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Tuesday, January 15, 2013

Why you cannot define business opinion on Europe in terms of ‘Eurosceptics’ vs ‘Europhiles’

On his Telegraph blog, Mats Persson argues:

Ahead of this week’s EU speech by David Cameron, journalists are searching high and low for businessmen and women to go on record on the vexed question of Britain’s European future. Alas, there’s no simple answer that makes for good radio or TV. Though broadly reflecting sceptic sentiments amongst the public, the business community is split and largely undecided, and as always it depends on the sector, size and position of a given firm. One thing is clear though: there’s absolutely no way the UK debate on Europe – among business or other groups for that matter – can be defined using the binary Eurosceptics-v-Europhiles logic that some in the media still cling on to. It’s far more fluid than any fixed pro or anti campaign.

A poll published yesterday by the British Chambers of Commerce is a case in point. Of BCC members, only 9pc of firms want closer EU integration, 12pc want to leave the EU altogether, 26pc want the status quo, 6pc are unsure. But here’s the interesting part: a full 47pc want "a looser relationship…but with the UK remaining a member of the EU".

Over the last few days, several business leaders have warned against the consequences of the UK leaving the EU, but very few have addressed the sharp end of the actual policy debate. A letter from Roland Rudd of Business for New Europe, for example, called on the UK to “lead” in Europe (surprise, surprise). But though these types of interventions are often written up as “Europhiles” challenging “Eurosceptics”, what they in fact show is how far the centre of gravity has moved (there’s no talk of more EU integration, as in the past, and certainly no talk of joining the euro, which Rudd used to passionately argue for). Also, they tell us very little. Most business people would have no problem agreeing with the “completion” of the single market, more trade deals, securing market access etc. Or, as the Rudd letter put it, “a strong reformed EU with Britain at the heart of it”. But what does this mean exactly? You’d be hard pressed to find a business person calling for “an unreformed EU with Britain at the margins”.

Remember, in policy terms, the UK quitting the EU isn’t actually on the table, as David Cameron has said several times and repeated on the Today programme this morning. Apart from Ukip (with no MPs), no party with national significance argues for it, so a "better off in" business letter misses the point (at least for now). Instead, the key question is: which is a greater threat to the trade benefits currently enjoyed by business in Europe? A new EU-UK deal or the status quo?

Here, Rudd’s lot will say that any “wholesale renegotiation” will be rejected by EU partners (as it means a “lower-cost membership”, etc) and, subsequently EU membership will be rejected by the British electorate in a referendum as expectations have been raised too high.

But there’s another way to look at it: given that around half of the British people favour the UK leaving the EU absent a new deal in Europe, it is, in fact, the “do nothing” option – not renegotiation – that is the biggest threat to the UK’s EU membership. Continue with EU membership despite the will of the British people and there may soon come a day when the electorate throw out the baby – the market access, free movement, mutual recognition, behind-the-border liberalisation etc – with the bathwater (the high non-trade costs around EU membership).

There are two other factors that should make business nervous of the “do nothing” option: First, further eurozone integration – not least via banking union – means that the status quo isn’t an option in Europe anyway. The prospect of a new “club within a club” has clear implications for business. The UK has to negotiate to secure existing rights, at least. Secondly, and most fundamentally, the EU simply needs reform to bring it up to speed with the global business environment: returning labour market laws closer to the shop floor, less EU micromanaging in environmental laws, ending the recycling of regeneration cash in Europe – riddled with opportunity costs for business – ending growth-destroying farm subsidies, and securing safeguards against investment-diverting measures in financial services, would, for example, all genuinely help business in Britain and beyond. That will require a new deal in Europe – not tinkering at the margins. It will also require a debate focussed on policy, not clich├ęs.

This is a very complicated debate, as the interaction between UK domestic politics and eurozone politics continues to produce an exceptionally fluid and emotional debate. To expect business people – who after all have a business to run – to have a firm view of a proposition that has not yet been made, is pretty unrealistic. But please, don’t make the mistake of thinking that this is a debate between two distinct camps. And that largely goes for the debate as a whole.

12 comments:

Rik said...

On a referendum.

1. A referendum almost by nature is a choice between 2. Democracy requires majorities and if you have a choice of 3 or 4 non of the 3-4 might get that majority and the one with the most votes might not be the preferred option of the population in total. You can otherwise have the worst possible option for 74% approved by 26% voting for it.

