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Tuesday, May 07, 2013

Is Lord Lawson's intervention likely to be a game-changer?

The big political news of the day happens to be strongly EU related – former Chancellor Lord Lawson’s piece in the Times (£) in which he argues in favour of a UK exit from the EU. So what to make of the piece – is it a game-changer or just a Westminster village story?

Lord Lawson rightly sets out many of the flaws inherent in the status quo - which we have looked at in detail numerous times,  from the democratic deficit through to the economic cost of over-regulation and the wasteful EU budget. He also draws particular attention to the threat of onerous and disproportionate costs from impending EU financial services regulation, with particular focus on eurozone-tailored rules imposed through an inbuilt majority in the EU's decision-making process. Familiar stuff. The key question is whether the UK is better off fighting to address these issues from within the EU or leaving altogether? Lord Lawson argues that:
“The changes that Wilson was able to negotiate were so trivial that I doubt if anyone today can remember what they were… I have no doubt that any changes that Mr Cameron — or, for that matter, Ed Miliband — is able to secure will be equally inconsequential… That is why, while I voted “in” in 1975, I shall be voting “out” in 2017.” 
The media have really gone to town on this story - it’s an otherwise slow news day and everyone loves a good ‘Tory splits on Europe’ narrative. No doubt, it has further heated up an already hot debate - and if there's one consequence, it's that the intervention has made 'better off out' a slightly more respectable position. Lord Lawson remains a respectable figure.

But a game-changer, it is not. The responses to the article have conformed with already well marked-out positions: UKIP says its delighted, Dan Hannan tweeted that "we can really win this guys" while those who usually object to this kind of proposition, have objected.

Leaving aside his pessimism about a new EU deal (which we take major issues with), Lord Lawson - whose eurosceptic views are hardly a secret - actually doesn't really tell us anything new. In particular, like most others who say the UK should leave the EU, he completely dodges the most important question of all: what's the alternative? This is the weaker part of his piece:
“Over the past decade, UK exports to the EU have risen in cash terms by some 40 per cent. Over the same period, exports to the EU from those outside it have risen by 75 per cent. The heart of the matter is that the relevant economic context nowadays is not Europe but globalisation, including global free trade, with the World Trade Organisation as its monitor.”
“Today too much of British business and industry feels similarly secure in the warm embrace of the European single market and is failing to recognise that today’s great export opportunities lie in the developing world, particularly in Asia.” 
While Lord Lawson makes a fair point about British business not making the most of global opportunities, he creates a false choice between one or the other (we've been through this before). The point is not the global market place versus the European market, the point is to maximise the total volume of trade - this is what the Germans do very effectively.

While claims about 3 million jobs being at risk in the event of the UK leaving the single market are way overblown, the truth is, as we've pointed out numerous times, all the existing alternatives, from the Swiss and Norwegian models to the WTO-only model, suffer from major flaws. It is unclear which of these Lord Lawson proposes but, judging from the second paragraph above, he seems to suggest we fall back on the WTO regime. So he is arguing for a raft of extra costs slapped on UK exports, including a 10% tariff on car exports to the EU, in addition to barriers to market access for all UK financial firms (absent new deals, which Lord Lawson, again, doesn't mention)?

Until those who advocate the mythical "UK option" actually flesh this concept out into a concrete and sell-able policy proposal, interventions like Lord Lawson's will primarily be something that the Westminster chattering classes can have some fun with.

20 comments:

jon livesey said...

I'd sum up this piece as a good example of learned helplessness. It's the usual tour of the horizon, finishing by summing it all up as the costs of leaving the EU.

The whole point of a negotiation between the UK and the EU is that the EU has little to lose by allowing some concessions to the UK, while the UK has quite a lot to gain by removing some EU regulation.

In other words, if we can have a UK in the Single Market, but not subject to so much EU regulation - think: about as much regulation as we have to put up with to export to *any* country - then they don't lose and we win.

But there is a lot of ego and inertia involved on the European side, so even if they don't lose in practical terms, they will inevitably be obstructive.

That means that there has to be a credible threat of the UK leaving the EU if a decent settlement can't be obtained. And that threat can't materialise if we spend all our time predicting doom and disaster for a UK outside the EU.

To have a credible threat to hold over the EU, we have to have a clear idea of what economic and export, etc., strategies we would employ if, with regret, we actually did leave the EU.

Rik said...

