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Monday, November 04, 2013

CBI concludes the UK should stay in a reformed EU - but leaves some important questions open


What would actually happen if the UK left the EU?
The Confederation of British Industry (CBI) has today published a report on Britain's position in the EU, which unsurprisingly concludes that Britain should remain in the EU. It is a decent, thought-provoking read. The CBI, of course, has historically tended to back further integration (see its support for adopting the euro). However, beyond the headlines, the organisation is actually surprisingly critical of the status quo and recognises things need to change:
"The EU has moved too far from ‘adding value’ to ‘adding functions’, resulting in ‘mission creep’ in several areas. The recent Dutch declaration that 'the time of an ‘ever closer union’ in every possible policy area is behind us' offers a positive indication that other member states are also looking at how to refocus the EU.
British business is convinced that, by staying in a reformed EU, the UK can get the best of both worlds – access to markets in Europe and beyond that build on our innate strengths."
Again, this goes to show that it's wrong to try to characterise the Europe debate - particularly as it relates to business opinion - as a polarised discussion between "pro-Europeans" and "eurosceptics" (the BBC has slipped into that again in its coverage today). What's clear is that virtually no one wants to be seen as backing the status quo.

Within the very broad "reform camp", there is of course a wide range of opinions. We agree that reform is possible and if attainable the UK should stay in a reformed EU rather than leave, as we set out last year in our report 'Trading Places' (which the CBI report draws from). The CBI report also offers some decent ideas for reform, including a sunset clause for EU laws in areas such as employment, a fresh single market drive, including in services, (which we definitely agree with), and crucially, that the "next" EU treaty includes institutionalised safeguards against the EU becoming an effective extension of the eurozone.

We have three observations, however:

First, the CBI "strongly" supports EU reform. While it plays down the risk of the "worst-case" scenarios in areas such as Eurozone caucusing, over-regulation and internal / external protectionism, it begs one question: what will the CBI's position be in a scenario where such reforms are absent and the worst-case scenarios materialise?

Second, how confident is the CBI in its estimates of the benefits of EU membership - £3,000 per household. The study notes,
"most studies cited find that the net benefit of EU membership to the UK is around 2–3% of GDP"
From which the CBI infers:
"It is not unreasonable to infer from a literature review that the net benefit arising from EU membership is somewhere in the region of 4–5% of UK GDP"
We'll look at this figure in a separate blog post, as it's important.

Finally, on the trade-offs involved in leaving, the CBI argues:
"Were the UK to leave the EU, it is not likely to adopt an off-the-peg solution; rather, it would negotiate a bespoke relationship with the EU"
We agree. There are models for 'non-membership of the EU': the Swiss, Norwegian and Turkish, but, as we set out last year, none of them would be suitable for the UK. The CBI also recognises that it would be an individual 'bespoke' UK negotiation.

We wouldn't be nearly as pessimistic as the CBI regarding the prospects of striking a decent deal outside the EU. However, absent a damascene conversion in key parts of Europe which will have to approve a new deal (over and above basic WTO-rules), there are likely to be drawbacks. As the CBI argues:
"market access – in particular the type of access that passport regimes provide – is unlikely to come without obligations on the regulatory side, including the likely adoption of EU rules without any ability to influence these."
So it is not that the UK could not leave the EU, and the downside can easily be overestimated, it is that a continuity deal the UK may be able to achieve is not likely to be as good as staying in a reformed EU.

So, here is the challenge we should all row behind: reform the EU as fast as possible, and in any event before the UK holds a referendum.

7 comments:

jon livesey said...

Yes, and no. Yes, the best outcome is for the UK to remain in a reformed EU. However, we have to negotiate those reforms and these negotiations are going to be with embittered partners who will concede as little as possible. It will be like negotiating a divorce where the slighted spouse will seek to discomfort the other even against their own best interests.

The only lever to get concession will be a credible threat to leave.

So, ironically, the best chance of staying in a reformed EU will be a credible threat to leave.

Anonymous said...

The chances of reforming the eussr are nil, anyone who thinks otherwise is completely deluded, the power grab is continuing apace.

The CBI had 15 minutes to question the Prime Minister at their conference, the fawning was even worse than the average tory back bencher at pm's question time, not one valid question was asked.

The net benefits do not help the vast majority, infact given that the nation is a net contributer how can we benefit, it doesn't add up. Also all the immigrants from the eussr tht come here add to the number of unemployed because they take the jobs leaving nationals without them.

The CBI of course is not even the majority of employers in the nation and their pro tory pro eussr rantings can be discounted.

IDRIS FRANCIS said...

Professor Tim Congdon's analysis of the costs of EU memberships provides detailed research and data indicating £150bn pa, 10% of GDP. Of course the CBI didn't mention that report!

About 12 years ago the then economics head of the CBi, when I asked her why she had given no numbers whatever in her speech advocating joining the euro, replied that "There are so many factors involving such wide margins of uncertainty that it is impossible to know what the consequences would be." When I asked her to confirm that she and the CBI wanted to join despite not knowing the consequences, she replied "Yes". What else do you need to know about the CBI - apart from their having been equally wrong about every significant issue at least since their promise of a "bare-knucked fight" against Thatcher's and Howe's policies in 1980. Wrong on the ERM, wrong on leaving the ERM, wrong on the euro and wrong -in spades - on EU membership.

