Sunday, 31 October 2010

David Cameron failed in Brussels on Friday because he doesn’t realise that they need us more than we need them.

In Prime Ministers’ Questions on Wednesday (27/11/10) David Cameron arrogantly affused a brief narrative regarding Lady Thatcher’s extraordinary EU rebate negotiations in 1984. After hours of heated posturing European leaders then gave in to Lady Thatcher’s simple argument that Britain’s economic contribution to the Common Agricultural Policy was disproportionate to the benefits brought home by the EEC. So Cameron had set himself for his Lady Thatcher moment, forcing us to find an assessment of whether his self-drawn comparison was justified. He came home after Friday evening in Brussels not just empty handed (he mitigated loss rather than acquired benefit) but also without discernible intended impact of reducing the increase to the EU budget.

I don’t know who was briefing the Prime Minister, but in the last few weeks when Europe was working out how to entrench a huge deposit scheme for national bail-outs, how off the wall his thinking of reducing a budget increase of 6% next year was- and simply how hard he would have to fight in this climate to get it. In simple terms while we are cutting costs back home, Europe is looking for increased contributions for its new monolith insurance policy, which like so many other self-proposed schemes carries with it no Treaty based mandate. The Prime Minister, without being able to effectively understand the eminence of Britain’s position in Europe and the importance of our current contributions to any of these causes, failed to go in there with a plan of reduced exposure to Europe in line with cuts that many domestic areas were facing. He thus did not play the old; ‘we would like to do this, but it is not sitting with what are doing domestically- hence my hands are tied’. Unfortunately, even this evaded the PM.

Lady Thatcher, of course, would have been far fiercer and stronger than that: I suspect she would still be in Brussels this evening, bullish if she had not got what she had wanted. As a result of this the Prime Minister has left a gaping disparity in the Comprehensive Spending Review set out by his Chancellor. I, for one, am still not convinced that those that will lose their public sector jobs at home will be happy that their jobs will be paying for policy development for bailouts for the future debt mismanaged Greeces of this world.

In the end the P.M. got the increase halved, yet an increase it still is. The policy disparity between domestic cuts and international expenditure caused by the upcoming UK contributions to the EU is no longer tenable. The EU expenditure is not negligible. UK’s net EU contributions will increase to £6.9 billion next year, roughly 6.5% of the NHS budget (the equivalent cost of prescriptions for the entire population for over a year or the cost of cancer treatment for the entire population for two years (Source: OHE 2009)). This makes reassessment of benefits of membership timely, as it genuinely affects life-style choices at home due its cost. The arguments thus move beyond self-government and preservation of democracy, to social needs of the UK population including national tax policy which impacts upon economic autonomy of the individual.

This self-assessment is particularly needed given the Lisbon Treaty endows the EU with the capacity to make treaties, making withdrawal now easier than ever. With the end of the Cold-war and growing global privatisation now bringing more and more sectors (and states) into the global market, Britain must branch its export/import circle far above and beyond the Eurozone. After all the Indians don’t speak French but English, and the advantage of bilateral trade increasingly moves us away from multilateralism into the bilateral realm of foreign economic policy. But beyond all this, the EU’s role in promoting global free trade is now questionably ‘redundant’. When the UK entered the EEC global tariffs were significantly high, and the GATT had yet to expand the areas of reduced tariffs now seen within the WTO. (The subsequent Tokyo and Uruguay rounds of world trade negotiations in the late 1970s and 1980s moved the world significantly towards global free trade in an unprecedented way). Now cost of exports and imports vis-à-vis tariffs are negligible, so that most areas of the world no longer have effective barriers to prevent trade. The rise of investment treaties in the last two decades (from over 50 to several thousand) has virtually ended the concept of market barriers. This renders benefits of exclusivity or preference to the Euro-zone for trade and investment dubious, and frees states from being ensconced in international institutions for trade to more global choices in line with global market liberalisation.

It is with this in mind, and with some developed choices in foreign economic policy that the P.M. should have faced the Brussels crowd on Friday evening. The most important thing that the PM should have noted: the UK contributes 13% of the EU budget (£13 billion 700 million Euros) –however, there are 27 member states. Some states contribute nothing. (Romania contributes nothing but still has 35 MEPs sitting in the European Parliament; Bulgaria contributes nothing but still has 18 MEPs sitting in the European Parliament- all able to vote on fiscal policy and expenditure which is based on the contributions of other states). The conclusion, my dear P.M., is simple: they need us more than we need them.

Copyright Abhijit P.G. Pandya 2010.
Copyright Birkenhead Society 2010.

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