Conquering the world market or isolating from it?

by currentaffairsplus

The tendency characterising most European Parliament elections is a victory for EU-sceptic and far-right parties. To exemplify, the “National Front” performed very well in France. In Germany, a country normally expected to have the most pro-EU citizens, 7 % of the votes was given to the Eurosceptic party AfD. In Denmark, Morten Messerschmidt, from the very far-right and anti-immigration Danish People’s Party, received the most personal votes ever for an EP-election.

The strongest example is however the UK. The ‘winning’ party in the UK election was, for the first time in a century, not from Labour nor Conservatives, with the very poor results for the Liberal Democrats leading some demanding Nick Clegg’s resignation. Everything seems to be upside-down – confirming the UKIP “earthquake” – a triumph for the eurosceptics.

This is a shocking (although not surprising) result, especially taking into consideration what this could potentially mean for the turnouts at the general election in 2015 where Nigel Farage predicts his party will become a significant player. If he could beat Cameron and Miliband at the EP-election why shouldn’t he be able to beat them at the general election?

The EU-scepticism in the UK will in the worst case scenario cause an UK exit from the European Union after the next general election. From UKIP’s point of view an EU-exit would be beneficial for two reasons.

First, UKIP believes that, after an EU-exit, the UK could conduct a similar or even expanded level of trade with the EU – just without being dictated to by EU’s institutions and regulation. More importantly, it would be a step towards conquering more of the global market independently! While this sounds an inspirational, even desirable, policy option, UKIP fail to mention the flip side of leaving the EU…

Creating new markets and expanding old ones is not a matter of as much deregulation as possible. In fact, operation of the world market arguably requires more regulation in order to harmonise business and trade procedures. Through this harmonisation (and thus through regulation) all trade partners would be assured more equal distribution of the benefits. To support this with an example, German beer purity laws made it difficult for other beer producers in EU to access it’s great beer markets. However, the German law was incompatible with the laws of the European Union allowing the ECJ to overrule it – creating fairer competition for the member states.

Indeed, the Confederation of British Industry (CBI) points out that it will be a mistake to leave the EU arguing that an exit will be bad for both employment and growth in UK. This can be supported by estimates from the UK Governments Department of Business, Innovation & Skills showing that 3.5 million jobs in the UK are related to trade with EU . CBI states that eight out of ten of their business members want to stay in the EU. Alone the fact that the membership of EU brings in 4-5% of UK’s GDP on annual basis should be reason enough to stay. Furthermore, the EU membership has increased investment flows into the UK, particularly to those areas traditionally underdeveloped.

Finally, free movement of labour gives UK’s businesses access to skilled workers from other EU countries. Even though the EU is not perfect, openness is, for the above mentioned reasons, the best economic and political option for UK from a broader business perspective.

Furthermore, the cost of isolation would be limited access to the UK’s current biggest trade market. Half of the UK’s export is to the EU – this would be restricted by an EU exit. Moreover, the EU is of huge importance in relation to the UK’s international trade. Leaving the EU would imply a need for new bilateral trade agreements,  which will not be as favorable as those that current EU-members benefits from. Furthermore, the size and security that the European Union offer its members should not be undermined as an important factor for UK growth and businesses as it creates certainty.

Secondly, Mr. Farage claims that it is not possible to have an adequate immigration policy as long as the UK is a member of the EU. This is backed up by horror stories of Bulgarian and Romanian boogie monsters coming ‘over here’to exploit government benefits and to commit horrible crimes. An easy trick to convince the politically unaware voter; fear has always had a certain political effect. UKIP’s horror portrait of immigration is however both grotesque and unfair…

It is true that many Bulgarian and Romanian people immigrate to the UK, but not as many as UKIP in the first instance attempted to claim. Furthermore, it is a huge generalisation to put all Bulgarians and Romanians in the same box. Immigrants come from many different countries and for many purposes – often to work or study.

This includes myself. I am one of those exploiting the great opportunity created by EU’s agreement on free movement of workers – and I’m not here to commit crimes or exploit government benefits. I moved from Copenhagen to London to study for an M.Sc. and with the intent to stay, find a job, and contribute significantly. My fellow students coming from outside EU faces huge amounts of bureaucracy to pass if they want to work in the UK.

The opportunity created by EU’s free (and easy) movement of labour – a great problem according to UKIP – provides businesses with the the access to qualified and skilled labour from the entire EU. Leaving the EU would create a huge uncertainty for UK businesses that would have trouble filling out the gap for skilled labour.

So the real problem, a problem that is reflected in most EU-countries, is the scepticism arising from a lack of knowledge. If it can really be proven that an EU-exit will benefit the UK in the longer term it is of course worth considering. However, the truth is that it is really hard to say – and in the short term there will for sure be many costs associated with an exit.

The UK will lose complete access to the EU market and would have to renegotiate trade agreements and find new trade partners. 4-5% of UK’s GDP will be lost and have to be found elsewhere. UK businesses will no longer have easy access to skilled labour from other EU countries but will instead have to spend a lot of resources on bureaucracy in the attempt to fill out the qualified workers gaps. Finally, the UK will lose a large amount of investment, as their membership of EU is exactly what many investors are attracted by.

So should UK consider an EU-exit? Looking at the huge short-term costs of an exit it does not seem as the right thing to do. UKIP and other EU-sceptics should be careful jumping to conclusions especially because we don’t have a lot information about longer term effects of an EU-exit. They should instead realise that being a part of the EU is being part of a central powerful player on the international scene. This is however only the start of the journey; to deal with the increasing EU-scepticism we have to acknowledge that the EU is outdated –  making it necessary to consider how to redesign and achieve a better fit with the realities of the 21st century. Only then can we create and benefit from a more united union.

by: Maria Bjerre Degn