Indeed, the last DG said to me, apparently seriously - but certainly hopefully - about 4 years ago, after a fringe debate, that "The coming recession may force us into the euro whether we want it or not". Such intellectual rigour!

Never forget either that the Big Boys of the CBI see their ability to lobby for and against regulations, and the costs of submitting to them, as a positive advantage to them, at the expense of smaller companies and potential competitors who have neither the lobbying clout not the staff to deal with the ever-growing Rule Book. And if there's one way to destroy any economy its to put obstacles in the way of small, innovative, nimble-footed companies to preserve the vested interests of the elite.




The only DG to have displayed any sort of sense on these issues was Lord (Digby) Jones, who made an emphatic statement in his speech at the recent UKIP Conference, that "there will be a free trade agreement within 24 hours of our leaving the EU"

Of course there will be! Does anyone imagine the EU, already on the skids, is going to start a tariff war with us, when they sell us far more than we sell them? In other words, the free trade deal the CBI wants to negotiate about, in in doing so sacrifice who knows what else, is available without any such sacrifices.

The other aspects the EU completely ignores, as it cobbles up more numbers to support staying in the EU include the lack of democracy, the rights of all peoples under the UN Charter to self-determination, that the Continent is in a progressive state of economic collapse leading to public dissent, with worse to come.

Having studied these issues over tens of thousands of hours over 20 years - since Maastricht, I am totally satisfied that we would be far better off in economic terms running our own country than having it done for us by the schemers and deadbeats who dreamed up the euro and much else - "Liars, cheat, scum" as Bernard "The Rotten Heart of Europe" called them at a debate in Devizes in the mid 1990.

And even if we were not, that would still be a price worth paying to be free, to elect and remove those who govern us, and to put an end to the EU's long term and continuing determination to eliminate this and other countries from the list of nations of the world.

And anyone who thinks that last statement is an exaggeration might wish to consider these words emblazoned on the wall of the European Parliament's visitor centre.

"National sovereignty is the root cause of the most crying evils of our time and of the steady march of humanity back to tragic disaster and barbarism...the only final remedy for this supreme and catastrophic evil of our time is a federal union of the peoples..."

At least they're no longer pretending that a superstate is not on the cards. What, if anything, does the CBI have to say about that? Or are their leaders, being amongst the elite, content with that, regardless of what less exalted people think of the idea?

Ashley Mote said...

As usual, Idris Francis is right. Effective lobbying of the EU for supposedly higher standards is routinely used by multinationals and other large companies to the direct disadvantage of their competitors. For them, the EU is a vast and officially sanctioned lobbying machine. CBI support for the EU has little to do with the national good - it is essentially blatant self-interest with the direct objective of disadvantaging smaller enterprises and stifling genuine innovation.

The CBI also chooses to ignore the permanent, massive and apparently unstoppable fraud and corruption endemic throughout the EU and which I helped to expose during my five years in the European Parliament. Despite the EU's recent efforts to suppress them, my published memoirs, A Mote in Brussels' Eye, are still available from Amazon, and spell out the appalling waste of public money in some detail.

If the CBI really wanted to improve the EU it might start by using its collective power to help fight internal corruption.

Ashley Mote

clinihyp said...

The CBI appears to want us to believe the spin posited by Mr. Cameron at the G8 meeting, IE>>>

" Britain has a "place at the top table" as a result of its seniority at the UN, the Commonwealth, Nato, the WTO, the G8, the G20, adding "and yes – the EU". 

Mr. Cameron, who to give him his due is a master of spin, appeared to be seeking to give the impression, or perhaps, auto suggestion, that if we were to leave the EU we would lose our place at. the WTO. such a suggestion is poppycock! The truth is that our place at the WTO is taken by the EU, however if we left the EU, we would in fact then be able to take our rightful place. In the same way we would also take our place at all the other organisations Mr. Cameron seemed to be attempting to imply was dependent on our continuing membership of the EU.

Our membership of the Commonwealth, the G8, the G20 and NATO would be completely unaffected by leaving the EU. In fact our membership of the UN Security Council is being threatened by our continued membership of the EU which wishes to Europeanise the post. As to our membership of the WTO, currently, we are represented there by Karel de Gucht the Belgian EU Commissioner. Britain has no independent representation and cannot have it whilst we remain in the EU.

I could add the statistics which proves that we would in fact be better off out of the EU, but I've gone on long enough. I would however, with due great respect and courtesy, remind the leaders of the CBI and our PM of the old adage which begins with the following line.

"You can fool some of the people some of the time"

Anonymous said...

Let me get this straight - the CBI wants the UK to stay as a part of an entity that has not audited its own accounts in over 20 years?! Really?

As for reform, if after so long the EU cannot even get this right then reforming anything else must surely be impossible.

Where is our Statesman to ask the right questions and get us out of this unholy mess.

SC

Anonymous said...

The EU has bought the loyalty of the CBI by allowing them only to pay TAX in the EU nation where they are headquartered while trading across the entire EU. This arrangement has helped them avoid Billions upon Billions in TAX & is nothing more than a Bribe from the EU so they support Federalisation.