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Should The Uk Stay In The Eu Essay

The business leader – John Cridland
'The UK is best served inside a reformed EU'

The political thermostat went up a notch as the debate on the UK's place in Europe heated up again last week, inside and outside parliament. The chancellor set out a compelling case for reform, while nearly 100 Conservative MPs called for national powers of veto over EU law. A large majority of CBI businesses of all sizes are clear: the UK is best served inside a reformed EU, rather than outside with no influence.

It's time to set out the importance of the single European market to our economic future based on hard facts. The single market is a great British success story and has been an engine for jobs and growth in every corner of the country and across the continent. Take our world-beating pharmaceuticals and chemicals industry, which supports 322,000 jobs and has exports worth £53bn, of which 56% head to the EU. Having common legislation to authorise new medicines across 28 countries, strong protection of intellectual property and access to the single market has been the base camp for global business success. Access to the single market has also been a magnet for investment from around the world. Being part of the EU has helped to make the UK one of the leading locations for investment, in part because of our direct access to a market of more than 500 million people and an EU economy with a GDP of $16 trillion (£9.75 trillion).

While it's true that the UK must boost trade with fast-growing markets in the rest of the world, we do not face an either/or choice between this and building on our existing strengths.

It is the EU's clout in signing trade deals worldwide, worth $24tn already, which is opening up new markets on strong terms for our companies. We would struggle to replicate this alone.

No other model – Norway, Switzerland or Turkey – offers the same benefits and influence. Indeed, some form of associate membership would be likely to leave the UK following market rules set by others.

But the EU cannot afford to tread water. It must stay competitive in a global economy where emerging high-growth markets are becoming ever-more dominant – Brazil, Mexico, Indonesia and others are all expected to have larger economies than any single EU member state by the middle of the century.

The EU must reform and renew to be more outward-looking and competitive, tackling the regulation handicap on smaller firms. It must focus on completing the single market in digital and services, pushing for more trade agreements – the proposed EU-US trade deal could potentially bring together two markets that cover almost half the world's GDP and 30% of international trade.

And, while the EU undoubtedly has to take steps to support the eurozone, it must not be to the detriment of the single market for those outside the euro. The EU of tomorrow must continue to work for all its members. Another area of reform is to strike the right balance between national parliaments and EU institutions. Securing progress in Europe is a marathon not a sprint, and the UK will need to work hard on building alliances. But it is do-able. We do have influence across Europe and there is a desire in many countries for reform.

So my message is: we can deliver the reforms we need across Europe, win the arguments about the EU at home and secure the UK's global future.

John Cridland is director general of the Confederation of British Industry (CBI)

The French politician – Rachida Dati
'David Cameron is right to have offered a referendum'

If Britain left the EU, it would undoubtedly be a defeat, both for Britain and Europe. It would be a step backwards, both for evident economic and political reasons. I urge the British media and politicians of all parties not to caricature the issues surrounding the referendum. Too much is at stake here.

What is needed is a debate in each member state and in the EU on the direction Europe should be taking. The people of Britain have clearly expressed, for some time now, the will to be consulted directly on this issue. The referendum addresses two simple but crucial questions: is the EU providing the results we are to expect from it? And are the people of Britain satisfied with the EU today? Who can honestly answer yes to both questions? By offering the British people a referendum, David Cameron has done the job and done it with courage.

Of course, the "Brexit", as it has come to be known, must be a serious possibility. It must be a possibility, so that Europe agrees to the useful reforms that Cameron is putting on the negotiating table. No one in Europe wants to see Britain leave the EU. But no one has any interest either in the EU continuing as it is, not delivering what it had promised, increasingly treading on national sovereignties.

Both in France and last week in London at the Open Europe/Fresh Start project conference, I backed many of Cameron's ideas to move towards a reformed EU: on deregulation, on bringing back powers from Brussels to state level, on EU immigration and so on. We must not shy away from the change that people across Europe are aspiring to and that has become necessary to increase competitiveness and employment.

A recent poll in the UK showed that most Britons want to stay in a reformed EU. The British government is sending out a clear democracy lesson to the rest of Europe today: "Do not be afraid to hear what the people have to say." It is the best basis on which to achieve a reformed EU.

Rachida Dati is a French politician and a member of the European parliament, representing Île-de-France

The Ukip activist – Rob Comley
'Leaving the EU will make Britain a global nation'

Growing up, one of the most important things in your life is the sense of freedom. You would understand my shock, then, when I realised that I did not have as much freedom as I first thought – that it was becoming more and more limited because of a group of unelected political figures based in another country.

The more I researched the European Union, the more I realised that it was starting to have an influence over everything in my life – from the food I ate because of the common agricultural policy, to the products I used on my hair and even how my toilet flushed. That was the starting point of my Euroscepticism. Talking to other young people, I realised some had also spotted what was going on; that the EU had become far more than just a trade bloc and that we could survive and indeed thrive outside it.

