Why the UK is leaving the EU today

The UK is not leaving the EU just because a majority of voters in the 2016 Referendum opted to leave or because that decision was finally re-affirmed in the December 2019 election.  The UK is leaving the EU because, as some politicians and commentators have understood for the past 70 plus years, membership of the EU entails an unacceptable loss of sovereignty.  Think of it — the UK could not even reduce VAT on tampons so long as it was a member of the EU.  Of course, sovereignty is a slippery concept and the realities of life in an interconnected world ensure that no nation is completely free to do whatever it likes without consequences.  But when membership of a political organisation cuts so deeply into the ability of a government to act independently in the interests of its people, it is right to depart.

Like so many other people I was starry eyed about the emerging EU when I returned from four years in North America just before we joined the EEC.  I was a European, not a North American, and the EEC seemed a benign and altogether advantageous idea. I should have known better.  It was not until I became a member of the Economic and Social Committee of the EEC in the mid 1980s that I began to understand that the purpose of the organisation was not economic progress but a political union.  The political objective of the first European institutions was fully appreciated by the post war Labour Government which, having taken the coal and steel industries into government ownership, were not willing to accept a supranational body telling them what to do. Ernest Bevin, the UK’s Foreign Secretary, said: ‘If you open that Pandora’s box, you never know what Trojan horses will jump out’.   Hugh Gaitskell in a speech to the Labour Party conference in 1962 discussed the idea of ‘political union’ in Europe.  ‘It does mean the end of Britain as an independent nation state – it may be a good or a bad thing but we must recognise that this is so…it means the end of a thousand years of history’. As recently as 1983 a Labour Party Manifesto promised withdrawal.  Even in 2019 the Labour Party was not a wholehearted advocate of continued membership.

I now appreciate that several of the founders of the original European institutions explicitly supported them as the route to the elimination of the nation state.  Unable to agree immediately on a new European Federation, they opted instead for a step by step progression through economic and legal integration.  Voters did not come into the equation and indeed for the first few decades when little impact was felt the populace supported their leaders with a ‘permissive consensus’.  But as the project has progressed, the issues before European decision makers have become less and less easily resolved.  The common interests of the six have been replaced by a cacophony of the 27.  Even when EU laws are manifestly out of date and counterproductive it takes years, even decades, to put the damage right.  The EU is a dysfunctional legal construct unable to adjust to a changing environment.

The UK leaves the EU today because it can thereby regain a measure of independent positive action in the interests of the peoples of these islands.  Gone will be the CAP described by Hugh Gaitskell as ‘one of the most devastating pieces of protectionism ever invented’ and gone will be the rape of British fishing waters (a notable example of ‘the tragedy of the commons’).   Of course, if UK firms want to sell into EU markets, they will have to tailor their products to the EU’s rules.  That is the same when selling to China or the USA.  But within the UK we can innovate – design new products that will sell around the world.  There would never have been an industrial revolution in the UK had the UK been tied to pan-European rules.  As an independent nation state we can exploit the possibilities of the current industrial revolution to the benefit of our citizens.  That is why we are leaving the EU this evening.

 

Further thoughts on minimum wages in federal states

Following on from yesterday’s post about a proposal for a minimum wage rule in the EU, I thought it would be worth describing how federal states deal with wage setting.  The USA has a Federal minimum wage (currently $7.25) but states (and even localities) may set their own minima at higher rates.  The purchasing power of the US Federal minimum wage has fallen over the years rendering it pretty ineffective.  If it were adjusted relative to purchasing power from its 1968 level it would now be nearly $20 an hour.

In Canada, however, the responsibility for labour law including wage setting rests with the Provinces and Territories.  The Federal government only sets minimum rates for workers under Federal jurisdiction.  Even this rule was adjusted in 1996 by linking the rates to the general adult rate in the province where the work is performed.  Most people in Canada on minimum rates are under 20 years old.

Australia, a very much more centralised Federation than is Canada, provides a different example.  There is a Federal minimum hourly rate, said to be the highest in the world.  The point about Australia is that, as far as taxation and social benefits are concerned, it is much more centralised than Canada (the USA being somewhere in-between the two models).

