Is the EU still an asset?

John BrutonIn 2012 the former Prime Minister of the Republic of Ireland, John Bruton, looked at the possible consequences of a break-up of the Eurozone (EZ), followed by a break-up of the EU itself. His article, in Fair Observer, opens with some favourable comments on the EU, which we summarise, with a few critical comments. The article, which is in two parts, can be found here: https://www.fairobserver.com/region/north_america/what-would-happen-if-eu-broke-part-1/

The main text below is quotations from Bruton’s article (our comments are in italic font).

The European Union has been a remarkably successful political experiment. It is the first ever voluntary coming together of sovereign states, pooling some of their sovereignty, so that they could do more together than they could separately…[This is] why the EU is still an asset:

1. An assurance of mutual security

There is a queue of states still lining up to join [but perhaps not so enthusiastic now]

2. A way to manage globalisation democratically.

CoEOther international organisations operate on a purely inter-governmental basis, which means that decisions must be made unanimously, and democratic involvement only arises when a deal already negotiated in private needs to be ratified in national parliament without possibility of further negotiation or amendment. [sounds just like the EU itself though]

A unique instrument for…problem solving in the wider world. [unique certainly but it creates problems it has to solve]

The Euro Crisis is Not Solved[A scenario that might lead to the end of the EU itself (Eurozone break-up)]

New currencies would have to be established. The relative value of these currencies would be unknown and unknowable. Some would lose value very quickly and others would shoot up in value. Exports would become dramatically uncompetitive in some cases, and in others they would become so cheap that there would be accusations of dumping, currency manipulation, and calls for immediate reintroduction of import duties to level the playing field. Such duties, if imposed, would break up the single market. That would be tantamount to the break-up of the European Union itself. Open markets – the assumption on which Ireland built its entire economy over the last 50 years – would be gone.

It is what happened when the rouble zone broke up in the 1990s and explains why incomes fell by 50% in the former rouble zone countries.

Euro punctureWe see signs of that happening already, but it is being held in check by the hope that problems can still be resolved on a collective basis. A break-up of the euro would show that that was impossible, and it would then be a case of every nation for itself, with particularly severe consequences for smaller countries like Ireland. [best to get out then, Ireland would get some shelter if it left along with the UK rather than after a eurozone failure which is very likely at some point]

https://www.fairobserver.com/region/europe/what-would-happen-if-eu-broke-part-2/

Meanwhile in the United Kingdom

In the European Union states are free to leave, so long as they fulfil their normal obligations under international law. [free to leave but not to be free, as the UK has found to its cost]

Weaker economies opened up their markets to stronger ones, and removed protection from local businesses, on the basis of a promise that they would qualify for structural funds to modernise their economies. These funds are provided by the EU budget. (Some of the EU budget also goes to agriculture, but the proportion has fallen from almost 80% of the total originally, to only 30% today.) The political difficulty with the UK stance is that of fairness.

Common MarketThere have to be common EU quality standards to construct a common EU market. Otherwise one country could impose specific standards, designed to exclude competitors from its market and to enable its own producers to make monopoly profits at the expense of its consumers. Any rulemaking power that could be abused in this way, cannot be handed back to national level without endangering the single market. [now they do it by central lobbying]

The EU is still regarded by many in the UK as a foreign country, not a Union of which the UK itself has been an integral part for the past 40 years. Membership of the EU is seen as a convenience rather than as a commitment. [except it’s pretty inconvenient on balance]

The UK’s Options Outside the EU

EEAOne possibility is to join Norway, Iceland and Liechtenstein in the European Economic Area, which would guarantee full access for UK goods and services to the EU market. But the price for that would be having to implement all EU legislation that was relevant to the single market and contribute to the EU budget, but without having any say in EU decisions. [better than the draft Withdrawal Agreement (DWA) for transition, if it didn’t last too long (it requires 12 months notice to leave the EEA)]

Switzerland has negotiated full access to the EU market for goods, but not for services. Services are the UK’s key export sector, so a Swiss style deal would not be attractive. [the Single Market (SM) doesn’t do much for services either]

If Britain negotiated a Customs Union with the EU, like that of Turkey, it would find its trade policies with the rest of the world were still being determined in Brussels, but with less input from London than at present. [that’s what Labour wants]

Finally, the UK might simply leave the EU, without negotiating any special deal. That would leave it paying tariffs on its exports to EU member states, including Ireland, and would necessitate the reintroduction of customs posts on the border in Ireland. [arguable, the EU did a lot to help the Swiss—where there’s a will…]

Conclusion

The EU does not enjoy democratic legitimacy in quite the same way that national governments do. As a member of the Convention that drafted what eventually became the Lisbon Treaty, I urged unsuccessfully that the EU should have a Presidential election. Then the Commission, headed by a President with a full EU-wide democratic mandate, would have more authority to propose solutions. [Oh God! Juncker on steroids?]

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