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Leaving the EU means joining the world



Here are three articles on the Brexit referendum of June 2016.


First, My last Times column before the EU referendum, published on 20 June:

 I was just too young to vote in the 1975 referendum. I would have voted “Yes” to the European Community and I think I would have been right to do so. It had contributed to European peace by blurring French and German economic sovereignty. It was a free trade area in a world of high tariff barriers, albeit within a protectionist wall that excluded other countries and continents. It helped to halt Britain’s disastrous obsession with central planning.

Two decades later, the European project stopped being about economic growth (to this day it still has no trade deals with America, China, Japan, Brazil, India, Canada, Australia and Indonesia) and embarked on the drive for monetary and political union, embodied in the treaties of Maastricht, Amsterdam and Lisbon.

The result has been horrible. Unlike every other continent, Europe stagnated for the best part of a decade after the crash of 2008. Monetary union in the eurozone without fiscal union gave Germany an undervalued exchange rate and southern European countries an overvalued one, and so produced rocketing levels of unemployment.

Far from promoting peace, the European Union now increasingly foments fury in many of its member peoples. War within its borders, though still unlikely, is no longer quite so inconceivable as we had hoped. Its ambition of trying to make a country out of a continent without preceding linguistic, cultural or economic equality, without even the ability to share wealth from the richer to the poorer regions, will be a painful one. In a world where trade is increasingly free, where global economic and regulatory co-operation is miles better than it was in the 1970s, I think this regional unification project is a red herring at best and fool’s errand at worst.

America made a country out of a continent by beginning with linguistic and cultural unity and by building a hyper-democratic structure in which the executive and legislative branches were both subject to frequent election. The federal government assumed the debts of the states (in exchange for moving the capital south), so ensuring automatic fiscal transfer between the richer and the poorer parts of the country.

Yet it also built in a crucial bulwark against over-centralisation, to allow local experimentation and diversity by giving huge power to an elected senate representing the states. Even so, it took a civil war to forge a united nation.

Germany became united through Bismarck bullying a lot of undemocratic regimes that already shared a common language and culture into a customs union, which then became a state under a centralised and militaristic regime with the barest veneer of democracy.

Yet it took three wars and a revolution (in 1989) before Germany’s borders were settled and its regime became democratic. Nation-making is a dangerous business: France and Britain had done it centuries before with just as much pain.

Be in no doubt that if we vote to remain on Thursday, turning the continent into a country is the path we are on. The Five Presidents’ Report of last year is admirably candid in this respect. David Cameron’s renegotiation of Britain’s membership terms made a crucial concession to get French agreement to some of his demands: that in future the EU institutions are at the beck and call of the eurozone in its quest for further unification.

True, Britain and Denmark may remain outside the euro for now (the other non-euro countries are committed to joining it), but future European summits will be all about making the eurozone work.

If the continent is not to be crucified on the cross of a currency, then it must become a country. It must have a single government that automatically transfers tax revenue from the productive to the less productive parts of the country.

The EU has created an ancien régime ruled by unelected commissioners with the sole power to initiate legislation, with a court able to overrule the elected parliaments of member states.

A regime whose corridors of power are swarming with lobbyists for big business, banks and pressure groups, all intent on getting bureaucrats to stifle innovation to protect their monopolies — and to harmonise the hell out of regional diversity.

This flies in the face of all that we have striven for and shed blood for over centuries, especially in Britain: that laws cannot be passed and taxes cannot be raised except with the consent of the people through their elected representatives. I say again: is this worth it? What is so fearful about the world today that we feel it necessary to be absorbed into such a risky project?

Now that the World Trade Organisation has brought tariffs to an all-time low, the decline of violence has brought deaths in warfare to low levels and the internet and budget airlines and container shipping mean that geographical proximity has never mattered less, we can all feel citizens of the world.

Islands that freely trade with the world, enthusiastically elect their own governments and willingly join alliances are thriving as never before: Japan, New Zealand, Australia, Hong Kong, Singapore, Mauritius (one of Africa’s countries with the highest GDP per capita). They see no need to be enmeshed in the top-down unification of their nearest continents.

In the 1840s at a time when war was common and slavery and autocracy were everywhere, Britain felt confident enough to try an ambitious bottom-up experiment: unilateral free trade. Richard Cobden finally persuaded a Tory prime minister to repeal the corn laws (170 years ago this Saturday) and he would shortly persuade a Liberal one to dismantle tariffs of all kinds.

France followed suit and the world began a race to the top, embarking on a period of unprecedented prosperity.

It was Bismarck’s punitive reparations demands in the wake of the Franco-Prussian war in the 1870s, leading to the “iron and rye” tariffs to protect German industry from the effects of an overvalued exchange rate, that began the 60-year race back to the bottom of protectionism, contributing eventually to the fatal calculation of 20th-century dictators that conquest could trump trade.