Any country that decided to leave the EU would regain the power to decide which young people to give visas to, exactly like the US and Australia. They would be able to pick the best candidates, those who want to work hard, pay their way and improve the economy. It would also give them the opportunity to take in the amount of migrants that the country could handle. The UK, as well as others countries around Europe such as Spain, with a 50% youth unemployment figure, cannot handle uncontrolled mass immigration.

It isn't sensible when we have one million youngsters in this country unemployed and a disturbing recent poll for the Prince's Trust showed that more than 750,000 young people in Britain feel like they have nothing to live for. We must focus on getting them trained and into the work force.

In a couple of years' time, I will be just another student who comes out of university looking for my first full-time job, but having to compete not only with the huge youth unemployment rate, but potentially everyone else living in the EU dependent on how their economies are faring as well.

The argument for leaving the EU is not one of negativity and pessimism, but hope and optimism. Ukip's world view focuses on how, once we leave the EU, Britain can once more become a global nation rather than simply one stuck in a backwards-looking European Union.

Rob Comley is chairman of Young Independence, the youth wing of Ukip

The Tory MP – Mark Reckless
'If we left, we would get back our democracy'

We can govern ourselves better than 27 other countries can do it for us. That is the positive and optimistic case for Britain leaving the EU and becoming an independent country, trading with Europe, but governing ourselves.

Of course, when exporting to the EU we would need to obey the rules of the single market, just as exporters to the US or Japan obey their rules, although many trade rules are now set globally. However, we would no longer need to apply the vast regulatory superstructure of the EU to the majority of our exports which go outside the EU, or to the near three-quarters of our economy that is domestic trade.

In return for giving up one vote among 28 countries on EU rules, we would again have a national say on global rules, as Norway, Switzerland and South Korea do, enjoy free trade with the EU as they do and govern our own domestic economy. Instead of having to obey rules set by the EU, we could set our own policies democratically. In some areas we might choose to allow greater flexibility, while in others, say in protecting animal welfare, we might regulate more strictly.

The EU's treaties require it to negotiate a free trade deal with any departing member state. It would certainly want to do so with us, given that it sells much more to the UK than to any other country and sells much more to us than it buys from us. Germany will still want to sell Mercedes and BMWs to Britain, so it is simply not credible that it would apply trade barriers to us. We would also be able to negotiate our own free-trade deals with other countries.

Why should Japanese or other car manufacturers have to pay EU high tariffs on parts they import from elsewhere to make cars here? Why should British women pay a large tariff to the EU every time they buy a bra, just to protect inefficient Italian or Portuguese manufacturers from Chinese competition? We are forced to buy food from EU countries, often well above the world market price, rather than buy more cheaply from Australia or the Americas. Outside the EU we could cut such costs for families by ending agricultural tariffs, while gaining access to overseas markets for UK business services in return. We would break free of EU protectionism.

We would also reclaim the £15bn-£20bn we are paying the EU each year. Currently, we get back only about half what we pay in, and much is spent on things we would not choose ourselves, such as subsidising wealthy landowners or promoting the EU. Outside the EU, we could both cut taxes and spend much more on our social priorities. Most important, we would get back our democracy. Instead of having little say in decisions, we would decide much more for ourselves, and voting might once again make a difference.

Mark Reckless is Tory MP for Rochester and Strood

The pollster – Deborah Mattinson
'We are more Eurosceptic than our neighbours'

In BritainThinks workshops last November, we asked swing voters to list the main issues that affected their families and their area. Dozens of topics were discussed with passion: the cost of living, the NHS, crime … Europe was not mentioned once.

As an "important issue facing Britain" (Ipsos Mori Issues Index, December) the EU does not even hit double figures, trailing at 7% behind education, crime, NHS, poverty/inequality, pensions, immigration and the economy – the last two scoring 33% and 47% respectively, with immigration on the up as people's concern about the economy dies down.

But this apparent apathy is deceptive. We Brits are much more Eurosceptic than our European neighbours – just 28% of us consider membership a "good thing", contrasting with an EU-wide average of 50%. Our lack of enthusiasm is longstanding. Historically it sat alongside a widespread belief that we were better in than out. Back then, Euroscepticism was driven by a contempt for the bureaucracy that determined our bananas were not straight enough or our ice-cream not creamy enough. Europe was pointless, even ridiculous but not dangerous. Now our Euroscepticism is fuelled by the perceived link between Europe and immigration, explaining why, in recent years, our apathy has turned to antipathy.

