THE BLOG

Deals, Not Diktats: Jobs Depend on Trade, Not EU Superstate

13/03/2014 10:41 GMT | Updated 12/05/2014 10:59 BST

Immigration remains headline news and at the centre of heated debate. The EU's open border rules have sucked politicians and officials into the battle over benefit tourism and job losses. This week the Home Office released figures that showed 121,000 non-UK EU citizens received working-age benefits in the year ending February 2013. In response to increasing public frustration at such statistics, the Conservatives have pledged to renegotiate Britain's EU membership with the promise of a referendum that is likely to go against Brussels if it refuses to reform. Labour's leader, Ed Milliband, however, sits on the fence, having ruled out a referendum except over new powers transferred to the EU, though Labour would consider extending the period before newly arrived immigrants can claim benefit to six months. On the other hand, the Liberal Democrats, who support uncontrolled EU immigration, seized on another report last week that was said to show the 'displacement' of citizens by immigrant labour had been exaggerated.

As they urge our continued submission to the open-door immigration rules imposed on European Union members, Nick Clegg and his party have turned to scaremongering. Britain, they suggest, would be cut off from Europe if the Tories have their way. The Lib Dems claim that three million jobs depend on EU membership. Lib Dem MPs like Julian Huppert are now writing to their constituents implying that local jobs are at stake.

The fundamental failing of the Lib Dems' scare policy on the EU is what it misses out: jobs depend on trade, not union.

In seeking to escape full political union with Europe, and its consequences - uncontrolled immigration, pressure on public services, and the erosion of democracy - Britain is not about to fall off the continent. The Lib Dems are missing out on the architecture which governs trade today. Britain is, and will remain, part of the European continent, with the strong trading ties, cultural and social links, and the interconnected economy she has always enjoyed, before and after 1973.

Indeed in any renegotiation, the EU will itself be bound by the agreements it has made, including those limiting potential trade barriers. That is why Lib Dem scaremongering over jobs is fanciful, a point brought out by the economist Tim Congdon in analysing the figures. As Professor Congdon explains, the original 3 million job loss figure was plucked out of context from a report by the respected National Institute for Economic and Social Research (NIESR) which also mentioned that alternative arrangements could offer net economic benefits. Besides, the EU would be bound by the Uruguay Round Agreement (under World Trade Organisation auspices) which imposed limits on the trade barriers that it could place on other countries. Finally, it would simply not be in the EU's interests to start a trade war with one of its biggest customers - in the year to September 2013, for example, our trade deficit with the EU was £66bn. For all the grandstanding of the Brussels Commissariat, there is little appetite in the EU to cut up rough with Britain, whose 60 million people buy almost half their imports from the EU.

For the best part of two centuries, free trade has been the leitmotiv of British popular democracy and was central to the country's joining the EEC in 1973 and the subsequent liberalisation of the labour market in the 1980s. However the goal of free trade in its true sense can be undermined by EU policy: its internal protectionism, single market policies including 'harmonisation' and the regulatory 'creep' which pushes up production costs, and an anti-democratic structure. The move to a wider Europe of 28 nations has led to a deeper Europe, with unelected commissioners controlling the agenda to promote favoured interests or outcomes - so often at odds with competitive and open trade - and the extension of qualified majority voting. In such a structure Britain can do little to put its economic interests, including free trade and plentiful employment, to the fore.

It is certainly true that jobs are affected by Europe but not the way the Lib Dems allege, and certainly not for the better. Professor Congdon also shows that Britain has higher employment levels than the EU or the Eurozone average, but that comparable nations outside the EU (Australia, Canada, Japan) have higher levels still. The EU increases the cost of production with swathes of regulation adding, it is estimated, £6-£7.5billion to UK business costs each year. This makes it harder for our British businesses to compete globally. Take the EU 'solvency' regulations, which put British insurers at a disadvantage over their competitors in the US and Switzerland, and tie up capital that they would otherwise be investing in the economy. Unless these regulations are removed, British jobs will go.

Nick Clegg and his party were wrong to make light of immigration's consequences for Britain's working poor. In fact, the report they made so much of last week did find that migrant workers had an impact on native employment rates between 1995 and 2010, especially in the recession years. And the coefficients for EU and non-EU migration were of similar size (although the EU numbers were not proven to be statistically significant). As well as its probable effect on jobs, uncontrolled immigration squeezes wages and increases housing costs. Yet, in single-minded devotion to Brussels, Mr Clegg is now warning darkly that far from causing unemployment, the EU prevents it.

There is simply no evidence for the Lib Dem innuendo about British jobs being dependent on EU membership, an innuendo based on misrepresenting the economic analysis and the evidence. Nothing stands in the way of Britain negotiating a deal which best serves the nation and benefits our economy and employment rate - not even EU self-interest. Mr Clegg and his cohorts should concentrate on what really matters with regard to the EU - the dependence on trade for economic success. British jobs depend on selling British goods worldwide, within and beyond the European Union. They are not dispensed by his former colleagues in Brussels.

Dr Sheila Lawlor is Director of Politeia.