John Bruton

Opinions & Ideas

Category: EU summit

WHAT WILL HAPPEN IF UK VOTERS DECIDE TO LEAVE THE EU?

Residents of Northern Ireland will have a vote sometime next year on one of the most important issues to affect these islands, and indeed all the nations of  Europe, namely whether the United Kingdom is to remain a member of the European Union, or leave.

A BIG DECISION…BUT TORY PARTY REMAINS NEUTRAL 

As I speak tonight, the UK government has yet even to put in writing what it wants changed in the EU.

Yet, regardless of what it seeks or what it gets, the Conservative party, which forms the government, has surprisingly said it will remain neutral in the referendum anyway. In other word, it is asking individual voters to  study, and decide upon, an issue in which their party itself is unable, or unwilling  to make a decision.

This is an example of the weakening ability of political parties in western democracies generally to lead, inform and mobilise public opinion. Rather than lead opinion, political parties react to it, a trend that is dangerous for the future. 

A TIGHT TIMETABLE, AN EXTREMELY COMPLEX ISSUE…AND A  VERY SHORT CAMPAIGN

I expect the UK will make a presentation of its requests at the October EU Summit, and aim to wrap up an agreement at the December Summit. 

Only after December, will any  positive case for continuing UK membership of the EU be made to the public, in what, given the inevitable complexities, hypotheses, and uncertainties to be explored and explained, will be a very short  referendum campaign. Examples in Ireland show how unpredictable referenda can be, and how difficult it can be to adequately inform voters on issues which are, of their very nature, complex, hypothetical, contingent on the reaction of others,  and uncertain. 

And, even if the UK referendum decision is to remain in, will that satisfy today’s Euro sceptics?

Will the UK always remain, psychologically, on the sidelines of the EU?
After all, no other country in the EU has so far demanded new terms for itself, as a price for staying in the EU. Could the EU exist for long if every EU state adopted the UK approach?

WHY THE EU IS WORTH PRESERVING

The European Union has evolved and developed over the past 70 years. 

But its goal from the outset has been, and remains, to cultivate so much mutual dependence between European states, that they could never go to war with one another again, as they did with such disastrous consequence in 1914-18 and 1939-45.

More than any other part of this island, Ulster has suffered when European peace was shattered ….the losses on the Somme, and the repeated bombing of Belfast come to mind.

A decision by the electors of the UK to withdraw from the EU would be a huge blow to the EU. That is where the debate should start…what sort of Europe to we want? What sort of Europe will be feel safe in?

A precedent has already been set by the decision of the UK to demand new terms for itself, under the shadow of an in/out referendum.
Let us look down the road and see where it is leading, and if that is really somewhere we want to go.

UK WITHDRAWAL THREAT HAS ALREADY DAMAGED THE EU

The precedent  of a major European country, an EU member of 40 years standing which already decided by referendum in 1975 to stay in the EU, deciding for a second time to seek special terms for itself, with a threat of withdrawal is damaging already.

But what of the further precedent that may yet be set.

That precedent would be of a major country withdrawing altogether from the European Union, because its voters felt the special terms it got, were not good enough?

The consequences of that for the cohesion of the EU itself are unknowable, but probably would be quite dramatic.  It would most certainly weaken the EU. 
Some may shrug their shoulders at that, but should they?

The UK precedent could be immediately seized upon by Madame le Pen in France who would seek a renegotiation of the French terms of membership. 

Geert Wilders in the Netherlands would not be far behind in saying that anything the UK can do, the Netherlands can do too.

EU HELPS EUROPE DEFEND ITS INTERESTS IN THE WORLD

The EU, as a force that can protect and unify European interests in trade, intellectual property, environmental standards, that has already been weakened, by the uncertainty around a the UK renegotiation and a referendum, would be weakened further.  

All over the world, those who do business with the EU would begin to wonder….is the EU going to break up?  Are others going to follow the UK out the door?

In a world in which Europe is becoming a smaller force, economically, politically and in population, a weakened EU would probably not be in the interests of Europeans, whether they live in Belfast or Bratislava, in Downpatrick or in Dubrovnik.

A disunited Europe, of 28 or more separate countries, pursuing their own agendas would become a playground for outsiders seeking advantage and playing one off against the other.

Vladimir Putin would be happy.

So would Europe’s small number of potentially monopolistic energy suppliers, who could then more easily play one  European customer off against the other.

Europe’s borders could again become barriers behind which criminals could hide.

So I would ask you,  you who will be deciding this question…to consider not only how the decision will affect yourselves, or  affect your local or national community, but also to consider how it will affect Europe as a whole, and its place in the world.

