European Union: Recent Developments

Baroness Falkner of Margravine Excerpts

Monday 17th December 2012 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, I support the European Union (Croatian Accession and Irish Protocol) Bill, which is anticipated to be uncontroversial and a welcome measure of the progress made by Croatia in getting to this point.

The past few years have seen a consolidation of democratic norms and political stability in that country. My only concern is about the rule of law and the backlog in dealing with cases related to war crimes, but I note that the Government remain confident that this will be resolved by the expected accession date.

On the Irish protocol, again there is nothing exceptional about this being given legal form through attachment to the treaty on the European Union and the treaty on the functioning of the European Union. What is nevertheless alarming, however, is that some Members in the other place believe that the negotiation of the Irish protocol somehow serves as a model for what the UK might wish to do in future. They do not seem to notice that its extremely limited guarantees, as they see them, are in no way comparable to what they might wish to seek in a much changed EU after 2008, when that protocol was negotiated.

I am pleased to have an opportunity to discuss developments in the EU, particularly as there have been significant changes since our debate in February this year. Two of those developments stand out. There has been progress within the eurozone countries in reducing debts and stabilising the banking systems. The architecture of a new regulatory regime is emerging, as we have just heard in the Statement on the European Council, albeit very slowly indeed.

The other development has been here in this country—the speed with which we have embarked on a new tone in the debate about our relationship with the European Union. We now have a situation where opinion polling on the EU, always a minority interest in the past, is carried out regularly in our media and shows significant support for a referendum on Britain’s relationship with the EU. That is a marked change over the past decade.

I do not find this particularly surprising. Developments in the eurozone are bound to impact on our own calculations. When 17 or a smaller number of countries move to a full fiscal and budgetary union with strong political underpinnings, it is inevitable that we will be affected. For an outward-looking, open-trading nation such as Britain, if there is a fundamental change to the architecture governing finance, capital, investment and labour, we certainly have skin in that fight.

A cursory glance at the figures reveals a lot. Since the 1980s, the UK’s bilateral trade with EU members has more than trebled. More than 45% of UK exports are to the EU. The single market, one of the more remarkable achievements of the past few decades, has given us access to a market of more than 500 million consumers. The UK attracts one-fifth of all foreign direct investment in Europe—mainly because of our membership, one assumes. While these arguments about protecting our national interests are familiar to all those across the House who clearly see what is at stake in the calls for an “in or out” referendum, I will explain where the opponents of proactive participation are coming from.

We have on the one hand those who believe that they are enhancing the UK’s negotiating position by threatening a referendum. In their book is the naive proposition that other European countries will be so cowed by the mere prospect of the UK departing that they will put up no resistance whatever in granting the UK exceptions, and that will undermine their own countries’ interests. Hence these people strike impossible bargaining positions and votes in the other place, confident that triangulation will work. This is a cynical and dangerous game and prone to failure, which is why it is so sad to see the Labour Party on the Benches opposite legitimising that position in the other place as recently as the Budget negotiations.

The second group are those who genuinely believe that we should leave the EU, and that the consequences will merely place us alongside Norway or Switzerland. This group are not just naïve; they are simply deluded. To posit an equivalence with Norway, which rides on its massive US $600 billion sovereign wealth fund and vast reserves of oil and gas, which protect a population the size of Scotland, is simply not to understand the challenges that this country faces.

[Lord Willoughby de Broke]

Most of us who want to leave do not equate our position with Norway, or indeed with Switzerland. We believe that we want to run our own affairs independently, so please let us not run the canard of being like Norway or Switzerland. That is not the case for those of us who want out.

[Baroness Falkner of Margravine]

The noble Lord cannot have been listening very carefully. If he had been, he would have noticed that I did not name any particular players in this regard. They come from all sides.

Norway’s membership of EFTA and the EEA is about as close to the EU as it is possible to be without actually belonging. It is bound by most EU rules and regulations and pays a significant amount into EU coffers. Norway depends on other countries to fight its corner, not least on Britain and Sweden. As the Economist describes the relationship:

“It would be as though Britain maintained a golden fax machine linked to Brussels, which cost billions of pounds a year to run and from which regulations issued ceaselessly”.

Indeed, the Norwegian Government have carried out its own assessment, which found:

“As a result Norway has implemented nearly three quarters of all EU legislation, 99.6% of all single market legislation (some 1,700 EU directives), and is ranked 4th best performing country”.

That also includes the working time directive, the supposed cause of so much frustration in the UK.

The Swiss model would probably not be available, as the EU would be unlikely to extend EFTA privileges to as large and significant a country as the UK without requiring convergence across a range of areas. Switzerland is implementing most EU financial services legislation to avoid being locked out of the single market. With 50% of British trade within the EU, and single-market access so essential for attracting foreign investment, the UK would end up in the same position: implementing EU laws but with no say over them. No British votes, no British Commissioner, no British MEPs—a substantial democratic deficit.

It is instructive that even Open Europe, whose lack of enthusiasm for the EU is well known, has found that:

“EU membership remains the best option for the UK.”

All the alternatives come with major drawbacks and would all, except the WTO option, require negotiation with the agreement of the other member states, which would come with unpredictable political and economic risks. This means that negotiating a new UK relationship with Europe outside the EU treaties—that is, leaving the EU—would present similar difficulties as renegotiating membership terms while remaining a member of the EU.

The position of both camps, along with elements of the Labour Party, assumes that there is the possibility of cherry picking items for removal from the UK’s obligations. This unilateralism is wrong-headed and was clearly identified as such by Mr Damian Green just last week, when he said:

“There is a fantastic vision of an EU which remains a single market, including the UK, but which in all other respects allows the UK to be outside … This is a fantastic vision precisely because it is a fantasy. What is in this for those on the other side of the negotiation?”.

If one read the French, Italian or indeed the Polish newspapers, one would find that the answer to Mr Green’s question might be, “Nothing”, accompanied with the word “Goodbye”.

If ever there was a time for serious reflection and for all political sides to weigh carefully where these calls will take us, it is now. We need to be clear-headed about a call for a referendum, which, if necessary at all, will be so only after a future treaty change that significantly shifts competences to the EU institutions at some date in the future. An abstract discussion on whether Britain is in or out does service neither to democracy nor to the national interest. One can either be clear that there is something substantive on the table, with readily understood pros and cons, or one can play the Alex Salmond card, which is to act first and fill in the blanks later, with resulting confusion and obfuscation.

For our part, the Liberal Democrats are entirely clear. In the coalition agreement, we have agreed to hold a referendum only when there is a treaty change. However, we are clear too that the United Kingdom’s best interests lie in being an active participant in the EU, being at the table, championing our cause, making common cause with others who are like-minded, building alliances where we can and standing firm when we must—well grounded, secure and well placed in the club of 27.