India, another Federation, has recently legislated for a universal minimum wage set at a very low level.  Even so, compliance will be difficult to ensure as 90% of Indians work in small or unregulated businesses or are self employed (often intermittently).  There may now be an apparent legal floor but most people are likely to remain under the floorboards.

The lessons for the EU are clear.  First create your political union and establish a uniform system of taxation and social welfare.  The more centralised your political union (e.g. Australia) the more likely you are to be able to ensure a uniform minimum wage covering all types of work throughout a vast territory.  Even if the EU were to attain its goal of political union it should not bank on it being a highly centralised model.  Any attempt to impose a uniform rule for wage setting for the whole EU seems, at present in the absence of political union, an utterly fruitless and time wasting task.

Here we go again – a bad idea never goes away in the European Union

It is many months since my last post.  There was little point in posting so long as the British House of Commons was shouting at itself over the EU.  But now we are leaving in a few days there is plenty to say about the EU and our future relationship to it.  The blog will continue…

As one who voted to remain in the EU I can now see much more clearly the advantages of leaving.  A good example arose this week.  The European Commission published a Communication on 14th January on the subject of ‘Social Europe’.  Among the platitudes and aspirations was an old chestnut from back in the days of the 1980s programme for a European Single Market.  The dangers of free exchange had, it was said, to be counteracted by ‘flanking policies’ particularly for a ‘Social Europe’. Among the many aspirations for a ‘Social Europe’ was the idea that there should be a single uniform minimum wage throughout the territory to prevent ‘social dumping’, that is the movement of workers from low wage countries to higher wage countries.

The idea was rejected and rested for a while but in the early years of the 21st century it flickered into life again supported by some intellectuals and socialist parties.  In the meantime Treaty changes explicitly omitted wage setting from the competences of the European Union.  Wage setting remains a national competence.  That has not stopped the call for a ‘fair’ or ‘equitable’ wage level to be set throughout the EU.  This time the demands come with a twist.  Rather than an absolute level there should be a ‘norm’ or bureaucratic requirement on all member states to set minimum wages at 60% of the median wage.

This may be all very well as an apparently ‘modest’ proposal except that some of the member states do not have mandatory minimum wages but well established systems of collective wage bargaining.  These member states (mostly Scandinavian) are hopping mad about the idea fearing that for them it would mean a lowering of wage levels.  Then, among the member states with statutory minimum wages these vary by the order of ten times between Luxembourg and Bulgaria (where the minimum is not even two euros per hour).  A minimum wage is not even a living wage and does not ensure that in work poverty is avoided.  There are so many other obstacles on the way to a single formula for EU wages that one despairs of the EU and its institutions for giving it credence.  The idea is a very bad one in principle and in practice.

Stage one of the process is a ‘consultation’ with the social partners as to whether this measure is desirable.  The representatives of European business have already made their position clear in a press release: ‘Business Europe is strongly opposed to EU legislation on minimum wages’.  The social partners are off to a rocky start….but the UK at least is spared the expense in terms of civil service and ministerial time in putting this silly idea into a peaceful grave.

Mrs Von der Leyen should read Roy Jenkins’s political memoirs

Ursula Von der Leyen, confirmed as the new President of the EU Commission, thanks to votes from UK MEPs, would do well to read the account of his time as President of the Commission by Roy Jenkins in his memoir A Life at the Centre.  Jenkins, realising that his ambition to become PM of the UK would not be fulfilled desired the job in Brussels above all others.  It did not turn out to be nearly as nice as he expected and half way through his four year term his attention turned back to British politics.

Jenkins notes that since the time of Walter Hallstein (the first President of the Commission) the Germans tended not to appoint people of the first rank to the Commission.  Hallstein’s ardent enthusiasm for European unity was a bit too strong for the Germans.  He was a mistake not to be repeated.  Mrs Von Der Leyen sounds like a pale echo of Hallstein but lacks his intellectual depth or his negotiating skills.  Hallstein came to a sticky end, thanks to General de Gaulle.

