostly EU Gravy Train nationals), nor do they want to scrap our nuclear deterent or join the euro, etc, etc, etc!!!!!!

In short, most of us still loyal grass route Tories have spent years having to work alongside liberal socialists who are all things to all people. To say that we loathe them would be an understatement.

I have so many friends who have deseted to UKIP and just hope that our back benchers get shot of our 2posh arrogant men who don't represent anyone except themselves the better for us all.

David Barneby said...

Gosporttory
Thanks for your kind words of support , that's right , give it them straight from the shoulder .
I wrote to David Cameron last year , to tell him that in his first year of office he hadn't got a single thing right . I wrote about him cavorting on the world stage , but that he and his cabinet were totally out of their depth , wet behind the ears .

Rik
You answer the point you are making . Are you by any chance one of the boys at the frontier handling the masses of paper , saying yes or no to goods passing the frontier ? You mean EU countries would not be able to export to Britain ? The EU would prohibit investors from putting their money in a non EU safe haven ? When the EU gets a tight enough grip it will srangle itself , is already doing so .
Britain would have in hand £30bl to £50bl ? its net contribution to the EU . I believe that would soften the economic blow to Britain while she recovers and resumes with a higher proportion of trade around the world . The loss of Britain's net contribution to the EU would leave a big hole in EU coffers , to block trade with Britain would be foolish beyond .

Rollo said...

Hello Open Europe. As you know we contribute a little to OE. But exporting to Europe would be no more tricky than now, if we were out. We have a Monthly deficit of £3.75 Billion with the EU so any trade war would be much more of a disaster for them than for us: and we could easily buy what we need from elsewhere. As you know, both Norway and Switzerland export more to the EU than we do, in proportion. There is a persistent lie, that 3,000,000 jobs depend on membership. Every civil servant, and every politician, including Clegg and Cameron, persist in propagating this lie; no wonder SMEs and others are frightened. They have nothing to fear.

Denis Cooper said...

Christina Speight is right.

We've been here before, with a phoney "renegotiation", followed by a propaganda blitz to dupe the people into approving "the better terms for our membership", when in reality there were none of any significance.

Michael Bond. said...

May I add two comments?
Firstly, I recall that before the UK left the Exchange Rate Mechanism we were told that if we did so it would be the end of civilisation as we then knew it. When it happened we found that after a difficult year or so we had several years of prosperity which only began to crumble as Gordon Brown got into his stride.
Secondly, in event of a national referendum about our relationship with the EU, whether 'in' on renegotiated terms, or 'out' completely, we should expect billions of euros from Brussels to be spent here to scare us all into voting for the status quo.

Michael Bond.