EU EXIT WOULD CHANGE THE UK ITSELF AND WEAKEN ITS ECONOMY

Northern Ireland voters also ought to take some account of the effect of a UK exit in your more immediate neighbourhood.

A study by the Centre for European Reform said that UK EU membership boosted UK goods exports by 55% over what they would be if the UK was outside the EU. 
That is a boost of £130 billion, which is three times as much as total UK exports to China. 

The UK’s National Institute for Economic Research estimated that leaving the EU would subtract 2.25% from the UK GDP. 

The losses would not be evenly spread. Regions in the UK which rely on services exports would lose least because the EU does not impose tariffs on services imports. But regions where manufacturing is important would be hit the hardest.  

The Centre for European Reform in London has calculated that, if the UK leaves the EU and if existing EU tariffs were then to be imposed on UK exports, the North East of England, with its big manufacturing base, would lose the most, the equivalent of 0.4% of its private sector output each year.  

Northern Ireland and the East Midlands would lose 0.35% per tear of their private sector output, but London, with its big tariff free service sector, would lose only 0.1% . Northern Ireland would lose almost twice as much as Wales would.

Some might argue that this will not happen because they assume that, even if the UK left the EU, it would be able to keep full free access to the EU market.  Maybe, maybe not. 

UK COULD ONLY KEEP ACCESS TO EU MARKETS IF IT MEETS EU TERMS

Switzerland has indeed negotiated tariff and duty free access to the EU market for its exports, but, in return it has had to accept immigration from the EU, contribute to EU funds for poorer regions, and has had to accept EU standards, in which it has no say. 

Given that these are precisely the sorts of thing that the UK objects too now, as a member of the EU, it will be difficult for UK to agree to pay that price for access to the EU Single market as a non member.

Remember the negotiation of the UK’s exit terms, after a referendum decision, will be a time limited negotiation where others can play brinkmanship too. 
And bear in mind that an EU/UK trade negotiation will not be a negotiation of equals. 

The EU sends only 7% of its exports to the UK, whereas the UK sends 45% of its exports to the EU. One must ask if other EU states would want to create a precedent of giving terms to the UK that it has refused to Norway and Switzerland, as non member.

If the UK exit terms are too generous, the precedent might encourage other states to leave, which of course they too are perfectly entitled to do.
If the UK leaves the EU, the world will not stand still.

At the moment, UK exporters benefit from any present or future trade and investment deal made by the EU, for example the mega trade and investment deal in prospect with the US. UK negotiators have an input to the terms. Outside the EU, they would have no say.

As a Union of 500 million, relatively prosperous, consumers, the EU has clout in such negotiations.

Without the UK, the EU would have less clout.

But the UK on its own will have even less clout than a diminished EU. Both of us would lose. And our competitors in Asia, the Americas, and elsewhere will gain. 

UK EXIT WOULD WEAKEN PUSH TO COMPLETE SINGLE MARKET

On the positive side, UK membership is vital if the EU is to complete its Single Market, particularly in services, especially digital services. Without the UK in the EU, protectionist forces would hold greater sway, and that would be a loss for UK exporters to Europe.

The organisation “British Influence” has estimated that completing the EU Single Market could add 1.8% to the overall EU GDP, but it has gone on to estimate that completing the EU Single Market it could add 7% to the UK GDP (assuming the UK is still in the EU)! 
Without the UK, support for moving towards a full EU Single Market will be much less.

Ironically one of the reported UK renegotiating goals, a veto on EU laws for a minority of national Parliaments, would most likely be used by others to block the completion of the Single Market, from which the UK has so much to gain.

Referring to the North East of England, The CER noted that “ironically regions that have most to lose from leaving the EU tend to be the most Euro sceptic”.

So it may be impossible, in a short referendum campaign, to convey all of these complex facts and risks to the electorate, given that there is so little knowledge of the value of the EU market, and the message will have to be conveyed through the medium of a press, much of which is viscerally anti Europe anyway. 

IMPACT OF BREXIT ON NORTHERN IRELAND WORSE THAN ON  MOST OTHER  PARTS OF UK

Coming closer to home, what might be the impact on Northern Ireland itself of the UK leaving the EU, and presumably taking Northern Ireland with it?
Unless the UK can negotiate a special trade deal, like Switzerland and Norway have, and I have already indicated the difficulties with that, customs posts would have to be erected along the border again. 

That would disrupt lives, and it would disrupt business.

Many firms process raw materials originating in the Republic here, and vice versa. All that would have to be subject to customs inspection, a costly and intrusive process.

If the UK wanted to restrict EU immigration from across the land border, it would have to institute passport controls within Ireland…..something that never happened in history before.