Although Jenkins wanted the job as Commission President he confessed that he had little idea about what the EEC, as it then was, actually did.  Like Mrs Von Der Leyen, Jenkins hoped to influence the composition of the Commission.  Like Jenkins Mrs Von Der Leyen is likely to be disappointed as member states nominate the Commissioners.  Jenkins found that his days were dominated by having to bring the member states in line for any sort of decision, however limited, to be made.  ‘My first six months in Brussels were not a success…I would not have made the decision to go to Brussels had I been able to see things in advance…the first months I look back on as a numb period, comparable with my first weeks in the army on the frozen parade grounds or in the foggy Nissen huts…  The summer of 1977 was one of the lowest of my life so far.  It was a horrible contrast to my enthusiastic anticipation of a year before’.

Jenkins concluded that he needed to announce a grand new initiative.  He proclaimed ‘Economic and Monetary Union by 1980’.  Easier said than done.  All that he achieved was the creation of the European Monetary System.  Economic Union remains, forty years later, an elusive concept.   Mrs Von Der Leyen listed ambitious targets in her speech to the European Parliament to encourage MEPs to vote for her.  There would be a European minimum wage, a capital markets union, European unemployment insurance and a European army among other things.  All these have been on the agenda for decades.  Previous Commission Presidents have seen them shot down by the member states.  Ah well, Mrs Von Der Leyen wants the end of the rule of unanimity on issues including social policy and tax.  Problem is that this can only be achieved by a unanimous decision of all the member states.  Like Jenkins she may find herself two years into her term of office plotting a return to domestic politics.

The UK has told the EU what it wants. If the EU wants a ‘deal’ it has to respond positively

At last the House of Commons has decided what it wants.  It wants to leave the EU with a withdrawal agreement (the ‘deal’) but it does not want to be bound in perpetuity by a Treaty encompassing arrangements for the border between Northern Ireland and the Republic of Ireland.  That such arrangements ever became part of the withdrawal agreement is curious – a result of political pressure.  Any arrangements regarding this border properly belonged in the second phase of negotiations on the future relationship between the UK and the EU.  Only once the UK has left the EU, according to the EU’s rules of negotiation, could discussion even begin on future arrangements.  The ‘backstop’ was inserted as if the arrangements for the border were similar to the rights granted to individuals or the debts incurred as a result of membership of the EU. It is normal that such rights and obligations are respected when a party to a Treaty decides to depart.   But the international agreement on the Irish border is not even remotely like either individual rights or debts incurred.  Both of these will eventually be extinguished.  People die and debts are paid.  They are legitimately part of the withdrawal agreement.  An international agreement between the UK and the Republic of Ireland is of an altogether different order.

The issue of the Irish border has been confected for political reasons.  At present with both Eire and the UK as members of the EU there is no physical border and no checks at that border.  But that is not to say there are no differences in the laws that govern economic life in these two jurisdictions.  There are differences in the VAT and Corporation Tax systems.  Regimes for checking animal and plant health vary – a horrible report of diseased cattle being illegally slaughtered in Poland reveals that even if there are common EU standards they may be ignored.  Not all products are subject to common rules.  Mr Varakar himself pointed out recently that fireworks are legally sold in Northern Ireland but not in Eire.  Are border checks required to enforce the law in Eire?  Not at all.  Checks, if any, are made within the territory of Eire.  And that goes for everything else.  The EU may have common rules but these are all applied and enforced within each individual member state.  Oh, but some Irish politicians are saying ‘there will be smuggling’.  That is what was said in the mid 1980s when we were told that even 1 pc difference in VAT rates would lead to wholesale smuggling.  The EU Commission concluded a few years ago that differences in VAT rates simply did not matter.

The EU seems unwilling to adjust the terms of the withdrawal agreement.  Yet, in order to ensure that Ireland voted for the Lisbon Treaty it was willing to provide it with substantial opt outs.  It is simply not the case that they cannot adjust a Treaty to ensure ratification.  It has been done frequently by adding ‘protocols’.  The EU’s negotiators  need to refresh their knowledge of their own rules and procedures and their memories of of how they got Treaties ratified in the past.

