The United Kingdom relies on its relationship with Europe, far more than Europe relies on the UK.
The election of a Conservative majority to the House of Commons on May 7th has done nothing but increase questions over Britain’s relationship with the European Union. Over the coming months (or even years), Commons debates, Prime Ministers Questions and news broadcasts will be dominated by one repetitive question: Should the UK remain part of the EU?
The camp of Conservative MPs, joined by Douglas Carswell, that will fight for separation are relying on one eventuality: that upon leaving the union, the EU will allow Britain access to the single market. Supporters of the ‘no’ camp highlight the Norwegian model, where as a member of the European Economic Area Norway has tariff free access to the single market. An alternative is the Swiss model, where negotiations are held on a sector-by-sector basis. Critics however highlight an amicable divorce to be a pipe dream. Yes, the EU has a lot to gain from trading with the UK, however it appears extremely unlikely that after leaving the union its neighbours will be quite so pragmatic. John Major recently criticised this pick and mix approach to Europe, stating that “it is a fallacy of the Eurosceptics to say we would just have automatic access to the single market”.
The UK Economy
So why is the EU so important to the UK? Membership allows access to this £11 trillion single market, which is greater than the USA and Japanese economies combined. This market consists of 21 billion businesses, giving UK consumers access not only to tariff free goods, but also greater opportunities to work. In 2007, an EU Commission study outlined that the creation of the single market resulted in a 2.2% rise in GDP alongside an extra 2.75 million jobs – benefitting the UK economy by £25 billion.
The Department for Business, Innovation and Skills has also commented on the importance of the EU. 51% of Britain’s exports go to the EU (over £200 billion) compared to 13% to the United States. It is estimated that this figure is double what it would have been without the UK’s integration into the single market. However, possibly the most important figure is the 3.5 million jobs that are either directly or indirectly linked with the European Union. Many of these jobs originate from Foreign Direct Investment (FDI). Behind the United States, China, France and Hong Kong, the UK is the fifth largest recipient of FDI in the world. In Sunderland, Nissan produces more cars than the entire Italian automotive industry. Without access to the single market, there are fears that firms would relocate elsewhere in Europe in order to avoid the high external tariff. Therefore, it is essential for the UK to remain part of the union to preserve its economic stability and export base.
Britain’s position in the Union does not only benefit large firms such as Nissan, but also helps small businesses’ grow. The rules on freedom of movement and labour mean that firms in the UK have access to a larger labour force, a more diverse range of skills and workers willing to work for less. Despite the advantages to firms, this is one of the most contentious issues over Britain’s membership of the union. Certain members of the Conservative party feel that migrant labour is detrimental to the UK, taking job opportunities away from British workers. In his on-going quest for reform, David Cameron has stressed the importance of being able to limit European workers from claiming benefits, thus reducing the burden on the UK Government. Despite objections, small businesses’ really do benefit from the EU, and not only from the freedom of movement. European wide trademarks and patents result in minimal bureaucracy and uniform regulation. Competition law also seeks to protect UK businesses’, restraining monopoly power with a wider reach than the Competition and Markets Authority, whose jurisdiction remains in the UK only. The EU is designed to increase economic activity, both protecting and enhancing the scale of British business.
The UK’s Global Role and Influence
The majority of arguments in this debate centre around the economy. However, the UK’s membership of the EU has far broader implications on its standing in the globalised world. Although it seemed contradictory, Sir Alec Douglas-Home as foreign secretary, suggested that the “only way to preserve our independence for the future is to join a larger group”. Despite EU membership, Britain’s influence has clearly decreased since 1945. One traditional argument that will be voiced in these debates on the EU is that international influence is a minor concern; the citizens of the UK must come first. Yet global issues affect Britain. It is the second largest manager of investment funds, holds the second largest share of world service exports while a quarter of its GDP relies on exporting goods. The UK must maintain, or even increase, its international presence and influence on discussions about trade, the global economy, energy and security. The European Union represents a useful and effective tool in this regard. The common position adopted by European nations, the Commission and Council increases the relevance of European (and British) demands. The leveraging effect this has on Britain’s influence is vital.
The Common Foreign and Security Policy (CFSP) is a clear policy that emphasises Europe’s common position. The ability of member states to come together, assess a security problem and find a solution supported by the states means the voice of the UK is backed by the union as a whole. Examples of the extended influence on international affairs include the two-state solution to the Israel-Palestine conflict and the strong European position towards Russia in light of the Ukraine crisis. By giving the UK a basis to find a common stance and approach, they have the opportunity to have a greater impact of global decisions.
Although these facts are beneficial to the UK they are not a defining argument in the union debate. The UK’s relationship with the United States however is of paramount importance. Membership of the EU strengthens this bilateral relationship. For the United States, the UK is the largest point of investment into the EU. In simple terms, the UK provides the gateway for US businesses into the single market. This is obviously beneficial for the UK economy, with increased investment, goods, consumption and GDP. At the G7 summit, Barack Obama recently stated that “we [the United States] are very much looking forward to the UK staying part of the European Union because we think its influence is positive not just for Europe, but also for the world”. Obama touched on the importance of British influence, although for him, a more pressing concern will be US business interests. If the UK opts out of the EU, the United States will have to choose a new option, most likely Germany. The two countries have extremely close ties, with 55 million Americans holding German heritage. From an economic and influence perspective the sharing of some sovereignty over policy making appears a small price for economic benefit and an improved global position.
About the Author
Caspar Everett is an International Relations and Modern History student at the University of St Andrews. His interests include the role of military intervention, international law and domestic policy in the UK and United States. Caspar has a keen interest in communications and campaigning, writing speeches in the 2015 General Election.
Cover image ‘UK EU Flag’ by GPPW