Why not take over UK waters, before having a referendum on in or out?

A galaxy of Tory grandees, led by Lord Lawson, Margaret Thatcher’s formidable Chancellor of the Exchequer, have come out in favour of the UK leaving the EU.”Its time to quit the EU”,The Times, May 7, 2013 http://www.thetimes.co.uk/tto/news/politics/article3757641.ece

“The heart of the matter, wrote Lawson, is that the relevant economic context nowadays is not Europe but globalisation,” he said. “I strongly suspect that there would be a positive economic advantage to the UK in leaving the single market.” He added that the outcome of Prime Minister Cameron’s strategy to negotiate a new relationship with the EU would yield “inconsequential” results.

The statement came after the UK  Independence Party recorded 25% of votes in the May 2013 local elections, taking votes from all parties, but most from the Tories. UKIP beat all established political parties in coming second to the eventual winners across the length and breadth of England.

Lord Lamont, also a former Chancellor of the Excuequer, stated in The Times (2013,http://www.thetimes.co.uk/tto/news/politics/article3760097.ece) that “I basically agree with Nigel Lawson with one reservation.” “I think the economic advantages of the EU are vastly overstated. I think we could manage on our own as Switzerland does. But I think it is worth one final attempt to renegotiate our relationship.”

Others have followed suit, with Michael Portillo, a former Tory Defense Minister, arguing that David Cameron’s proposal to renegotiate the terms of UK membership was “an insincere ploy”. Cameron, he alleged, wanted to stay in the EU, as had Harold Wilson in 1975. (http://www.telegraph.co.uk/news/worldnews/europe/eu/10045760/Michael-Portillo-Camerons-EU-referendum-is-an-insincere-ploy.html?fb).

Lord Forsyth, the former Secretary of State for Scotland,  has written in the Sunday Telegraph that “the idea that David Cameron could get agreement from all other EU members to a special deal for Britain was always wildly optimistic.” He added that the Prime Minister was not consistent in insisting that the principle of Scotland’s continuing membership of the UK must be settled first, “yet on Europe he says just the opposite: that we must endure a long and costly period of uncertainty, and a pre-referendum negotiation.”http://www.telegraph.co.uk/news/newstopics/eureferendum/10050585/Europe-stifles-us-and-Nigel-Lawson-is-right-its-time-to-leave.html?fb

Boris Johnson, the Mayor of London, said that he remained “narrowly in favour” of staying inside the grouping of 27 states and supported David Cameron’s policy of negotiating a new relationship for Britain in the EU.  Leaving the EU, he stated, would be a shot in the arm for UK democracy.”If we are honest, I think, democratically, it would be a shot in the arm because people would suddenly feel, yes, we are running our own destiny again, our politics is entirely independent, British electors can choose the people who are taking decisions that affect their lives. (http://www.telegraph.co.uk/news/politics/10046990/Boris-Johnson-leaving-Europe-a-shot-in-the-arm-for-democracy.html?fb)

The most pro-EU position by a Tory grandee has been taken, unsurprisingly, by Lord Heseltine, writing in the FT of May 11/12, 2013, Britain should be leading in Europe-not leaving it. The alternative to EU membership,he argues, is not independence but isolation and irrelevance. Outside the EU, the UK would just have to wait for emails from Brussels stating what standards UK manufacturers had to apply in an EU, whose rules would once again be stitched together by France and Italy, as was the case in the 1950s and the 1960s.(http://www.ft.com/cms/s/0/88ebd984-b89f-11e2-869f-00144feabdc0.html)

The Prime Minister’ response has tilted the Heseltine way, for staying in the EU, but going further. The UK, he says, has an opportunity not just to negotiate a new relationship with Europe, but to reform it. The  “pessimists”, he said, like Michael Portillo and Lord Lawson, assumed that “you have to, in Europe, simply sign up to every single thing that anyone in the EU suggests.””I think they are completely wrong,” Mr Cameron said. A second group of pessimists, he argued,  “say there is no prospect of reforming the EU, you simply have to leave. I think they are wrong too.” He added, “I think it is possible to change and reform this organisation and change and reform Britain’s relationship with it.”