The Ghost of Edmund Burke stalks the House of Commons

The Brexit waters are getting ever muddier.  In my last blog post I called on members of the House of Commons to use their informed judgement in the public interest and not to rest their judgements entirely on sentiment and party advantage.  I did not, however, deal with the question of the role of the individual MP vis a vis those who elected him personally – his constituents.  Now, it seems, this is troubling some Labour front benchers.

It is reported that 70 Labour MPs support a second referendum.  They do so not because they believe the people are better informed or have stronger powers of judgement than themselves but because they want a different result – a vote to remain in the EU.  Other Labour MPs have their doubts about a second referendum.  Why?  Because in many cases the majority of the local electors who voted them into Parliament voted to leave the EU.  The MPs doubtful about a second referendum promised their voters they would support Brexit and fear for their seats if they then change their minds by backing a second referendum.

There are several ways to find out if the UK still wants to leave the EU and all the obligations that go with membership: a ‘people’s vote’ which if they get it wrong can be repeated until they get the right answer, a vote in Parliament, which has already taken place when Article 50 was triggered and confirmed in a general election, or a calculation of opinion based on whether or not the majority of constituencies voted leave or remain.  The trouble with this last is that the result would not be based on one man/woman one vote because the boundaries have not been adjusted for years and one vote in constituency A is worth more than one in constituency B.   But, think about this, if we were to rely on a count of constituency opinion, we would reduce the role of the MP to that of a ‘delegate’ instead of that of a ‘representative’.

The difference between these two views of the role of the MP was clearly set out by Edmund Burke.  In his famous ‘Address to the Electors of Bristol’ he rejected the idea that he was to be the mere mouthpiece of his electors.  Once elected his judgement would determine how he voted.  The Burkean view of the role of an MP is usually quoted approvingly.  But, there is a nasty twist in the tale of Edmund Burke and his relationship to the electors of Bristol.   They were not so enamoured his lofty attitude once differences appeared between them, merchants of the port of Bristol, and Burke on the subjects of free trade and Catholic emancipation.  Within a few short years the electors of Bristol rejected him as their member.  That, is precisely what some Labour MPs fear – if they vote in the House of Commons for things that are against the views of those who elected them they will, at the next election, lose their place.

At present there seems to be no way out of this impenetrable maze.  The Prime Minister has run out of ideas and the Leader of the Opposition is floundering around, very weakly, like a fly caught in a spider’s web.   International Treaties should be negotiated between governments (and international organisations) following a mandate from the electors.  Letting a numerous assembly into the process can never work as John Stuart Mill explained in his classic text on Representative Government,  Brexit is indeed a test of the British system of government.

 

So, What Next?

 

I was clearly on the losing side in the vote on the Withdrawal Agreement from the EU.  The Withdrawal Agreement was shot down by a clamour of conflicting voices. Our MPs knew that they did not like the Agreement but their reasons for disliking it were wildly different, based in many cases on ignorance both of the EU and how it works and of the terms of the agreement before them.  How many of our 600 plus MPs had read the 585 pages on which they passed judgement?  Some of those who voted against it thought it ‘bad’ because it kept the UK too close to the EU, some that it would place the UK too far from the EU.  Some thought that it kept the UK subject to EU law, some that it meant that the UK would deviate from EU law on employment and the environment.  Above all, a large number of MPs objected to those elements of the agreement implying permanent special arrangements for the Irish border.  Many of them muddled up the terms of withdrawal with the future terms of the UK’s relationship with the EU.  Close examination of the Hansard Records by future scholars searching to explain the vote will reveal a kaleidoscope of largely uninformed views.  As a whole the House of Commons threw out what was on offer but made no constructive suggestions for alternatives.  It is hardly surprising that the general population is losing trust in its elected representatives.