If things stay as they are, recent polling by YouGov says we would vote to leave (in 32%, out 45%), although this changes to an even split with "modest renegotiation" (in 39%, out 38%) and, with a "major renegotiation of powers" a clear majority would stay (in 52%, out 23%). When asked what changes would encourage a "yes" vote, renegotiating immigration limits tops the list at 61% and reducing benefits for immigrants comes second at 46% while reducing business regulation matters less at 37% Specifically, 76% would support a two-year ban on immigrants receiving benefits and six out of 10 would like to see a five-year ban.

Deborah Mattinson is founder director of research and strategy agency BritainThinks, and was formerly pollster to Gordon Brown

The Liberal Democrat – Shirley Williams
'EU treatment of human rights is second to none'

We are coming up to a major crossroads in the country's future and the heart of it is whether we are going to ditch an expansive vision and opt for a shrinking one. Do we want to become a medium-sized country with no great influence or responsbility in the world, abandoning our international role, or do we want to be part of a much bigger entity with far-reaching international influence in which we would be a significant decision-maker?

The shrinking of the vision will also shrink our ideas, our attitudes and the scale of our innovations. It would be the cautious move of a relatively elderly society deciding to abdicate from any major global role. The once-upon-a-time alternative to the EU, our relationship with America, is no longer the option that it might have been. Our most powerful ally is increasingly multicultural, rather than Anglo Saxon, and its major strategic interests lie predominantly in Asia.

America's interest in us is as a leading member of the EU and that is the one option that gives us global influence. On the economic side, it is clear some international investors will think very hard about staying here should we leave the EU. That is because they see us as a bridge nation – the nation that bridges the Atlantic and acts as a launching pad into the EU single market. If we are not involved in the EU, the key investors in Japan, the US and, increasingly, China will not see us as the best place in which to base their industries.

Given the economy is not recovering quickly in some sectors, that is surely a very serious risk to jobs. Meanwhile, the City, whether you like it or not, is seen throughout the EU as the key European financial centre – but depends on us being in Europe.

But the global role we would jettison in leaving the EU isn't just economic, it is also cultural. It is through being part of the EU that we have broken into film, theatre and music. Britain is now seen as a leading artistic nation which was simply not the case before. The UK has also been a leading player in the world of international science and a lot of our scientific innovations emerge from multinational teams. And we arguably have the most famous universities in Europe, with a huge number of overseas students.

It is brilliant position which we would, not only put at risk, but go quite a long way to destroying, if we left the EU.

Finally, let us not forget human rights. Historically, we have been the premier country in this area, but we have to admit that we are not doing as well as we were. Our attitude to asylum seekers and immigrants has hardened. This is not the time to pull out of the EU – the world's strongest international champion of human rights where, for example, the equal treatment of men and women is second to none in the world. Why, indeed, would we want to give any of this up?

Baroness Williams of Crosby, a former leader of the Lib Dems in the Lords, is a professor at the John F Kennedy School of Government at Harvard University

How would a British exit from the EU affect the UK’s economy? Swati Dhingra, Gianmarco Ottaviano and Thomas Sampson outline the economic consequences of a Brexit, writing that reduced integration with EU countries is likely to cost the UK economy far more than is gained from lower contributions to the EU budget.

The direction of UK trade policy with its biggest trade partner – the EU – will be decided in the upcoming general election. The Conservatives are committed to holding an ‘in-or-out’ referendum on membership by 2017 while Labour and the Liberal Democrats have opposed this, but how would Britain’s exit from the EU affect the UK economy and the income of UK citizens?

Brexit would harm the UK economy primarily by reducing trade with EU countries. Leaving the EU would also prevent the UK from benefiting from future free trade agreements negotiated by the EU, such as the Transatlantic Trade and Investment Partnership currently being negotiated with the United States. Finally, Brexit would reduce the attractiveness of the UK for foreign companies.

Jumping off the trade train

The best understood channel through which Brexit would affect the UK economy is via changes in UK trade. EU membership has reduced trade barriers between the UK and EU countries, leading to increased trade. When the UK joined the European Economic Community in 1973, just over 30 per cent of UK exports went to the EU. By 2008, over 50 per cent of UK exports went to EU countries (see Figure 1).

Figure 1: Share of UK trade with EU countries

Note: Data covers trade with Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and Sweden.

Using a quantitative model of the global economy, we analyse two scenarios for how leaving the EU would affect trade costs:

  • An optimistic scenario, in which the UK continues to have a free trade agreement (FTA) with the EU much like Switzerland and Norway currently do through the European Free Trade Association (EFTA).
  • A pessimistic scenario, in which the UK is not able to negotiate such favourable terms and there are larger increases in trade costs.

Table 1 summarises the results of our analysis for the impact of changes in trade barriers on incomes in the UK. In the optimistic scenario, there is an overall welfare loss of 1.1 per cent, which is driven by current and future changes in non-tariff barriers. Non-tariff barriers play a particularly important role in restricting trade in service industries such as finance and accounting, an area where the UK is a major exporter.

