General election 2015: Britain and the European Union – are there alternatives?

By Dr Matt Broad

 

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A couple of weeks ago, I bemoaned the lack of discussion about foreign policy in the general election campaign. On that occasion I wrote that none of the main parties had ‘dared to mention foreign policy at all’ and that the campaign lacked any sort of ‘discussion about Britain’s role in the world, the degree and veracity of Britain’s international ambitions and the country’s place in an ever-changing and increasingly uncertain global environment.’

Strong words indeed. But I may be prepared to eat them. For judging by recent developments it is as though the political world took note of my criticisms and responded accordingly. This week in fact saw two notable developments in the campaign concerning Britain’s place in the world.

The first came on Friday, when Ed Miliband travelled to Chatham House to set out Labour’s foreign policy priorities. The speech did much to highlight how British policy will likely develop under a Labour government.

For a start, a Miliband administration would likely cut the armed forces less than if the Conservatives remain in power after 7 May. As is usual – and perhaps understandable – for any politician, he refused to be drawn on specific figures. But he went further than most, rejecting ‘the extreme spending cuts that the Conservative party propose’ and calling Cameron’s already savage cuts to defence ‘truly catastrophic’.

Miliband also made clear that Labour would be committed to what he called ‘hard-headed multilateralism’. The party leader was at pains to stress that the biggest challenge to Britain today does not come from nation states but from those threats that cross national borders – in particular Islamic terrorism, climate change and migration. For Miliband, such issues can only be dealt with if ‘we work with allies across the world and seek to strengthen not weaken multilateral institutions.’

As part of this, Miliband’s analysis centred on Britain’s future in the EU. As he rightly put it, Britain is ‘stronger as a leading partner in the EU […] it is precisely our influence within the EU which makes us more influential in the world.’ The thrust of his critique was that under Cameron Britain has shirked its responsibilities and reduced its influence, not least because the prime minister has endangered Britain’s EU membership at the behest of ‘political forces in his own party and by his fear of other political parties in our country.’

The second main event of the week was not unconnected to Miliband’s speech: the announcement by Douglas Flint, chairman of HSBC – Britain’s largest bank – that his company’s board is actively considering whether it should relocate the bank’s headquarters out of London. Flint cited ‘regulatory and structural reforms’, including forced changes to the bank’s structure and the UK bank levy, as reasons why a change was under discussion.

But it was the uncertainties facing the British banking sector, and most obviously worries about potential British withdrawal from the EU under a future Conservative-led government, which appear to have hastened the review. As Flint put it at the company’s AGM in London, reforming the EU would be ‘far less risky than going it alone, given the importance of EU markets to British trade.’

There is perhaps some irony in the HSBC announcement. Relocating a company’s headquarters is not a cheap undertaking, and might well prove more trouble than it’s worth. And then there’s the matter of where to place the building – Hong Kong has emerged as the most obvious substitute, but the decision to put a bank’s finances under the glare of Chinese scrutiny is not one to take lightly.

Putting these developments to one side for a moment, all this talk of impending EU exit and ensuing economic doom and political obscurity has got me thinking. What would British exit from the EU – ‘Brexit’ as it’s often called – look like? What are the alternatives, if any?

It is a discussion that has been had many times before, and I don’t here in any depth want to recite what Parliament, the CBI, the European Movement and various academics have all already said on the matter. A few points are worth mentioning, however.

Some, especially Eurosceptics such as Conservative MEP Daniel Hannan, support membership of the European Free Trade Association (EFTA). Britain was instrumental to founding EFTA in the late 1950s and was a signature to the Stockholm Convention establishing the association signed in January 1960, before it left to join what is now the EU in 1973. The story goes that by rejoining what is a free trade area based on intergovernmental organisations, rather than a customs union like the EU, Britain would be free to set its own tariffs and tax rates and to negotiate its own foreign trade agreements.

But EFTA is a smaller player on the world stage. And joining EFTA doesn’t necessary mean less interference from ‘Europe’: EFTA states often participate in EU foreign policy operations; the organisation is represented by a Secretary General in most international trade discussions in the same way that the Commission represents the member states of the EU; the EFTA council and parliamentary assembly perform somewhat similar functions to the EU’s Council of Ministers and the European Parliament of old; and topics such as health services, energy, climate change, maritime policy and the environment feature regularly on EFTA’s agenda. This is not to mention that a UK return to EFTA is far from assured.

Others talk of the ‘Norwegian model’. This consists of being a member of EFTA but still accessing the EU’s Single Market through the European Economic Area (EEA), an agreement between the EU and EFTA established back in 1994. But there’s an obvious downside: although not an EU member, Norway contributes to the EU budget – a considerable amount when compared to Britain’s own per capita net contribution – and accepts the rules relating to the free movement of people – the much maligned policy which allows civilians from any EU member state to work and reside in the UK – without any political input whatsoever. And the EFTA Court, established to ensure compliance with the rules of the Single Market, is a supranational body not unlike the European Court of Justice. Even the Norwegian prime minister recognises problems in this arrangement. Then there’s the ‘Swiss model’, which closely echoes the Norwegian model but excludes services, a sector so vital to the British economy.

Beyond Europe, some remain hopeful that Britain might reinvigorate Commonwealth trade – an argument that seemed antiquated even in the 1960s – or join a North American free trade area, despite the fact that the US wishes Britain to remain in the EU.

This is what is most perplexing about the current debate over Britain’s future in the EU. The Union might not be perfect, and alternatives doubtless exist, but the options available to Britain are clearly second bests. This is why all of the main party leaders – David Cameron, Ed Miliband, Nick Clegg and Nicola Sturgeon – support Britain remaining a member of the EU. If others want Brexit, they need to explain why such poor alternatives offer Britain, and Europe, a better future. Even the briefest examination of these options suggests they don’t. This is why I might not eat my words just yet. Miliband’s speech and HSBC’s announcement were both welcome interventions in an otherwise foreign policy-free election. But they are just the beginning of a debate that the country deserves about its future.

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