Does Britain’s destiny lie at the heart of Europe? | Will Hutton and Ruth Lea

With David Cameron’s speech on Britain and its relationship with Europe reverberating throughout the continent, the Observer commentator and pro-European Will Hutton goes head to head with economist and Eurosceptic Ruth Lea on an issue that will define our country’s place in the world

Dear Ruth…

I know that as a long-standing pro-European I was meant to feel down-cast by David Cameron’s speech – the triumphant moment for Britain’s Europhobes and Eurosceptics. But instead I felt relieved.

If this is the worst that can be thrown at us, Britain will still be in the EU in the decades ahead. Thinking Conservative sceptics are not adopting the careless nativist nationalism of the ultra Europhobes and Ukip. Rather, they are entering into a serious argument about what kind of political and economic Europe we want to build and share with our neighbours. That is important.

I don’t agree with them and wouldn’t risk exit from the EU to have the argument, but I can see that the political dynamic on the right of British politics forces this unnecessary promise of a referendum. Yet importantly, serious Tory Eurosceptics are also recognising that Britain has crucial economic and political interests that cannot easily be put to one side. Geographically and culturally, even they concede we are part of this continent and share its destiny.

What caught the headlines was Cameron’s call for an in-out referendum on renegotiated terms – apparently a Rubicon. But who would not want their cake and eat it?

Any deal in which the terms are unilaterally reset to favour us is bound to be attractive. The open question is whether such a deal can be negotiated with big enough concessions to bear scrutiny. I doubt it and I wouldn’t put so much at risk to achieve such a scant outcome. For what has become obvious during the long years of Eurosceptic ascendancy is that too much that is positive about the EU has been left unsaid, which is now surfacing.

For example, Britain is the home to the European headquarters of 469 multinationals compared with 86 for Germany and 77 for France. Part of the reason they are here is because they can freely access the European Union. Having so many decision-makers based here is a fantastic market for our knowledge service industries. Then there is agriculture, the City, the car industry and even our universities – I could continue. All one way or another have come to depend on EU markets, connectedness or support.

David Cameron knows he has to fight heart and soul to keep Britain at the heart of this network. The pity is that he feels he has to go through the pantomime of renegotiating terms in order to argue for it. But that is what ultimately, one way or another, he will do. Will you?


Dear Will…

I welcomed the prime minister’s promise of an in-out referendum on British membership of the EU. The last time the electorate had an opportunity to vote on European membership was in 1975. But “Europe” has changed out of all recognition since then. A vote on EU membership is long overdue.

There are problems with Mr Cameron’s promised referendum. It depends on a Conservative victory in 2015 about which there have to be doubts. But Mr Miliband may yet match Mr Cameron’s bold move, hugely enhancing his democratic credentials. Equally challenging is the prime minister’s strategy of negotiating a “new settlement” with a reformed Europe that is “more flexible, more adaptable, more open”. Despite Angela Merkel’s emollient words, there is little appetite on the continent for Mr Cameron’s agenda. The focus of attention in the EU’s corridors of power is building the machinery to enable the eurozone to survive and prosper. Yet the choice Mr Cameron offered us was staying in the EU on the basis of the “new settlement”, for which he would campaign, or leaving. If there is no “new settlement”, it is unclear what his position would be.

The prime minister’s speech was interesting in other ways. He commented that changes to the EU “to help fix the currency” have profound implications for “all of us” – how very true. As the eurozone unifies, power and influence will inevitably leach from EU27 institutions to eurozone institutions, such as the European Central Bank. Short of joining the euro, which I don’t expect, Britain will struggle not to be marginalised. He also commented on Europe’s inexorable shrinking in terms of relative size and power. For “globalists” such as myself, this truth highlights the need for Britain, unfettered by membership of the EU’s Customs Union, to develop trade agreements with fast-growing countries in the global economy.

The EU’s global significance is fading and, coupled with the existential challenge of holding the eurozone together, EU membership is an increasingly unappealing option for Britain in the 21st century. Britain needs a new relationship with the EU based on trade and co-operation – not political union. As the prime minister acknowledged, “Britain could make her own way in the world, outside the EU” – why not indeed?

The virtues of the single market are greatly exaggerated. According to the commission, the costs may be double the benefits, acting as a drag on most British businesses and the economy more generally. And remember, most great trading countries trade with each other without feeling the need to belong to it.


Dear Ruth…

I find that a strangely abstract reply in which you deploy slogans rather than argument – and don’t address my points. Your self-definition as a “globalist” dodges every difficult question.

Any country is obviously part of the globe, but that does not excuse it from the realities of geography, how it lives with bordering countries, the need for a framework of agreed rules to govern trade and how to manage the economic and political interdependencies created by trade.

The more any country relies on others for key goods and services the more intertwined and interdependent with them it becomes. I am very wary about too much interdependency with authoritarian China – much less so with countries that share common values and institutions.

The point about the European single market, however incomplete, is that EU member states actively try to promote more interdependence through trade because they trust each other – and build accompanying political institutions to entrench and extend that trust. This is the so-called Brussels “bureaucracy” from which we need to be “unfettered”.

But why is this “bureaucracy” not holding back, say, German exports that are growing so much more rapidly than ours? Brussels “bureaucracy” has got nothing to do with British economic and trading weakness. That is home-made, rooted in profoundly dysfunctional economic institutions biased against investment, innovation and long-termism.

