Sunder Katwala had an excellent piece about Tory confusion over how to deal with Europe. In the Blair years, I think the Labour government did a reasonably good job in fending off the euro-skepticism of the likes of William Hague. Unfortunately that’s all they did – fend. Understandably, they didn’t want to use their political capital in defending their status quo when they were looking to make numerous reforms in health, education and ultimately the decision to pursue the war in Iraq.
However the effectiveness of the domestic policies didn’t match the investment and the foreign policy we all know about. As the centre-left anticipates being in opposition after the next elections, again understandable after 12 years in power, I think now is a good time to develop persuasive arguments about the importance of the EU rather than being stuck playing defence.
The EU, Free Markets and Globalisation
As an economy, on the whole Britain has done well out of increasing international trade. However before I get accused of being a neo-liberal, I think its important to distinguish between trade underpinned by effective regulation and trade which isn’t.
This is where the genius of the EU comes in. You are free to transfer capital, sell goods and work in any country the EU, encouraging greater economic dynamism and efficiency. However you have to play by the environmental, labour, competition and other rules which the EU sets. This helps create a level playing field.
If a Polish company produces cheaper widgets than a British one because it is more efficient than that’s fine. If it does so because it doesn’t have to pay to take measures to limit pollution, then that’s not acceptable.
British companies being successful in Latvia because they are taking advantage of their technical expertise is ok, but taking advantage of their dominant market position to undercut other companies isn’t.
The EU Taking Over Government Regulation
The response to the above point usually has something to do with the lack of democracy resulting from Brussels bureaucrats making these regulations. Companies who move production to places like Vietnam and Cambodia don’t face these regulations thereby distorting the basic rules of fair play. In an increasingly globalised world, if Brussels wasn’t passing these regulations, nobody would be. The British government doesn’t have the power to police companies for their actions overseas.
There’s also the obvious point that from a purely European perspective, no common regulations would mean that there would be a regulatory ‘race to the bottom’ in which countries compete with each other in lowering standards in order to attract businesses to their country.
What About the Small Businesses
Small businesses are right to be worried about red tape and regulation stifling enterprise and innovation. There is a legitimate debate to be had about how much regulation is needed at a Europe-wide level. However the main solution is to reduce the amount of unnecessary regulation created by the UK government.
I’m not an economist and I don’t claim to have the answers when it comes to specific policy proposals. However it seems to me that if the global financial crisis has shown anything, its that markets need to be effectively regulated, albeit without stifling innovation and enterprise. The EU has to play a central role in this and its time that people on the centre-left took the initiative on this and showed some leadership rather than being worried about how people will react.
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Filed in: Current affairs,Economics