The best way to unite the nation is for the British people to turn out on Thursday in large numbers and express the wisdom of their crowd and for us all to embrace that decision. I hope we choose the world, not just a continent.


Second, my Wall Street Journal column on the day before the referendum, 22 June:

 In voting Thursday on whether to leave the European Union, the British people face perhaps the most momentous decision since Henry VIII broke from the Roman Catholic Church in the 16th century so he could marry as he pleased. Though lust is not the motivation this time, there are other similarities. The Catholic Church a half-century ago was run by an unelected supranational elite, answerable to its own courts, living in luxury at the expense of ordinary people, and with powers to impose its one-size-fits-all rules despite the wishes of national governments. We were right to leave.

 The European Union is quite unlike any of today’s international organizations, and has never been emulated elsewhere. Britain has no desire to withdraw from NATO, the United Nations, the International Monetary Fund, the Council of Europe or, for that matter, the Olympics. These bodies are agreements between governments. The EU is a supranational government run in a fundamentally undemocratic, indeed antidemocratic, way. It has four presidents, none of them elected. Power to initiate legislation rests entirely with an unelected commission. Its court can overrule our Parliament.

 This was deliberate. In the mid-20th century, French and German politicians, with bad memories of brief and chaotic democratic interludes between autocracies, designed a way to ensure that power would shift gradually to a technocratic elite. Britain’s history of democracy is happier. Long ago we had a “glorious revolution” to establish the principle that laws cannot be passed or taxes raised except by the consent of the people as represented in Parliament.

 A centrally planned, regional customs union—though not one run with a colonial mind-set, chaotic accounts, a bureaucratic surplus and a democratic deficit—might have made some sense in the 1950s. That was before container shipping, budget airlines and the internet, and the collapse of tariffs under the World Trade Organization, made it as easy to do business with Australia and China as with France and Germany. But today, Britain—the most outward-facing of the major European economies—will thrive if it leaves. Europe’s GDP has only just staggered back up to the level where it was before the 2008 financial crisis.

 This is because the EU’s obsession with harmonization (of currency and rules) frustrates innovation. Using as an excuse the precautionary principle or the need to get 28 countries to agree, the EU gets in the way of the new. “Technological progress is often hindered or almost impossible in Europe,” says Markus Beyrer, director general of BusinessEurope, a confederation of industry groups. Consequently, we’ve been left behind in digital technology: There are no digital giants in Europe to rival Amazon, Google, Apple and Facebook.

 The EU is also against free trade. It says it isn’t, but its actions speak louder. The EU has an external tariff that deters African farmers from exporting their produce to us, helping to perpetuate poverty there, while raising prices in Europe. Having confiscated Britain’s right to sign trade agreements—though we were the nation that pioneered the idea of unilateral free trade in the 1840s—the EU has signed fewer trade agreements than Chile, Singapore or Switzerland. Those it has signed usually exclude services, Britain’s strongest sector, and are more about regulations to suit big companies than the dismantling of barriers.

Even worse than in Westminster or Washington, the corridors of Brussels are crawling with lobbyists for big companies, big banks and big environmental pressure groups seeking rules that work as barriers to entry for smaller firms and newer ideas. The Volkswagen emissions scandal came from a big company bullying the EU into rules that suited it and poisoned us. The anti-vaping rules in the latest Tobacco Products Directive, which will slow the decline of smoking, came from lobbying by big pharmaceutical companies trying to defend the market share of their nicotine patches and gums. The de facto ban on genetically modified organisms is at the behest of big green groups, many of which receive huge grants from Brussels.

In a fine speech in 2013, David Cameron, the British prime minister, called for fundamental reform, but this year he settled for far more modest demands in a travesty of a “renegotiation”. He has since campaigned for a vote to “Remain,” making increasingly implausible claims about the wars, depressions and plagues of Egypt that will follow if the world’s fifth-biggest economy tries to survive in a world where Norway, Switzerland, Japan and Singapore seem to manage fine. His latest claim is that the leaders of Islamic State would welcome Brexit, for which he has adduced no evidence. George Osborne, his chancellor of the exchequer, has bizarrely promised a punitive budget of tax rises and spending cuts to deepen any recession after our departure.

The most striking feature of the campaign is that nobody on the “Remain” side is prepared to make a positive case for the European Union and its further integration. By contrast, the “Leave” campaigners, led by Boris Johnson, the former mayor of London, and Michael Gove, the justice secretary, talk of Britain’s escaping a regional backwater and getting into the global mainstream, while remaining an ally and friend of Europe. I shall be voting Leave.