2. That really is an issue here. We got an IN and OUT and we got a reneg or not-reneg. Furthermore complicated by the fact that a result of a reneg is not known and pretty difficult to guess what it will be.
This gives 4 possibilities and makes it nearly impossible to have a proper referendum on.

3. The 4 possibilities can in a way be seen as 3. Skipping OUT-not reneg. However this is under the assumption that no new legal international framework would be needed for the relation between UK and EU in cast the UK would decide to go out directly. Which seems highly unlikely. There will have to be some legal stuff (effectively a lot of it as 50% of the international trade goes that way).

4. Starting from there 2 alternatives basically will have to fall off before a proper referendum can be held.
In this respect Cameron took imho the by far most likely 2.
Working to a choice between an OUT and a reneg, seen eg the polls on this issue.
IN-no reneg is simply not supported by a proper percentage of the population and as important is heavily disliked by a majority.
Which will also mean that if it is an out option4 OUT-reneg will likely follow if it an OUT vote. Difficult to see how the UK could live (economically seen) without a lot of legal paperwork on its traderelation with the EU. And possibly the results of that could be the basis for a later referendum (after the first ended in an OUT (if that would happen, not the most likley scenario).

5. Of course the delay caused by this will not be popular in the UK. In that respect it is essential probably that the population sees that things are happening and cost a lot of time. In this respect all the opposition we see now is simply benificial. It shows the government is working on it. And by ignoring critisism from abroad it is shown that it is a credible effort. As credibility on this issue is also a problem.
The polls also indicate that roughly the population is 1/3-1/3-1/3 IN-OUT-RENEG(with proper results), which also leaves the Cameron-way as the only option.

6. Cameron will likely have a huge push in the back by the fact that Millibrand doesnot want a referendum. Which makes Cameron effectively the only realistic option for such. Voting UKIP simply means you show that you want a referendum, but it also means that you will not be able to get one (as votes to show you want one come from the only guy (Cameron) that is realistically able to deliver on it.

Rik said...

Business opinion (and not only this poll) shows that the issue is not yet properly communicated with the people it concerns. The main issues in this respect:

1. Sustainability of the present situation (an unconditional IN). The present situation looks simply not sustainable. mainly in 2 ways.
A top of the agenda (why would 15% of the population want to vote for a single topic party otherwise), long term (with alot of election in that term) has to take public opinion into account. If only for mere survival of the current political parties.
This issue will keep playing up in the Conservative party until there is a final solution.
IN-NOchange-NOreferendum (FT letter) is therefor not a realistic option.
See it as damage limitation if you will. The preferred option of the people in the FT letter is simply not sustainable. It will come up again until it is properly solved. Which on one hand makes it more uncertain than a somewhat controlled reneg (as Cameron is proposing). And on the other a source of uncertainty, risk if you like (aka bad for business). With as an extra dimension that if it is kept to long under pressure the Cameron alternative will likely be of the table as well as it will simply take too long to realise. And a quick decision simply means an OUT obo the current polls).

2. The Euro-mess gives the possibility for a reneg. That otherwise would not have been possible. It could be the change for a reneg, but it also means that it will determine the timing and make this rather uncertain.

3. The EU as is, is really in need of a revision anyway. It is an expiriment, which means things go wrong. That would not matter if they were subsequently stopped. However they are in principle not (leading often to a bigger mess).

4. There has to be one way or another a lot of legal stuff between the UK and the EU even if the UK would leave today. International trade simply is organised this way.

5. The negative consequences of an simple quick exit are not really known (but are inventorised). But the first indication thereof is that these are likley severe.

6. The UK looks simply split in 3 more or less equal parts on this issue. It is essential that the votes (proper reneg camp) get what they want. As they also indicate that their alternative for a proper reneg is a straight OUT. Which would make it an OUT overall.

7. The issue will imho only get quiet again when the opposition to EU membership in any form is shown in an honest vote that they are not backed by something close to a majority (or more). The average EU-style referendum (France, Holland and Ireland) will unlikley do that job. It has to be an honest (credible if you like) referendum with results taken seriously.
Polls indicate that you will need a proper reneg to convince the balancing group (1/3 if you like) to do that.

Rollo said...