1. At the end of the day exit plus a new working relationship and stay plus a proper reneg are probably not that much different.
2. Hard to see that the UK electorate will accept a 'Wilson'. My guess it would make things worse as large groups will see it as an insult.
3. For mainly 2 reasons the UK has also a much better negotiating position now:
-UK leaves you have a 'Europe' which would consist for 2/3 of basketcases in one form or the other. Not a nice club to be a member of if you are not a basketcase yorself. Stick with the Euro (knitted to all sort of semi- to complete dysfunctional Southern states and only busy with getting things in order. Anyway an Brexit could very likely lead to huge problems in the EZ as now already things are held together by ECB promises (which the market incorrectly sees as as strong as Ben B's). If they get the impression the thing is falling apart, CB intervention is nearly useless as the ECB backing would effectively be gone.
-The UK is a big market by itself (it is simply no Norway or Switzerland. Plus other countries likely rather join team-UK than join team-bust. It can negotiate favourable at least decent conditions.
4. Well timed. Schauble with: 'maybe no treatychange'. Same day countered with this. There should be pressure and constant on the other side.
5. For the negotiation it simply looks by far the best if exit is properly on the table. So in that respect also well timed. Looks like Cameron will not have to do much to achieve that.
For the negotiators probably best if they can hide behind voters, backbenchers. Gives a better atmosphere important for long negotiations.
6. Clegg simply looks like an idiot with his 3 million jobs. Seen the situation with UKIP hard to see that the UK public will buy any of this stuff anymore. Mainly makes the one who comes with it look like a semi-moron.

Anyway Clegg should substantially increase the quality of his responds on this issue or for his own sake probably better shut up.

jon livesey said...

Good points, Rik. Hard to disagree with anything you write here.

Jesper said...

The threat has to be credible or there'll be no change. Announce the referendum, print the ballots and whoever wins the next election can then cancel or go ahead with the referendum.

I believe that if a country were to leave the EU then the treaties specify a transition period to smooth the exit. That should be sufficient for a government; the private sector will do what it always does - manage its trade-deals on its own.

The ones who should care a lot and start planning now for the eventuality of an UK-exit would be EU-institutions as they'd find big wholes in their budgets as lots of funding would disappear....

bernardcrofton said...

Now why should this statement by Lawson have more impact than his view that we should still be building oil-fired power stations and bring back leaded petrol?
Or his view in the '80s that the UK should join the ERM, as the best way to allow banks to operate outside any regulatory control or taxes?

Rik said...

@jon
On your last point.
I donot think that differences between leaving and staying are that big.
Leaving will never mean cutting all links. Simply MAD the UK would be shot with an economic RPG the EU with a 357, but the end result everybody dead.
There will remain a sort of freetrade zone (might be the single market might be - or even +).

From the other side it is hard to see that things will ever be as they always was. The rest of Europe certainly as long they have the Euro in the present set up will hardly grow. Which simply means that as a proper businessperson you will have to look somewhere else as well. Brush off the Commonwealth eg. You donot bet on a horse simply because you own 20% or so of it, you bet because you think the odds are favourable (and they look far from that in the EU under any scenario).

So the growth strategy for the UK will be likely rather similar and depending on the outcome of the negotiations might require probably seem in the bigger picture some adjustments.

Anyway the UK (an all other European countries) seem to need one and urgently. Growth is nowhere to be seen and you cannot go on stimulating without it showing results as well.
New ideas have clearly to do the job.

Thanks for the compliment just saw it.

Travis Zly said...

The UK local election results on Thursday 2 May showed a strong move to the UKIP position. UKIP campaigns to retake control of the UK borders. Arguments about economic benefits or otherwise are attempts by the left not to be sucked in to the immigration debate. UKIP's appeal is for Britain not to lose its national identity and history in an amorphous Europe. Europe is moving towards a Soviet-style federalism with central command-control. This is inevitable because Europe is an ideological construct which needs to be enforced and policed by a massive bureaucracy, like the former USSR. Europe will therefore follow the history of the Communist Bloc and collapse because it will become too unwieldy to react to sudden economic or social changes, as we are already seeing with the debt crisis.

Anonymous said...

Eu insisto mais uma vez que o Reino Unido irá permanecer no espaço da UE porque as grandes empresas e as pequenas empresas querem estar no mercado unico esse Sir Lord Lawson deve mundar de atitude

IDRIS said...

Nuts. Whole Hazel nuts - Open Europe that is, not Lawson.

On the same day Barosso announced that withina very few years the EU will be a Federation, including all 27 members not just the euro countries.

Do you STILL not understand that this is what they intend to achieve and will let nothing, not even mass starvation of millions of their people get in their way?