We must remind ourselves that not only did the people as a whole vote to leave the EU but the House of Commons voted overwhelmingly to trigger Article 50 and then in a general election the major contenting parties all promised to respect the result of the referendum. Few voters opted for parties that promised to reverse the result.   The first question the House of Commons must now address is ‘is the House still sure that it wants the UK to leave the EU?’   Then, after a week in Committee (perhaps of the Whole House supported by Select Committees working in tandem) the House should, section by section examine the Withdrawal proposal.  It should vote on each section in turn so it is clear which parts of the agreement on withdrawal are acceptable or unacceptable just as it would in respect of any major item of legislation.   Before voting all MPs should be required to read the terms of departure – all 585 pages so that they, avoiding accusations made against voters in 2016, can confirm that they were fully ‘informed’ before making a decision.   While judgement as to what is best in the national interest may be based to some degree on sentiment that judgement should at least be based on an understanding of what is on offer.  Once it is clear what the UK House of Commons does want in the withdrawal agreement the government can take its conclusions back to Brussels.  For once the EU negotiators have a point when they complain that the UK does not seem to know what it wants.

The members of the House of Commons need to be reminded over and over again until they understand the point – once they accept that the UK will leave the EU two separate decisions have to be made.  The first is the terms of the UK”s withdrawal.  The second is the terms of the UK’s future relationship with the EU.  These two decisions need to be clearly separated.  As for the future relationship there is much loose talk of customs unions.  There is need for precision here.  There is a big difference between being a member of the EU’s customs union – an arrangement made internally a decade after the adoption of the Treaty of Rome  – and being a member of ‘a’ customs union with the EU.  Turkey has ‘a’ customs union with the EU which notably excludes agriculture and services.  The UK could agree ‘a’ customs union with the EU covering manufactured products which represent almost all the intra EU trade – notably vehicles.  That would satisfy the demands of big business and its unlikely new spokesman in Parliament, the leader of the Opposition.  But ‘a’ customs union or any other trade deal with the EU can only be discussed with EU negotiators after the UK has left, and they have warned us off ‘cherry picking’.   It is time for someone to bring logic and clarity into the heated atmosphere of uniformed declamation which has characterised the last few days of non-debate in Parliament.

 

Decision Day

Tomorrow the UK’s House of Commons votes on the ‘Withdrawal Agreement’ brought back by the Government from its lengthy negotiations in Brussels.  It is widely expected that it will be rejected.

What would I do were I a member of the House of Commons?  I voted ‘Remain’ after changing my mind day by day before the Referendum.  Were I asked again I would vote ‘Leave’.  The EU is not working for the benefit of the peoples of its member states but in the interests of its own future.   Dreams of a European state have not disappeared – the President of the Commission is even now pressing for the abolition of the national veto on tax proposals.  In its present form the EU is not a well functioning organisation.  The single market is a dangerous myth because it promises what it cannot deliver.  A single European market for all products and services is unattainable and undesirable.  The single market is primarily useful for vehicle manufacturers and their industry is, like coal and steel in the past, in a perilous state.  New technology will transform the way we move around by the end of the century.  This requires diversity rather than unformity if new products are to be developed and sold within the European space.

Never, never, never believe that the EU’s single market has delivered on its promise of more growth and jobs.  Italian GDP per capita is now actually lower today than 20 years ago, for example.  EU unemployment, particularly among the young, remains high.

I voted remain because at heart I am a European, not a North American or an African.  The EU was a good idea until it got too big for its boots.  Free trade may have advantages but all the add ons, notably the Euro, have had adverse rather than positive effects.  Reform of the EU seems impossible.

But, what about the agreement on the table?  How bad is it?  I have read but a few of its 585 pages (several only have one paragraph to be fair).  The worst bit is undoubtedly the Irish Backstop.  But even here there is hope.  Whatever the UK House of Commons decides tomorrow it cannot bind its successors.  That is the essence of our Parliamentary sovereignty based on the sovereignty of the people.  In twenty years time circumstances will be quite different, the people will have different views, they will convey those to their representatives who, using their judgement, will decide on ‘great matters’.  Whatever the words on the withdrawal agreement concerning the Irish border by then the EU will have changed, the Irish may have decided to unite or we may be at war.  Who knows?  I would vote for the agreement subject to caveats reaffirming the sovereignty of the British people.  There is a huge pile of defunct Treaties and an unacceptable commitment on the Irish border could well join it.

