What if we could Rebuild the EU?

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Lecture date: Sun, 22nd Jan, 2017
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Estimated 9 min read

In this unique and controversial discussion event, Lucy Anderson and Professor Keith Pilbeam addressed the question of whether our focus should be on creating a brand new EU rather than worrying about soft and hard versions of BREXIT, as well as other questions, head on.

Lucy Anderson:

Unless there is a large shift in the political climate, it is likely that we will all need to come to terms with the UK formally leaving the European Union. Despite this, there is a general consensus that the EU will survive without the British. Indeed, President of the European Commission Jean-Claude Juncker says categorically that Brexit is not the end of the EU and that, on the contrary, is encouraging its continuance and resulting in a growing approval for European integration ‘in more or less all Member States’.

But, whatever happens next, those of us on the Left and centre ground of politics should nevertheless continue to unite across Europe to rebuild the EU and organise together to combat right-wing dominance. There are positive trends in this direction which can be strengthened and accelerated.

Firstly, there is genuine renewed interest in a more ‘positive populism’ and focusing on improving the lives and prospects of everyone in Europe and not just a privileged minority. This deeply ethical goal self-evidently cannot be reached by national governments acting individually without any pooling of sovereignty. The EU continues to be the best mechanism we have to achieve more equality overall, setting basic standards and norms that can endure. Racism and xenophobia are on the increase, but are utterly against the stated fundamental principles of the EU and must be fiercely opposed on that basis.

Equally, the growing concern about insecurity at work cannot be addressed without some level of shared framework of employment and social entitlements. The argument that workers may often prefer so-called ‘flexible’ contracts just doesn’t stand up. For the British workforce, the evidence shows that those on a zero-hours contract are three times more likely than other workers to say that they would like to work longer more regular hours. And at least 30 percent of temporary staff want a permanent job.

Key to rebuilding the confidence of Europeans, whatever their nationality, in a collective way forward is real progress towards the availability of secure jobs and sufficient social protections. The long-awaited strategy from the European Commission on this will be important. The European Parliament has made its views abundantly clear; overwhelmingly passing a resolution in January 2017 calling for concrete measures for ‘full practical implementation’ of a European Pillar of Social Rights in pursuit of the social objectives of EU treaties.

There is also still major resentment and concern about lack of transparency and accountability in EU macro-economic and financial policy, as in relation to the treatment of Greece. It is doubtful that the actions of Eurogroup finance ministers and the European Central Bank when dealing with the Greek debt crisis were sufficiently authorised through the EU treaties. This issue must be addressed through legal measures and policies, not simply ignored.

And one of the absolutely critical areas of interest for a rebuilt EU is its attitude to globalisation, and trade in particular. As economist Joseph Stiglitz and many others have pointed out the problem is not globalisation itself but the way in which it is managed. Special interests in so-called ‘advanced’ industrial countries have clearly prevented fair regulation of global capital and markets. The recent debates in the EU about trade deals with the US and Canada are a good example of this. From now on, the EU should be vigilant about ensuring that its trade policy promotes the well-being of disadvantaged groups in society in all countries, whilst making sure that legitimate local regulation is not overridden by multi-national companies. The EU can also still continue to play a very positive role on a range of key global challenges, especially leading the fight against climate change, pollution and high-level tax avoidance.

Significant and welcome too is the recent enhanced emphasis at European level on regulating and encouraging new technologies in the interests of both consumers and businesses. Sensible frameworks of regulation on issues such as data protection, copyright, and digital content need to be in place across national boundaries. This is a concrete area in which the EU can demonstrate its worth.

It is true that there are contentious policy areas where the EU is struggling. Sadly a genuinely common and effective EU approach to helping refugees and migrants seems further away than ever. The UK’s hard-line stance has certainly not helped, although new asylum law proposals are under discussion in the European Parliament and over €10 billion was allocated from the EU budget over the past two years for humanitarian projects and other support. But at least through EU structures, processes and constitutional values a decent and humane standpoint can be articulated and fought for.

In a final analysis, it is hard to see that there is much wrong with the institutions and aims of the European Union. Talk of democratic deficits and ever closer union seems to be missing the point and diverting energies from the real task at hand. It is the policies and laws that matter, which can be improved within the existing frameworks. Winning hearts and minds, and therefore elections at all levels, determines outcomes.