In the pessimistic scenario, the overall loss swells to 3.1 per cent, with most of the impact coming from non-tariff barriers (2.55 per cent). Leaving the EU would increase non-tariff barriers to trade (arising from different regulations, border controls, etc.) and reduce the UK’s ability to participate in future steps toward deeper integration in the EU. The costs of reduced trade far outweigh the fiscal savings. In cash terms, the loss is £50 billion in the pessimistic scenario and a still substantial £18 billion in the optimistic scenario.

Table 1: The effect of a ‘Brexit’ on UK welfare (static gains)

Note: Welfare measured by change in real consumption in the UK. Source: Ottaviano et al, 2014.

While the estimates of Table 1 directly relate to tariff and non-tariff barriers to welfare, they do not account for the dynamic gains from trade such as productivity growth from trade and the impact of other channels (such as FDI and transaction costs). Baier et al find that after controlling for other determinants of bilateral trade, EU member states trade 40 per cent more with other EU countries than they do with members of EFTA. Combining this with estimates that a 1 per cent decline in trade reduces income by between 0.5 per cent and 0.75 per cent implies that leaving the EU and joining EFTA will reduce UK income by 6.3 per cent to 9.5 per cent.

Table 2: The implied changes from leaving the EU and joining the EFTA on UK welfare

Note: Welfare measured as change in per capita consumption in the UK. Source: Ottaviano et al, 2014.

These estimates are much higher than the costs obtained from the static model, which suggests that the dynamic gains from trade are important. To put these numbers in perspective, during the 2008-09 global financial crisis the UK’s GDP fell by around 7 per cent.

Missing the next trade train?

It is sometimes argued that Brexit would allow the UK to increase trade with fast-growing economies such as China and India and with other important trade partners such the US and Japan. Being part of the EU does not restrict the ability of UK companies to trade with the rest of the world, and our analysis above accounts for the effects of Brexit on both trade with the EU and trade with the rest of the world. The EU is currently negotiating major new free trade agreements with the United States and with Japan. If the UK leaves the EU, it will not benefit from these and other FTAs negotiated by the EU in future.

CEP researchers have quantified the impact of recent EU FTAs on consumers in the UK. Consumer prices fell by 0.5 per cent for UK consumers as a result of FTAs negotiated by the EU with trade partners that are not EU members, saving UK consumers £5.3 billion per year. Based on this historical experience, the FTAs with the US and Japan would save UK households £6.3 billion every year. It is unlikely that these benefits would be as high if the UK were to negotiate alone. The size of the EU economy gives it a stronger bargaining position in trade negotiations than the UK would have on its own.

Foreign direct investment and immigration

Two further issues are how Brexit might affect investment and net migration into the UK. Part of the attraction of the UK for foreign companies is as an export platform to the rest of the EU, so if the UK is outside the trading bloc, this position is likely to be threatened. This matters because foreign multinationals tend to be high productivity firms and they bring new technologies and management skills with them. Given the large sunk costs involved in FDI, the uncertainty generated by the possibility of an in-or-out referendum may have a negative impact on investment in the run-up to the vote.

An argument used to support Brexit is that immigration from the EU has harmed UK-born workers in terms of jobs, wages and access to public services. But there is no compelling evidence that these negative effects exist (as shown in CEP’s Election Analysis of immigration and the UK labour market). Economically, migration acts much like trade, as people tend to move to countries where they can be more productive and earn higher incomes, increasing total welfare. Restricting this mobility will, just like restricting trade, reduce overall UK welfare. Di Giovanni et al find that the maximum size of such effects would be a loss of 1.5 per cent of income.

Conclusions

The economic consequences for the UK from leaving the EU are complex. But reduced integration with EU countries is likely to cost the UK economy far more than is gained from lower contributions to the EU budget. Static losses due to lower trade with the EU would reduce UK GDP by between 1.1 per cent in an optimistic scenario and 3.1 per cent in a pessimistic one.

The losses due to lower FDI, less skilled immigration, and the dynamic consequences of reduced trade could also be substantial. Even if the UK maintained full access to the single market following Brexit, it would not have a seat at the table when the rules of the single market are decided. Staying in the EU may cause political trouble for the major parties; but if the UK leaves the EU, the economic trouble will be double.

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Note: This article is part of the CEP’s series of briefings on the policy issues in the May 2015 UK General Election and originally appeared at our sister site, British Politics and Policy at LSE. The article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.

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About the author

Swati Dhingra– LSE
Swati Dhingra is Lecturer in Economics at the LSE.

Gianmarco Ottaviano– LSE
Gianmarco Ottaviano is Professor of Economics at the LSE.

Thomas Sampson – LSE
Thomas Sampsonis Lecturer in Economics at the LSE.

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