Third, my Times column after the EU referendum, on June 27th: 

David Cameron’s dignified and well-crafted speech on Friday, announcing the end of his outstanding tenure of the top job, left one thing out. He needs to say today what his government’s policy will be towards the European Union between now and his departure. The eleven-week transition from one American president to another is being reinvented here, but without the separation of powers and while preparing for crucial international negotiations.

It is understandable that he wants nothing to do with such negotiations himself, that George Osborne should have gone to ground, and that Lord Hill, our European Commissioner, should have announced his resignation. But the effect has been that while Berlin, Brussels and Edinburgh have all been making noises about what should happen next, there is a deathly silence from London.

I am told that senior Leave figures spoke to Number Ten and asked for clarification on this point and were told, effectively: you’ve made your bed, you lie on it. That’s wrong, because Leave are not a government and have no power to instruct ministers or civil servants. The risk is that some of the current occupants of Number Ten and the upper echelons of the civil service may even want the immediate decisions to be taken badly, so that they can say “I told you so”.

Here is what should happen. If reports are true, we are in the happy position that the most senior cabinet minister in the Leave camp has no wish to stand for leader: Michael Gove. He should be told by the prime minister that he can now set up a negotiating team with power to instruct civil servants, both in London and in UKREP, the Brussels outpost, with a budget to recruit talented outsiders to help him – and to include people from the devolved administrations.

Their job would not be to start negotiating with the rest of the European Union, but to prepare for such a negotiation by recruiting and training people who know how to do it and by exploring all options. Gisela Stuart MP should be included. Daniel Hannan, the talented MEP who did more than anybody to articulate the case for Brexit and who has thought longest and hardest about how to do this, should be appointed Mr Gove’s deputy in charge of the Brussels end of the operation.

Mr Hannan has been criticized for trying to be conciliatory in the wake of the vote, saying that for the sake of the 48% who voted to remain, we should seek the sort of associate status that he believes was potentially on offer before all the renegotiation began: with free movement of goods and services, but with an end to the supremacy of EU law, and with controlled but not necessarily much reduced immigration. Disappointed Remainers are so busy shouting “racist” that they are not listening to what many Leavers were actually saying, not least the majority (ten out of 17) of Tory MPs from black and minority ethnic backgrounds: Adam Afriye, Rehman Chisti, James Cleverly, Suella Fernandez, Nusrat Ghani, Ranil Jayawardena, Kwasi Kwarteng, Priti Patel, Rishi Sunak and Nadhim Zahawi.

Mr Hannan is right that we should beware the tyranny of the majority, look for a deal that would be acceptable to the minority as well, and listen carefully to what was being said in Europe before, not during the last few frenetic days. As Lord Hunt, chairman of the Association of Conservative Peers, wrote at the weekend, this is a spectrum, not a schism.

There are other things that need doing now, not in October. If Mr Cameron will not do it, then Mr Gove and his new team should now set out to reassure the 48% that it will not be the government’s aim to reduce, let alone sever, economic links with the continent. Britons want to trade and travel as much as ever. To scotch the silliest scare stories, we need to hear that things like the Erasmus student exchange programme and the use of EHIC cards for health treatment while travelling in Europe will be unaffected whatever happens. Also that the only conceivable change for European citizens living in Britain will be that they may lose the right to vote in local elections.

The 52% who voted Leave should not be forgotten, however. Surveys show that their top concern was sovereignty and democracy, with immigration second. The end of the supremacy of EU law over British law must be declared non-negotiable. On immigration, Boris Johnson is not wrong to make the argument that it is the lack of control that most threatens community cohesion. I often met people during the campaign who are happy to see a migration policy the discriminates on the basis of skills rather than nationality: that makes it easier to get scientists and engineers to move here from India or China but harder for East Europeans looking for work and putting pressure on public services.

The Swiss, for example, have free movement of goods and services with the European Union, full mutual use of health services and so on, but a bilateral deal to allow free movement of labour, but not of people. That is to say, you can move to Switzerland so long as you have a job offer. They have recently voted to cap the numbers, but a negotiated compromise with Brussels is likely to be announced shortly: it was only being delayed till the British referendum was out of the way. Britain will want a different deal from Switzerland, no doubt, but it shows that you can be a fully sovereign nation while having full economic links with the EU. Switzerland is a very prosperous country.

Likewise, the rest of the world needs to hear as clearly as possible that we are leaving the European Union not to be isolationist, but the reverse: for the sake of global engagement. The government could announce an immediate cut in corporation tax to attract foreign direct investment. The negotiating team can begin talking to other countries about trade agreements immediately. It will not be easy because we have so little expertise in trade negotiation, having outsourced trade policy to the European Union for so long.

Our future lies in a new relationship with the continent next door: just as close economically, but without political subjection. Let’s make it work.

By Matt Ridley | Tagged:  rational-optimist  the-times