The business leaders which want to stay in the EU are the same people as the 'Captains of Industry' survey 10 years ago, in which about 55% said they liked the EU: they are chosen from the FTSE 100 and FTSE 250 companies, and mostly are of the International persuasion. These chaps like supranationalism; like to be able to shunt jobs around the world; are able to benefit from thye 'single market' by having a presence in different countries. But there is no single market for SME's; and SMEs represent the great majority of Bristish business. I have yet to meet any of these keen to stay in the EU.

Bugsy said...

Rik analysis and Rollo's comment seem to add up to the same result, big business is in favour of the EU, middle and small business isn't and a majority the remainder, the working (tax paying) population want to leave.

We are past a renegotiation that would take years, we need some kind of resolution to the question "what kind of referendum" before the election or the result of the election will be a mess, Labour with most seats but the Tories and UKIP with around the same number, other parties carrying the balance.

Unless Scotland leaves the Union. Would the Scots still have representation after an "OUT" vote and until the separation is complete?

Andy J said...

You’re right – Europhile v. Europhobe is absolutely not the debate here.
An in-out referendum doesn’t tackle the problem. If we vote ’In’, we’re giving the EU Commission carte blanche to continue its systematic corruption. If we vote ’Out’ we abandon all the remaining member states who are all just as affected by EU corruption as we are.
The answer is a referendum question along the lines ‘Should the UK leave the EU by [date] if the EU’s accounts have still not been signed off by the auditors?’ (It’s been 18 years, by the way).
Other member states could take the same position, and we (Europe)could then move beyond the UK-in- or-out issue.

Patrick Barron said...

Leaving the EU allows the full range of options for British business. Those who wish to abide by EU trade rules can do so. Those who calculate that the cost of abiding by EU trade rules can find business elsewhere in the wide wide world. British business MAY be concerned that it would be locked out of European trade even if it agreed on a company by company basis to abide by EU rules. True, the EU IS a free trade zone with protective wall around it. But this is even more reason to leave now and find more honorable trading partners elsewhere in the world. The EU WILL FAIL. It's model of continental autarky is seriously flawed.

Jesper said...

There most certainly are two different sides:

The ones who want to centralise power to Brussels vs the ones who'd like subsidiarity. The central planners are so far refusing to consider the possibility that they've taken too much power. Refusing to acknowledge even the possibility of being wrong... Could it be seen as an example of intellectual hubris?

UK isn't trying to get a special deal for the UK, it is trying to get a better deal for ALL nations in the EU. The nations who don't want the better deal can use the enhanced co-operation principle to hand their regained power back to Brussels.

The ones who like to centralise power are using their regular tactic - divide and conquer. Claiming that UK is trying to get something only for itself is yet another very obvious example of this tactic.

The debate is not: racists vs intellectuals, the debate is: central planners vs the rest. The above is another example on the importance on setting the framework for the debate.

Rik said...

@Bugsy
Imho Mr Ed and Clegg have just given you your referendum and for the following reasons.

1. Cameron. Not very successful as a PM till now and got the economy not really helping as well. Anyway he cannot campaign on that he would most likely be butchered even leaving the EU issue aside.
The only thing he can campaign on in a next election is Europe. It is simply the only other important point and it is simply important as 15% of the UK population wanted to vote for a one issue party, the UKIP only because of that issue.

2. Looks at polls the population wants:
-a referendum (it simply looks like they are attached somewhat to democracy, it shouldnot get any weirder). Even seen the percentages people who are in the reneg or stay in camp;
-basically the population wants a substantial reneg or an out (somebody without serious braindamage cannot interpret the polls in any other way).
The polls may change over time but they look pretty stable on this. Taken out no opinions, not likley to vote and ingeneral spread even over the 2 options, it is around 60% (or even slightly more) OUT.
And it lokks relatively stable.

3. From the 'governable' parties only Cameron offers now a referendum. The other 2 just came back on their promises in this respect.
With a major party in for a referendum it is very unlikely that we will see a massive swing to the status quo side. Basically you see that mainly when it is a weird plan by outsiders.

4. What you could however see is a swing from UKIP to Conservatives.
With Cameron being the only one to promise a referendum AND reasonably being able to deliver on it. UKIP promise might be even better, but the chance they can deliver is close to 0%
So UKIP voters have the choice be very principle and forget the referendum further (and voter massively UKIP as the polls now indicate they are likely planning) or vote Cameron and you might find him not fully convincing on the issue, but if he wins you will have your referendum.
And as we see all over Europe support for small so called populist parties rises first as a warning for the established parties and if not picked up it happens in the election after that. Cameron looks just in time to counter this move. As the votes are leaking 8 from 10 roughly from his party, he could not have afforded putting the IPs on the map.
Anyway strategic votes will likley massively move to the Conservatives from the IPs if he can credibly makes his case.