Professor Keith Pilbeam:

The vote for Brexit on 23 June 2016 is a watershed moment in the history of the UK and the European Union. The majority was very narrow 51.9% to 48.1% but sufficient to cause a major dislocation in UK relations with the European Union. Does that mean that the European Union and its four freedoms, free movement of goods, free movement of services, free movement of capital and free movement of labour require fundamental reform? Is there a need to reform the institutional infrastructure of the European Union to cope with the diversity of its 28 and soon to be 27 countries? Do we need to consider a multi-speed Europe with different levels of integration and the possibility of some countries adopting a deeper form of economic and political integration than other members? These are some of the interesting questions that arise as the UK invokes Article 50 and undertakes a 2 year negotiation period concerning its divorce terms and its future trading relationship with the EU27.

My opinion is that like any organisation the European Union has its imperfections and therefore some reform is called for, but the concept of greater integration is a fundamentally sound thing for the European countries. As an economist, I quickly learned that free trade is a good thing for nations as a whole but it does nonetheless create winners and losers. However, the key point is that the gains to the winners exceed the losses to the losers and it is possible to redistribute some of the gains from the winners so that the losers are compensated for their losses so that they are no worse off and still have a net gain for the winners. When it comes to Economic integration there are trade creation gains as trade is opened up between the trading partners but there are also trade diversion losses whereby the common external tariff of a customs union can give an unfair competitive advantage to high cost trading partners within the union over lower cost trading partners from the rest of the world. However, an economic union offers many trading advantages because of its long term nature. This means a guaranteed export market for the indefinite future, the ability to exploit economies of scale and the undermining of domestic monopolies due to competition from other countries within the trading bloc and the competition effect which forces domestic companies to become more efficient. These dynamic gains should not be underestimated.

The European Union has gone further in promoting trade in goods and services than any other trading bloc in the world. The Single Market is a phenomenal achievement allowing firms that have a national licence to sell their services be they insurance, banking or accounting throughout the whole of the Union. This has to be a good thing for consumers especially as Europe has moved gradually from manufacturing to services. Lesser known is the Single Administrative Document that has enabled goods to be transported with ease across the whole of the European Union eliminating the need for separate national documents at each border point. The harmonization of basic regulations throughout the European Union as a result of the Single Market project of 1986-92 has lowered the costs to businesses and led to far greater competition than could ever have been imagined under a simple free trade arrangement. So in respect of trade in goods and services the European Union is a tremendous success.

When it comes to free movement of capital and labour these are core principles of the European Union that in theory are a good thing. It enables firms to get a better return on their investments and workers the opportunity to relocate to a place where they are better paid than in their home country. In practice, however, the free movement of labour has proved to be contentious and was used by the Brexiteers as the defining issue in the UK referendum. Although I personally favour free movement of labour it is undoubtedly an issue for countries that are net importers of EU labour. In my view, this has been a big benefit for the UK but unfortunately it is not perceived as such by many voters. I do think the European Union could make some reforms in this area, for example permitting agreed annual quotas of EU migrants for each country related to its population size so as to provide some reassurances that one country cannot move wholesale into another country which is theoretically possible as things stand.

There is also a need for the European Union to reform the way it spends its money, agriculture still takes up something like 40% of the EU budget but the sector is less than 3% of the French Economy and less than 1% of the UK economy. This does not make sense when youth unemployment is close to 50% in countries like Greece and Spain – surely the EU has to work in the interests of all its citizens not just a group of powerful lobbying farmers. In other words, Europe needs to reconnect to the needs of the citizens that it serves. Perhaps the only good thing that will come of Brexit is that it will force the European Union to reconsider how it can reform itself so that it can better serve its citizens going forward. There is a democratic deficit that needs addressing as the elections to the European Parliament attract a far smaller percentage of voters than do the corresponding national elections. The lack of voting cannot be easily addressed, but making sure that the European Parliament is seen to add real value on issues where real common interests and real problems are at stake; such as youth unemployment, environmental concerns, preventing banking and financial crises and ensuring fair conditions of work for employees would be a useful start in helping to improve public perceptions of it as an institution.

In sum, the European Union has done much good, it has made the thought of war between its members unthinkable, it has promoted economic stability, freedom of movement of people and enterprise and it has improved the living standards of hundreds of millions of its citizens. Recognising that you have faults and remedying them through a reform process is a realistic aim and it is a great pity that the UK is unlikely to be part it.

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Thinking on Sunday

Keith Pilbeam is a Professor of International Economics and Finance at City, University of London. He has worked for NatWest Bank and the Royal Bank of Scotland. He is Secretary…

Lucy Anderson is a London Labour MEP. She took office in July 2014, and is spokesperson for the European Parliamentary Labour Party on transport and tourism. Her background is as…

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