Tory MPs calling for a referendum on the UK’s membership of the European Union may have been voted down in the Commons, but their rhetoric – that the UK is giving up sovereignty to a dysfunctional union that drains the country’s resources through red tape and regulation – is persistent.
Right wing papers - long the source of dubiously accurate stories on the acceptable curvatures of bananas - talk of a “rising tide” of popular sentiment against Brussels. In the face of such vitriol, counting the benefits of membership of the free trade area is an unpopular hobby.
Baron Roger Liddle, chairman of the Policy Network, Tony Blair’s former adviser on Europe and an "ardent pro-European", told the Huffington Post UK that the benefits of European membership were manifold, and that the rift between the government and the Tory back bench damages the UK's ability to negotiate on the very issues the eurosceptics complain about.
"There’s a fundamental contradiction in the British position, and that contradiction is that we have to recognize the eurozone is going to get together and have closer governance if it’s going to survive," Liddle said. "The government is clear when it says ‘we have got to stay as close to that as possible. If we don’t, we won’t be at the table when questions like the single market, the future of regulation of the City of London, tax regulation, are decided."
If - or when - the eurozone manages to coalesce towards some form of fiscal federalism, it will cooperate much more closely on these microeconomic matters, Liddle said.
"We can’t avoid that, so we’ve got to be very close to them, which I think is David Cameron’s first instinct, which is a sensible, pragmatic instinct, and what the Tory backbenchers want, which is repatriation of powers and a looser relationship," he added. "I don’t see how the coalition government is going to ride these two horses at once – one horse bolting in one direction and the other bolting in another."
The UK exported nearly £143bn worth of goods and services to the EU in 2010, compared to £121bn to the rest of the world.
The United States is the largest single importer of UK goods and services, with £37 billion worth in 2010, but the next seven of the country’s bilateral trade partners are EU members: Germany (£28bn), the Netherlands (£21bn), France (£20bn), the Irish Republic (£16bn), Belgium (£13bn), Spain (£10bn) and Italy (£9bn).
The UK exports more to EU member Sweden (£5bn) than it does to emerging market powerhouse India (£4bn).
Exports to the 12 new member states in 2009 were worth £11.7bn, against £4.5bn a decade earlier.
Figures from the European Commission say that between 1992 and 2006, the single market increased the EU’s prosperity by 2.15 per cent of gross domestic product (GDP) and created 2.75m extra jobs.
Research from the UK’s own Department for Business, Innovation and Skills said that the single market has led to European countries trading with each other twice as much as they would without the trade zone being in place. Membership may be responsible for income gains of between £1,100 and £3,300 per year per British household.
Some critics maintain, however, that the adoption of the single market has actually held back the development of the UK’s trade relations with the rest of the world.
“I think initially the single market was expected to be of huge benefit to free trade, but it turned out to be a bit of a trap. It was an excuse to introduce controls and regulation from the centre,” Dr Richard Wellings from the Institute of Economic Affairs, a free market think tank, said. “It’s rigged patterns of trade so that the UK is forced to or incentivised to trade with Europe, rather than the rest of the world.”
Tariff barriers for agricultural products, and non-tariff barriers - such as environmental and health and safety regulations – for manufactured goods mean that lower priced goods from outside of the EU are not available, he added.
The trade balance with the EU is actually negative, with the UK importing £43bn more than it exported to the union in 2010. That balance is skewed by Germany’s manufacturing-led economy, which sends £17bn more to the UK than it imports from it.
By contrast, the trade balance with China is far heavier weighted. The UK imports £28bn worth of goods from China, versus exports of just £7bn.
“It’s a highly corporatist system, where the big European companies have captured regulation and used it to shut out competitors from the rest of the world,” Wellings said. “The car industry builds new plants in the Czech Republic or Spain, instead of going to the really cheap places in India or China. The reason they do that is because of all these EU barriers to trade.”
“It’s a fake market and a false economy,” Wellings said.
The UK remains the top destination in Europe for foreign direct investment (FDI). According to figures from the United Nations Conference on Trade and Development, the country attracted more than $1 trillion of FDI stock in 2010. Nearly half of that was from within the EU.
Global businesses – both large and small - have used the UK as a hub to invest across the EU, taking advantage of the country’s membership. Companies from other Anglophone and Common Law jurisdictions routinely headquarter their European operations in the UK for ease of operation.
Because of the lack of a counterfactual, it is likely to be impossible to comprehensively prove that membership of the single market has been a net benefit to Britain, or if it really has held back the country’s growth. Few EU insiders are willing to publicly talk about the UK’s apparent rejection of the union’s benefits, but privately they express frustration. Anti-EU sentiment is far less widespread on the mainland, where politicians have been slightly better at articulating the benefits to their electorates.
Some current and former “eurocrats” note that the UK needs the EU in the same way that France needs the EU - as a waning global power that needs the increased scale, security and bargaining power of a union that, while it has many differences, broadly shares Britain’s values.
"If the United Kingdom seriously wants to repatriate powers on things like social and employment legislation, or if it wants to pull out of the charter for fundamental rights, it will have to pay a high price to achieve those negotiating objectives," Liddle said. "In other words, it will have to sacrifice... the objective, which should be to be as close as possible on the issues that are of vital importance to us."
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