And do you disagree with Lawson, and believe that the British would be prepared to accept that Federation?

Aw come on! Wake up for goodness sake

Ray said...

If today's announcement that an EU Parliament delegation has told Argentina it supports their position on The Falklands is true and supported by the EU Parliament as a whole, then this will be another game changer. Lets see Cameron talk around that.

Average Englishman said...

@Rik
I agree with most of your comments except the one that if the UK stays in the EU or leaves the effective results will be much the same. I beg to differ. On psychological grounds alone it would be wonderful for the UK to leave the EU and there would be many other benefits for the UK. It may be true that many trade arrangements would not change dramatically and that the UK for practical convenience would align itself with many EU dictats on the environment, etc., which would be just sensible co-operation between trading partners and neighbours but there would be one very big difference: the UK people would get their country back!
Like most UK people I am fed up being told what to do by a bunch of unelected bureaucrats in Brussels. I want as little to do with their parochial little world as possible and I certainly do not want to pay for it. When the UK leaves the EU a giant anchor will not be lifted from the Thames and the country will not set off into the Atlantic Ocean; we'll still be here trading away with our neighbours as we have always done but with a whole world perspective and able to decide upon our own way of doing things without the restrictions or costs of Brussels. We will also get back proper control over our borders so that we can maintain our own culture, have our own controls over our financial services industry and over time we will also get our fishing industry back.
Dave will not be able to fudge this one. The Mainstream UK political class has still not really grasped what has happened with UKIP but they will have to learn quickly. With respect Rik, I was right in our last exchange on UKIP and you were wrong, in that UKIP's recent electoral rise has been drawn not just from older ex Conservative voters but also from erstwhile Labour and Lib Dem supporters (who want EU immigration stopped amongst other things) and unaligned 'new' voters who like UKIP's more down to earth style. UKIP is not just a short term phenomenom and support will rise for them strongly as mnore people from all persuations realize that something different from the 'middle ground BBC supported pro EU establishment consensus' really can be achieved by voting for UKIP.
The UK people want a major change and Mr. Lawson has just helped UKIP to achieve that aim. Nigel Lawson has just lent major credibility to UKIP's economic view of the EU and the benefits of leaving it. No more 'fruitcake' jibes will now be possible from Dave because he would then be calling the Conservative Party's most successful chancellor since the 2nd World War a fruitcake. Nigel Lawson, (like me and many others) now realises what a con and a mistake it was entering into the Common Market and the ERM fiasco in the first place and his public comments are a useful help to getting the UK out of the clutches of the EU. Dave will have to do a serious u-turn or go; I suspect the latter will be necessary because the man has lost the trust of the electorate and many in his party and anyway, he is another closet Europhile.

Rollo said...

There is no renegotiation of any worthwhile point. The Acquis Communautaire sees to that; we will have our fisheries back; ha ha. We will stop throwing money ate the CAP Ha ha. We will curb the power of the brave new world of the European court of Justice, the neforcement arm of the EU state Ha ha. Lawson ahs mnade a worthwhile contribution for the first time I remember. Time Tebbit and a few others had the principles and the guts to do so. Who will rid us of the wet Clegaron Miliband?

Rik said...

@Jon
Thinking about your first comment brought me to something else.
Funny how seeing the same thing basically only written differently can bring you further in an analysis.

As such the EU would not have to give much up only their pride (idea of the European dream).
This probably will however be important for them.
So next to making it clear that the alternative vis-a-vis the UK is an exit it should also be made clear that the present EU set up has had its time. What I mean that the whole concept of an always further integrating EU and basically for all countries is not a viable idea anymore.
In other words if the present set up isnot made more flexible it will very likely break. And not only in the relation towards the UK.

Which might face some opposition of the Euro-boys at this moment as they desperately try to hold the team together. But things like:
- an E-exit without an EU-exit;
- membership without the possibility of flooding other countries with your paupers;
- relation with Turkey and Russia in general;
and so on.
Basically having the possibility of a mutual beneficial relationship in different levels of intensity.

Ian Campbell said...

If we are to stay we must have barrels at their head and their lower anatomy - "we are leaving without full renegotiation" and "ever closer union to be removed from the treaty of Rome".

An end to integrationist agenda is the only way to save what should otherwise have been a successful association of nations that have previously destroyed each other. That should be enough and national identities left to individual nations who may, over time, merge with their immediate neighbours, perhaps as a voluntary journey without a fixed agenda.

Rik said...