Rik said...

@Bugsy2

5. In general: Mr Ed and Clegg have just determined the electionstrategy for the Conservatives. Campaign on Europe and a referendum (a substantial reneg or OUT). Looks seen the polls over the last year a winning strategy if not messed up otherwise. It is likley the election issue and he has the monopoly on the by far most popular 'product. Plus this strategy will pull voters back from the IPs.

6. Plus the EU/Euro will likely remain a PR nightmare for years to come. Crisis is hardly solved. Markets might be calm, very doubtful if that remains that way, but the population isnot calm. And they can make as much if not more problems than the markets. Likely we will see alot of that already the coming year. History shows that roughly 2 year after austerity hits in populations start to make problems (and we are about there).
Anyway riots in capitals if relatively similar countries as the UK, are just as bad PR as markets tanking.
Without positive PR (and real positive not the usual BS variety, that nobody is buying) most likely OUTs will rise substantially (everything else being the same, which of course will not be so). The EU and the Euro are just brands in this respect and nobody buys stuff if it has come into negative publicity for years in a row, is what selling soap and cars and a lot of other things show.

Nutshell. Cameron has simply no choice if he wants to win the next election. If he messes this up it is goodbye Cameron. Even if he neutralises the issue which looks totally impossible. The economy becomes the campaign issue and he is a goner.
And from everything he and the people around him does you can see that a)he knows this and b)he is taking on the challenge.

jon livesey said...

To insist on a straight in/out vote is to make a serious but tempting error. It is a serious error, because 'in' is the status quo, and 'out' has serious costs.

On the other hand, it's a very tempting error to make, because in/out looks like a choice that is simple enough that ordinary voters can handle it.

But I think we all know what a simple in/out question will lead to - a campaign of Euro-disgust versus out and out fear-mongering, wit the result that an important national issue will be at the mercy of raw emotion.

My preferred outcome is a UK with remains in the EU and the Single Market, but outside the euro area, and Brussels becoming more and more the Government of the euro area, while providing providing single market access to the non-euro 10.

We even have a model for this in the ECB, where the euro 17 are full shareholders and share the ECB's profits and losses, while countries like the UK are not shareholders and pay an annual fee for clearing services.

Now I fully accept that you can phrase my preferred solution as a referendum question, so how do you do it? I think you send a team to negotiate with the EU when they finally get around to amending Treaties to implement euro-area integration, and then a referendum follows in which the question is "Do we stay in under the new conditions, or do we leave".

Ian Harris said...

Rollo's right. Big businesses like the EU, as they can cope with the bureaucracy and regulation, and it discourages SMEs from competing with them. What needs nailing is the lie abut jobs and trading. We buy more from the EU than they from us, and they are not going to jeopardize that. Also I understand they cannot stop us joining ETA/EFTA. We should focus on exporting to growing economies, rather than the sclerotic EU. We should also regain our borders, since there is no doubt that the influx of workers from Eastern Europe has diminished job prospects for our own unskilled work-force for whom no jobs are available. Pity that the EU incomers are harder-working and better qualified than some of our own, but that is something we have to overcome. Now we have the prospect of an influx from Bulgaria and Rumania, including their criminal class,who would rather get £6 an hour here than £1 over there, if they're not on benefits, including getting child benefit etc at UK levels, far beyond what they would get at home. As I understand it, there is NO renegotiation possible of the Lisbon treaty and ever-closer union without the threat of withdrawal. Without that threat, Cameron is spitting in the wind. Brussels will never agree, because it would cause a major bust-up with all the other countries who would like to do the same, and who are always going to be out-voted by the poorer nations who benefit from the money providing by the richer nations. Out is the only acceptable possibility, to my mind.

Gosporttory said...

Fully agree with Ian Harris. The corrupt anti democratic profligate EU Gravy Train is never going to allow a renegotiation and Cameron and the 2 socialist leaders Milliband and Clegg know this only too well.

We are all sick to the teeth of the whole expensive Gravy Train fiasco.