Above all, the tower of Babel that is the House of Commons is talking about the wrong thing.  All they have to do tomorrow is to agree on the terms of withdrawal.  Then, and only then, they can debate until they drop the many different versions of future arrangements including those for the Irish border.  The EU insisted on sequencing.  The House of Commons has muddled the two parts of what has to be agreed – how we leave, pay the bills and respect accrued rights (always a big issue in Treaty law) and what we do next.  There will be nearly two years in which the MPs can shout at each other about our new relationship with the EU.  Tomorrow is not the time for that.

 

 

 

 

If the EU can let Japan ‘cherry pick’ on a trade deal why can’t it offer the same to the UK?

The EU signed a new trade deal with Japan last week.  It is worth reading (at least in summary)  its provisions.  There are a number of striking features in this deal which expose the weakness of the EU’s current negotiating position with the UK.  The UK is constantly told it cannot ‘cherry pick’ and that the four freedoms come in a package.  Those principles do not, it seems, apply to deals with the land of the cherry blossom.

The EU Japan deal is primarily about the reduction and/or elimination of tariffs i.e. customs duties.  In some cases like cheese there will be duty free ‘quotas’ not absolute free entry.  As far as non-tariff barriers are concerned the provisions of the deal refer frequently to joint application of international standards on products such as motor vehicles and medical devices.  Services are only partially covered.  Public services are excluded from the deal.

The second striking feature of this deal is that it does not provide for unfettered free movement of people between the EU and Japan.  It only facilitates the temporary movement of company personnel and their families.

Finally, disputes will be settled by an independent arbitration panel as is usual practice in international trade agreements.   There seems to be no problem with allowing the Japanese to ‘cherry pick’ bits of the single market it seems.  This deal must surely point the way to a similar deal for UK.  Only problem, this would not suit the Commission negotiators who have consistently refused to consider any such flexibility towards the UK.   Time to hand over to the member states who are likely to have a more balanced and pragmatic approach.

 

 

 

 

 

Mr Raab’s pointed present – the Hedgehog and the Fox

It has been reported that the new UK Brexit Secretary of State, Dominic Raab, presented Michel Barnier, the EU Commission’s chief negotiator, with a copy of ‘The Hedgehog and the Fox’ by Isaiah Berlin.  At first I thought what a wonderful sense of humour – and then I thought what a very, very pointed present this was.

The Hedgehog and the Fox contrasts two ways of looking at the world: the monist and the pluralist.  Archilochus, an ancient Greek, said: ‘The fox knows many things but the hedgehog knows one big thing’.  Guess who is the hedgehog – the EU of course.  It is monist, Utopian and rigid, imbued with the philosophical ideas of continental Europe.  The UK’s philosophical underpinnings are those of the fox – it is pragmatic and rooted in the real world of human beings.  By offering M Barnier this essay by Berlin Mr Raab is signalling that he wants to be a grown up wily fox in his dealings with the EU hedgehog. At present he is still very much a cub.

The fate of the two animals in the natural world is instructive.  Where is the hedgehog?  Crushed under a fast moving vehicle as he exercises his single minded ambition to cross the road, eaten up by an ever growing tribe of Badgers who are bigger and nastier than him.  Where is the fox?  He seems to be doing exceptionally well, give or take a few road accidents.  The fox is in the ascendency not only in the countryside but also flourishing in urban areas.  I often saw fox or smelt his presence (faint whiff of skunk) when I lived in central London.

Mr Barnier, the EU’s chief hedgehog of the day, needed reminding of the dangers lurking in a monist, intransigent attitude to the creation of the European Utopia.  Hedgehogs, with only one big idea (the purity of the single market) cannot allow that big idea even to be questioned.  Mr Raab will have his work cut out if he is to become a grown up fox. What he now has to do is to emphasise the realities of human life, of economic activity and the merits of pluralism.  Isaiah Berlin would have been cheering him on.

Meanwhile, the Irish PM, Leo Varadkar, says he will stop UK planes flying over Irish air space unless Irish fishermen can fish in UK waters.  He is trying to be a good hedgehog but the wily fox knows that if he got his wish Irish planes could fly direct only to Spain, Portugal and the Canaries.  Better, better by far for survival for the EU and its negotiators to start to behave a bit more like a fox.