@Average Englishman
The UKip is and has always been in my view a protestparty (at this stage at least it is).
These usually attract voters from all over the spectrum most non-voters, especially in the early phase. And usually from the parties that are most in a mess at that particular time.

The UKip looks in this respect a bit different. It mainly attracks voters from the Conservatives. Which isnot all Dave's fault as I am pretty sure that most voters think Mr ED being at least as crap. They of course attract also from the other parties, but much less as it looks now.

However:
1. As said they attrack relatively more from the Conservatives by a decent margin. Look at the polls until very recently the loss on the Right meant win for UKip with not much rounding off differences.
2. They will likely end up on the right (they are there already in fact) and be long term an alternative for again mainly the Conservatives. Have a look at Belgium (Flanders) and Holland. After the protest parties have settled they become an alternative on the right.
3. Voters from the other parties look more recent. Which usually means that they are less stable.

This all means that the Conservatives have by far the most to fear. Have furthermore a look at the guys they even look Conservative.

Fully agree that a huge part of the British electorate looks fed up with the current political elite (and traditional parties).

If I look at the situation in Holland. The countries donot look that different. But Holland has a much more flexible electoral system. Now the potential for anti-traditional parties (next to Wilders there is a Socialist party and a party for the elderly (next to some small stuff) is probably around 50%. It is below that in the polls at 45%, but one part is not used yet (the pro-business and low tax part). The stigmata are not longer there (aka you are not seen as nutty if you vote for them). So half the population is unhappy with the traditional product.
So would be strange if the UK would be very different. Might be even worse as in Holland the system could rejuverate itself earlier.
However UKip is only one 'taste' you will never have the full 50% of the vote via just one anti-establishment party.

However with the UKs voting system even if UKip would only eat marginally more from the Conservatives than Labour mainly the Conservatives will have to take the hits.

The Conservatives could decide to move even further to the left and open their right flank even more. (Hopeless strategy as conservatives changing your brandvalues btw).

Protestparties usually do well when it is a big mess (like now) and the traditionalist donot have the answers (like now). My guess being as the mess trend will continue potential support for them will rise further.

Traditional parties in turmoil. All 3 UKs traditional parties look to be in a bit of a mess as well.

Anyway I donot see any other thing to do for the Conservatives than to try to link/peg again with their voter base.
And Dave looks to have a credibility issue there. That will have to be managed properly or will mean he soon will be political history. The Conservatives can simply not afford to put UKip on the map. That is several times more important than the political future of Cameron (or anybody else) as it will chase them for decades.

Bugsy said...

Rollo is absolutely right, argue what you like, the rules say no negotiation, it is clear that the primary aim is a federation of states. It is equally clear that will NOT be a democratic institution as people in the UK understand. The EU parliament takes an anti UK stance on the Falklands, clearly we are required only for our financial input, our diplomatic, cultural and political needs are irrelevant.

In order to set our own house in order and to make the EU understand our international position we need to leave, before the next general election.

Anonymous said...

Th eussr is falling apart, it isn't only the UK where anti eu parties are growing there is one in Germany as well. however the unelected political failures that make up the commission are incapable of seeing any position other than their own to increase their own little piece of power. As long as they are there and the democratic deficit continues to grow, the anti eussr parties will also grow.

David Cooke said...

As the British electorate is coming to realise, there is no future for the UK in the EU. The long term aims of the EU are to create a United States of Europe. You cannot negotiate any meaningful exceptions for member states and continue to progress to the US of E. As others have correctly said, DC will not be able to get any meaningful and significant changes by negotiation - even if he is making a credible threat of departure. It is long overdue for the UK to plan its future - potentially a very attractive future - as an independent and respected member of the world community.

christina speight said...

There is in fact nothing to renegotiate about but piffling details. . There is NOTHING which would return even ONE "competence" to Westminster (eg "livestock").

We want ALL competences restored to us so that WE can govern ourselves. No matter how many arcane details Open Europe puts on the table to be picked over, , none of THAT matters. We remain serfs in an EU on the march to a Federal Europe. They have no intention of surrendering one iota of the power they've grabbed. We have to get out BEFORE the City is wrecked by their present campaign to wreck it.

One out we can negotiate all, sorts of things.

John McClane said...

I've been away so I'm a bit slow on catch-up. The EU & the Falklands?

Falkland Islands: “British sovereignty over the Islands as such, is not accepted by the European Parliament”

British sovereignty around the world is not an issue for for discussion in the EU.

Do we complain about Spanish enclaves in Morocco?