So who is right in this Tory battle? Those who say out, and the sooner the better;those, like Lamont, who say stay in, and try re-renegotiation; those like Heseltine, who say stay in to lead; or those, like Cameron, who say the UK has a once in a lifetime chance to reform the EU.

There is a chance to lead Europe, but in alliance with Germany and the Nordic countries. The main reason for the five years of Euro paralysis resides in the fact, commented elsewhere in this blog, that the Franco-German relationship is seriously impaired. It is not just a matter of a lack of personal chemistry between Chancellor Merkel and President Hollande; it is also that the deeper differences that have always existed between France and Germany on monetary and fiscal union have now come to the fore.

This leaves open the opportunity to forge a new alliance between London and Berlin for a liberal market Europe, open on the world, and highly competitive. It is no doubt true that Paris will try every trick in the book to preserve its privileged relationship with Berlin, at the expense of the UK if need be. But it is also true that Paris has only itself to blame in failing to have implemented the deep reforms needed to have made the Euro project a success.

There can be little doubt that Cameron’s position is the most statesmanlike. The EU project, developed above all by horse trades in the past between Paris and Berlin, is in dire straits. The denizens of “ever closer union” in “Brussels”-the UK’s shorthand for the opaque EU policy process and institutions- have floated their EU up a creek and thrown away the paddles. They are stranded, and approaching the Niagara Falls.

After the end of the cold war, supporters of “ever closer union” thought now was the moment for their utopia to be implemented. Monetary union would be a major and irreversible step to political union. “Europe” would lead the world on climate change. “Europe” would back human rights everywhere around the world, and tie them to trade and investment deals.

But their determination to press ahead to “ever closer union” has met its moments of truth. At the climate change conference in Copenhagen in 2008, the Brazilians, the Chinese, the Russians, and the U.S. ignored the EU Commission completely. Monetary union has experienced the mother of all crashes. The only way for the EU to export human rights is if it has some military clout: but the EU is practically defenceless.

What is worse, it is evident that there is not going to be a big leap forward to fiscal and political union into  a European superstate. Even the banking union agreement of the last week is a partial accord, which will lead to greater co-operation among the states, with reserved areas of their own. Rather the reality is that the old Europe has re-asserted itself. Europe is a Europe of the states, and Germany is in charge. This would seem to be a great spot for Germany to occupy. In the longer run, there is a reasonable prospect that London’s crown as Europe’s financial centre could move to Berlin, just as economic power has ebbed from France.

But it is also very bad spot for Germany to occupy. It is blamed for whatever happens. Meanwhile unemployment can only rise in France and Club Med countries. Germany and the Nordic countries insist on no transfers to southern countries.

What does this mean for the UK? The evidence is incontrovertible that a Europe of the states, cooperating together wherever necessary, is now the only viable model. A one size fits all currency is not suited to a diverse Euroland, and the countries of Europe will not abandon their sovereignty. In other words, the UK was right all along. Mrs Thatcher in particular.

There are many people in Germany and the northern Europeans who recognize that things cannot go on as they have. They are prospective UK allies to reform the EU root and branch.

We can’t reform the EU from without. We can only reform it from within. Which doesn’t mean that we accept anything from Brussels. For instance, the UK, I consider, should announce that the Common Fisheries Policy is a massive failure, and just take over control of UK waters. Period. That would send a clear signal that the UK is no pushover.

Do I hear someone objecting that the Commission would take the case to the European Court of Justice? So what? The EU, is an alliance between states-these are the words of the German Constitutional Court-, and its institutions are therefore a second order arrangement to serve the interests of the sovereign states, definitely with no legitimate authority to override them. The ECJ might fine the UK. But it would look ridiculous. It has no enforcement powers.

The UK should stay in. We have a once in a lifetime opportunity to shape Europe in a way suitable to the UK, and that happens to be the only way suited to Europe, as it is, not as Brussels imagines it.

If “Brussels” insists on its own course the UK can withdraw, and take the challenge. It will do more than revitalize democracy. It may well revitalize the UK. It would assuredly change the EU. All the more reason to negotiate fundamental change in the EU now.

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About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) (www.chinauncovered.net) His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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