Smuggling would undergo a revival, with endless profit making opportunities would be opened up for subversives and organised criminals.

I have attended a number of debates in London of the possibility of Brexit, and have been surprised by how little notice is taken of the implications for Northern Ireland. Similarly little notice seems to be given to the effect of the UK leaving the EU on Scotland, or to the consequent effect  on the Union itself, a matter of concern to a significant section of the population in Northern Ireland.

Given the difficulties that exist, as things stand, in applying UK budget limits to Northern Ireland, one must also wonder where funds will be found to replace the EU Single Farm Payment for Northern Ireland farmers,  the EU rural development funds coming here, as well as  the EU Regional Fund monies.

The report prepared for the Northern Ireland Assembly by the Open University Business School, which I commend, says that between 2007 and 2013, a total of £2.42billion in EU funds came to Northern Ireland, of which £1.2billion was Single Farm Payments.

Will the UK be able or willing to replace that, especially if it still has to contribute to the EU budget as a non member, to get access to the EU Single Market?

I have focussed, so far, on the problems that might face the UK if it leaves. 

REPUBLIC WOULD SUFFER TOO

But my former constituents in Meath would not be unaffected.
We would lose a friend in Europe if the UK leaves.
We would lose the common EU framework for the whole island that has contributed so much to peace, and is specifically acknowledged in the Belfast Agreement.
Our tourist industry would suffer if barriers have to be placed on the border again.
But, we, south of the border, will have little say in the decision. You will.

As I said at the outset, I hope you will think of what will be best for yourselves, but also what will be good for Europe as a whole, for the rest of the UK, and, I hope, for the rest of this small island on which we all live.



………………………………………………………………………………………………………………………………..
Speech by John Bruton, former Taoiseach, at the annual dinner of the Council of the Incorporated Law Society of Northern Ireland, in the Ulster Museum, Belfast at 10.30pm on Friday 25th September .
………………………………………………………………………………………………………………………………..

THE LATEST VERSION OF THE EURO AREA FISCAL COMPACT-WILL IT BE ENOUGH TO SATISFY THE ECB TO DEPLOY THE NECESSARY FIREPOWER?

On the basis of the  agreement at the EU Summit on 9 December, the EU is working out the details of the proposed fiscal compact which will be incorporated in a Treaty between EU members, except the UK. The latest version has been published on the Open Europe website and is herewith.

My own view is that something solemn and strong, along these lines, is needed if sovereign borrowing by European states is to regain the confidence of the markets. This a vital national interest for all euro area member states, notably for Ireland. So the Treaty must  pass. But we must also make sure it is as well designed as possible.

A few questions need to be answered.

1.)    Will this Treaty need to be put to a Referendum in Ireland?

When Ireland joined the United Nations and the IMF, no referendum was needed, even though in the former case Ireland theoretically could have been, or be,   committed militarily,  in  defined circumstances, which have not  in fact yet arisen.
One of the provisions in the Treaty , would commit Ireland to introduce a balanced budget rule into its legal system in a  binding and permanent way, preferably in the national constitution.
 A constitutional amendment would definitely require a referendum. But an amendment to the Central Fund Act or some other piece of “permanent” financial legislation, to impose a balanced budget policy, would not require a  referendum.
I wonder if  that would be sufficient?

2.)    How easy will it be to interpret is the proposed compact?

If the wording of the proposed Treaty is to subject to adjudication by the European Court of Justice and, in Ireland’s case, by the Irish Supreme Court it needs to be very clear .

The Treaty would allow a country to have a structural deficit of up to 0.5% of GDP , “in terms of the country specific medium  term objective” for that country. That objective would presumably be set by the Commission.

 Interpreting administrative objectives set by the Commission would be difficult for Courts.

Furthermore, the concept of the structural deficit itself is quite elastic. It depends on the point a country is on in its economic cycle. But there is often controversy even among top economists about when an economic cycle began or ended, and even about whether there is such a thing at all. This will bring judges into very difficult areas in which they have little expertise.
There is also a question about how binding these rules will be. A rule in Ireland’s constitution is much more  severe, than rules in constitutions in other countries, where the constitution is  seen as guidance, rather than absolutely binding regardless of circumstances


3.)    Does the compact do everything that needs to be done?

My own sense is that there is not enough in the draft Treaty about how Europe is to regain competitiveness and market share.
 This means bringing downs costs, in the way Germany did in the 1990s and Latvia did more recently. Fiscal austerity is necessary, but not sufficient, to achieve this.
Austerity is not an end in itself. It is only a means to an end, and that end needs to be more credibly and clearly defined by the Heads of Government of the Euro area.

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