The EU single market is our saving grace, allowing us to attract more foreign direct investment and the headquarters of many more multinationals that we could otherwise expect. Lose them and we would be even worse off – or do you disagree? You seem prepared to put it all at risk for a chimera.


Dear Will…

Come on, fair’s fair. You had your opportunity to express your untrammelled views on Cameron’s speech and the least you can expect is that I have mine. And I’m amazed that you had difficulty with my use of the term “globalist”, which was innocently used to refer to the globalisation of international trade.

However, let’s get on with the nub of the argument – the point of the single market. I worked in the DTI in the 1980s when the single market was being negotiated. From the British perspective, the objective was to encourage trade by removing the non-tariff barriers to trade as the Customs Union had removed the tariff barriers (which had been high). Suffice to say, the British were somewhat taken aback when they were attacked in the 1990s by French prime minister Edith Cresson, among others, for “social dumping” because they had not signed up to the social chapter at Maastricht. Britain, in its naivety, has simply failed to appreciate the political, regulatory and social implications of the single market, believing it to be all about free trade.

No one disputes the EU countries are an important market for us, but we can trade with these countries without being in the single market. Switzerland’s notably internationalist economy is more closely integrated with the EU than ours is. And, as I mentioned in my previous post, the single market brings more costs in aggregate than benefits. Perhaps multi-nationals benefit, but the vast majority of the economy does not trade with the EU (85%) and so bears the costs without the benefits. I also doubt there would be a major haemorrhaging of investment if we withdrew from the single market.

There are more important reasons for investing in the UK than access to the single market. UK Trade and Investment, for example, places the “springboard to Europe” just sixth in its top eight reasons. And, yes, I admire Germany’s economy hugely.


Dear Ruth…

Trade has political and social ramifications. It was ever thus and British officials must have been very naive to have thought otherwise. What follows from a deep single European market are both the economic benefits of being able to produce at scale and to specialise, but also a willingness to welcome the opportunity to manage the political and social fallout by developing pan-EU institutions and rules. And once in place they need to be held to account, hence the European parliament.

The participants are happy to do this because they want to express that they share a continent, values and a destiny and to build institutions to express that. The logic goes further still – to climate change, tax avoidance and bank supervision. These are pan-European issues requiring pan-European responses.

Interestingly, David Cameron’s speech accepted that logic, but he wants a new settlement that would freeze Britain’s economic participation within some yet to be determined limits, but he still seemed to want a role in determining foreign and security policy. I don’t think you can cherry pick like that.

I think the EU project stands or falls as a whole. If anything, it needs to go further, which it will, especially in the eurozone. I would like Britain to play its part in shaping our continent – a prospect I find inspiring.

Am I right to understand you as a “globalist” who essentially wants out of an EU, whose costs in your view exceed the benefits? If so, although I profoundly disagree, it has more integrity than Cameron’s half-way house. But at least reality has made him seek a halfway house. What left me relieved was the realisation that your arguments don’t wash even with Cameron and that the Brits will either vote for the status quo or some Cameronian fudge. One way or another, we will be in rather than out.


Dear Will…

I am indeed a “globalist” who wishes to leave the EU. The economic costs of the EU are considerable, many and various. The net costs of single market membership are just the start. The UK’s budgetary contributions are significant and especially pertinent in times of austerity; the common fisheries policy has arguably wrecked the industry and the common agricultural policy is protectionist and costly. There are also the opportunity costs of membership of the Customs Union, well past its sell-by date, relating to our inability to negotiate our own trade deals with favoured countries while part of the bloc. Free of the EU, Britain would be better positioned to realign its trade patterns towards fast-growing economies, thus stimulating economic growth, than it is now.

Hugo Young in his book This Blessed Plot reminds us that “… the Treasury … remained officially against British entry. That is to say, its judgment of the economic consequences was negative, and it submitted a paper to that effect”.

So the economic disadvantages of EEC (EU) membership were identified from the very start. But it’s not just the economics that persuades me we should leave. I regard the EU as profoundly anti-democratic. The French and Dutch electorates both voted against the constitution and were ignored. Why should Europe’s political elite listen to the people?

The EU is an important bloc, but its influence is inexorably waning. And the issues you quote (climate change, tax avoidance and bank supervision), if I may say so, don’t require pan-European responses, they require global responses. We shall not decide the future of Britain’s relationship with the EU. This will be up to the British people if/when we have an in-out referendum. Suffice to say, I shall be voting for freedom.


Dear Ruth…

There is a danger of utopian myth in this, rather like the Labour left and shop steward movement in the 1960s. I don’t believe in earthly paradises or that there are EU shackles from which we have to break free. Instead, whether conserving fish stocks or reducing carbon emissions, we have to act together.

That is hard enough to achieve in the EU – impossible globally. “Globalist” freedom is the one-way, Tea Party freedom of the already strong to exploit the rest of us free from public obligation or responsibility to others. But for some on the right this is powerful karma.

I can’t see you compromising ever – David Cameron and the Tories are in more trouble than they know.


Dear Will…

As you may know, I was civil service trained and, as such, told to stick to the issues, however “strangely abstract” (in your words) they may be, and never indulge in wild and unsubstantiated personal comment, however enticing that may be. Such has been the stuff of dark propagandists throughout the centuries.

Let me sum up the debate. Come the referendum, I shall vote for a more prosperous and more democratic Britain free of the shackles of the EU, which I believe to be anti-democratic, dysfunctional and declining in influence. I shall vote to leave the EU. You, presumably and if I understand you correctly, would vote to stay in.

Ruth © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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