The Centre-Left and the EU


by Shariq
23rd September, 2008 at 2:00 pm    

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.

Conclusion

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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  1. Rumbold — on 23rd September, 2008 at 2:54 pm  

    Shariq:

    “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.”

    I actually agree with this. As our lords and masters have reduced Britain to little more than a colonial outpost of Europe, it would be nice if they actually defended this policy, rather then pretend it wasn’t happening.

    The EU should be nothing more than a free trade zone, with movement of goods, labour and capital unrestricted (as it is at the moment, only goods move freely). But what about the distorting effects of EU trade barriers? Why should EU comsumers pay billions of pounds in tax so as to impoverish third world farmers while having to pay higher prices for their own food? Why are 80%+ of our laws now made in Brussels? Why don’t we do anything about the massive corruption over there, given that EU accounts are so full of holes that the auditors have refused to sign them off for 14 years (and counting)?

    “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.”

    The majority of regulations come from Brussels (although the UK does tend to ‘gold-plate’ some directives by adding their own regulations).

    Put quite simply, we are an unwilling part of a neo-colonial state and have to make the best of it.

  2. Shamit — on 23rd September, 2008 at 3:29 pm  

    Shariq

    I think Rumbold’s got it spot on and its hard to argue against his points. As I probably would have written the same things.

    I would still like to add couple of points. As an economic powerhouse, EU does not have the clout that you suggest it does in enforcing its regulations beyond its borders or even within its borders.

    The whole Euro zone stability pact is a prime example where France and Germany openly flouted the rules and got away with it while Greece and others had to make very very painful decisions which did not help them much.

    Third, Britain’s clout in the world really does not come from the EU. At least until Blair it did not. If you got to India and/or China and meet politicians and bureaucrats they still tend to deal with individual countries rather than EU as a block except for doing free trade agreements.

    fourth, ASEAN and NAFTA have done wonders for all the economies involved yet they did not need a centralised bureaucratic structure and aspire to be the US OF EUROPE. So why should Europe be any different?

    The newer countries in the block such as Czech Republic, Poland and some others have very different views than the core Europe of France, Germany and Luxemborg. In the newer countries, they are more keen to have a Rumbold style EU economic area but not the other baggage.

    I am for an enabling and accountable government but Europe flouts those rules all the time and rather than healing problems it adds to it especially in the case of agriculture.

    And, finally the Sunder Katwala piece was not brilliant — it was a typical tory bashing piece. And, interestingly Sunder avoided talking about the inequality that Europe brings which should go against the very ethos of the organisation he represents

  3. Bishop Hill — on 23rd September, 2008 at 7:10 pm  

    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.

    What about if it produces cheaper widgets because it pays less?

  4. Rumbold — on 23rd September, 2008 at 8:32 pm  

    Good points about the Eurozone Shamit. And didn’t Greece lie in order to get accepted as a member of the Euro?

    If David Miliband gets in, we could be heading the same way.

  5. Shamit — on 23rd September, 2008 at 8:42 pm  

    actually greece did and they forced them to cut their deficits but guess what the french deficit was much higher and no one said a word.

  6. shariq — on 24th September, 2008 at 8:25 am  

    Rumbold and Shamit, answer me this. How would you prevent a regulatory race to the bottom in a free trade zone without a common regulatory structure.

  7. cjcjc — on 24th September, 2008 at 9:39 am  

    If it does so because it doesn’t have to pay to take measures to limit pollution, then that’s not acceptable.

    Better not buy anything more from China then!

  8. Shamit — on 24th September, 2008 at 9:54 am  

    Shariq

    We are not against a common regulatory structure agreed upon by all parties to manage the free economic zone again look at ASEAN or NAFTA.

    What we are against is creating a federal structure which is the direction EU is heading towards. I have no problems with a common standards being established — which could be enforced through a tribunal procedure.

    The key argument is about the undemocratic approach and behaviour of Eurocrats and politicians who have long passed their sell by date. For example, Barroso and his cabinet were either removed or thrown out by voters in their respective countries and now they make decisions on behalf of the entire EU population.

    And, they have the audacity to say even before the results are announced that the Irish voters were wrong in voting against Lisbon and they have to come back to do so again.

    If the Centre – Left wishes to remain relevant in the minds of the voters in this country then accepting Sunder’s argument would be a major political flaw.

  9. sonia — on 24th September, 2008 at 10:22 pm  

    its important to understand free trade, what the neo-liberals are talking about is NOT free trade, its highly institutionalised-controlled trade between cartels. of course they use the term ‘free’ in some made up sense. if someone can please tell me what sense of the term ‘free’ applies to ‘free markets’ i will be very happy.and also how anyone thinks ‘regulation’ is not involved. last time i looked so called trade negotiations didn’t happen by themselves, they happen through significant effort certain strong (non-government, non-accountable ) institutions have employed, with a considerable amount of blackmail. i suppose some people won’t call that ‘regulation’ but it seems pretty ‘regulated’ to me. Heh.

    the point with the EU is to think collaboratively – make it what we want, rather than denying the need to work to work together. obviously one needs to be applying the same logic to a bigger group as you would do with a smaller group – transparency, accountability, and democracy. there needs to be some major reforms of EU institutions, in the same way government institutions need reform. its just thinking on a more agglomerated level.

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