Euro-sceptic Trade Myths

Euro-sceptics used to argue that Britain outside the EU could have the same kind of relation to it as currently exists with Norway and Switzerland. That argument never had legs. Firstly, both Norway and Switzerland are more the size of London than of Britain, so comparing them to the position Britain would be in, is not tenable. But, it has also been pointed out that both Norway and Switzerland, in order to obtain the relation they have, have had to basically accept EU conditions and costs, but without having any say in the formulation of those conditions. So, the euro-sceptics have tried a different tack, arguing that Britain would be able to negotiate the same kind of relation as countries like Canada. It is no better as an argument.

First of all, the euro-sceptics seem to forget that Canada itself is part of a similar arrangement as the EU, via its membership of NAFTA, the North American Free Trade Area, which in itself is an indication that the world is increasingly being divided up into these large economic blocs, just as in the 19^th century, the economic development that came along with capitalism, created the need for the establishment of the nation state, of the merging of separate regional economies and currencies, and the establishment of common rules and laws for the rational functioning of capital within a single market. But, also the truth is that the relation of Canada and other economies to the EU, is itself not the same as either the relation of Norway or Switzerland to the EU, and certainly not the same as that currently enjoyed by the UK within the EU.

In fact, the half-hearted relation of the UK to the EU already means that it does not enjoy the same benefits that it would within a single federal EU state, similar say to the United States of America. For example, over the last couple of years, the pound has been strong. Yet, even with all of the travails of the Eurozone debt crisis, with the ECB introducing money printing, and so on, the pound is not even back to the level against the Euro it was at back in 2007, when the Euro stood at around £0.66, compared with £0.78 today. In the intervening period, that rate has varied considerably with the Euro rising to near parity with the pound in 2009. For UK businesses buying from and selling to the EU, swings in the value of the pound, in these ranges, moving by more than 50%, over just a couple of years, impose considerable costs and uncertainty. No wonder that in the aftermath of Dave's Dodgy Deal, and the potential for Brexit, the pound dropped sharply in value against both the Euro and the dollar.

Just think of the costs you incur on going on holiday in changing your Pounds into Euros, and back again. The commission alone in such transactions can swallow up 10% of your Pounds, quite apart from any changes in the actual exchange rate. For businesses that conduct billions of pounds of trade in a year, that cost of paying money-dealers commission on such transactions would be a huge additional cost, were it not for the fact that the very scale of the transactions means they can use foreign exchange dealers who charge lower commissions. But, the fact of any commission at all, is a charge that British business faces in addition to the costs of all businesses operating within the Eurozone.

That does not change the costs of continual changes in the exchange rate of the pound to the Euro, and the costs resulting from uncertainty which that creates. It has become received wisdom over recent years to believe that the decision for Britain not to join the Euro was a wise move, but its not at all clear why. Has membership of the Euro affected German economic growth during even the period of the Eurozone crisis? Not noticeably. And, currently, capital has been flowing into the Eurozone's bonds to an extent that even the bonds of states in the periphery have been trading at lower yields than on UK Gilts! The yield on German Bunds has even been negative, as speculators scramble for safety.

A similar thing applies with the UK's exemption from Schengen. Anyone who travels across Europe knows the advantages of being able to move from one country to another without all of the costs and delays of having to have all of the bureaucracy and administration involved in obtaining, passports, visas and other such documents, let alone the time taken going through border controls. Again when it comes to businesses and trade, those costs are even greater. For business time is money, and capital continually seeks to reduce the turnover time of capital. The faster capital can sell the commodities it has produced, and thereby realise the capital consumed in their production, along with the profits they contain, the less capital it has to advance to produce that profit, and so the higher the annual rate of profit it enjoys. A central part in raising the rate of turnover of capital is the circulation time. Removing borders and speeding up distribution has been a powerful means of capital within the EU, raising the rate of profit.

If British capital wants to reduce its costs, reduce uncertainty, and raise the rate of profit, a closer integration in the EU is what it requires, not further separation from it. The arguments over security and terrorism in relation to borders are really meaningless. Most of the terrorist acts in the UK have been undertaken by home grown terrorists, not people who have come in from the EU. In relation to Syria, for example, it is not the UK that has a problem with Syrian terrorists, but Syria that has a problem with UK terrorists. The UK's border controls have not stopped thousands of UK based jihadis travelling to Turkey, and on to Syria, for example.

Moreover, I remember the Black Panther marauding around my own neighbourhood in the 1970's. I also remember the Yorkshire Ripper. In fact, there are UK terrorists, and run of the mill criminals who travel around the UK, from county to county, town to town, all the time. Yet, no one suggests that the answer to this is to close the borders between Yorkshire and Lancashire, between Staffordshire and Shropshire, and so on, to prevent these criminals from being able to move around the country. No one suggests introducing passports for people living in Yorkshire so as to be able to move to Lancashire! The reason is simple, the actual proportion of people moving across these borders who are criminals, let alone terrorists is very small. To close down free movement, simply on that basis would then be ridiculous, and the same applies to the borders between the UK and France, Germany and Belgium and so on.

All of these things, and more give countries in the Eurozone advantages over UK capital, even as things currently stand, let alone were Britain to leave the EU. None of those things either involve the EU imposing any kind of tariff or penalty on the UK, it simply flows from the economic relation of the two, outside a truly single market, and currency and fiscal union. Those advantages will necessarily strengthen the Eurozone, as against Britain, whether the UK stays in or leaves. But, that is not a reason for the UK to leave, it is a reason for the UK to be more integrated within the EU, and the Eurozone.

The Eurosceptics argue that because the EU sells lots of commodities to the UK, they will want to have a free trade agreement with it. Maybe, but maybe not. Over the last few years, countries around the globe have been engaged in a currency war, where each has tried to devalue its currency so as to gain competitive advantage over others. In less benign economic conditions in the 1930's, they each attempted to gain advantage by imposing tariffs and other import controls on the goods of other countries. There is no reason, why in similar conditions, the EU would not impose such controls on British goods and services, because the EU economy of 500 million people, will have no problem replacing British made goods and services.

But, the Eurosceptics, even in current conditions, seem to have missed the point. Yes, of course, Germany will want to continue selling BMW's to the UK. The point is that, increasingly it will not just be the existing BMW's produced in Germany and exported to the UK, it will be BMW Minis produced in Germany rather than Oxford that will be shipped into the UK; it will be increasing numbers of Ford's produced inside the EU and shipped to the UK, rather than produced in Britain; it will be Hondas, Toyotas and Nissans produced in the EU, rather than in the UK that will be shipped here, creating jobs in the EU and not in the UK. In order to pay for all these imports, capital will flow out of the UK and into the EU, thereby increasingly impoverishing the UK economy, and accumulating capital in the EU!

The Eurosceptics do not seem to understand that the consequence of free trade for the UK outside the EU, will be to impoverish it. In order to compete, it will mean pushing down UK wages and conditions even further, much as would have been the case for Greek workers had Greece been forced out of the EU. At least the national-socialists of the likes of George Galloway, as with those who advocated the Alternative Economic Strategy in the 1970's, understand that, and it fits with their ideas of economic autarchy.