Who sees the globalisation elephant in the EU debate?

Jonathan Lindsell, 24 March 2015

Open Europe’s new study, ‘What If?’, has been panned by Eurosceptics for suggesting that leaving the EU could realistically cost 0.8% GDP, while few praised the alternate finding that, by 2030, exit could add 0.6% GDP  yearly. The report says both: it examines what might happen with the EU; domestically; and with the rest of the world. It concludes a positive settlement can be reached through deregulation – cutting most EU-inspired ‘red tape’ – plus a trade agreement with Europe and unilateral tariff slashing to embrace growing markets.

But, like Gerard Lyons, the authors argue if Britain turns inward after Brexit, GDP could suffer. The impetus that drives Ukip, currently the only committed ‘exit’ party, is split between a libertarian wing that would embrace free world trade, and one characterised by Open Europe’s advisor Lord Wolfson as protectionist. Remember: the latest-generation free trade agreements include provisions for the free movement of business people, i.e. limited migration. Retaining substantial EU free movement could be crucial to securing a tariff-free exit deal with Brussels.

The question does not only apply to Europe. Dropping external tariffs or signing trade agreements necessarily means that some British sectors will lose to competition. This can be minimised by prioritising deals with countries whose economies are complimentary, but winning agreements with big players like America, Japan or China would mean far more foreign goods sold in British markets, while top UK exporters benefit. As we see from debates over TTIP’s effect on product standards, trade deals include either mutual recognition of countries’ goods regulations, or standardisation of them.

Such deals, and the WTO’s programme of world market liberalisation, also seek to improve competition in government contracts. Procurement is open in Europe. This is blamed for instances wherein British firms lose out, like Siemens beating Bombardier over the Thameslink train-making contract. Trade agreements mean outsourcing as well as opportunity. This competition element, a global issue, is one Britain must face in any given future.

It is a fine line to tread, and one that Eurosceptics need to take seriously in presenting exit blueprints. Ignoring the global forces that determine economic success could lead the pro-exit camp to be characterised as overoptimistic, a label that contributed to the Scottish independent movement’s defeat.

Open Europe errs on the liberal side of economics – prosperity through open competition. If the exit side is to win an EU referendum, then the globalisation challenge must be taken seriously. The national conversation should include not only critiques of the EU, but a debate on the balance between laissez-faire and national interest protection. It will be especially interesting to see if the left will contribute and reject this study’s dichotomy – whether models for prosperous independence can be delineated that retain social law, green initiatives, skilled migrant integration and perhaps alternative free trade models built through development initiatives.