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Can you outline the argument? I know there's a conventional (and strong) argument against the EU in that it combines the 'worst of both worlds' for many of its

Can you outline the argument? I know there's a conventional (and strong) argument against the EU in that it combines the 'worst of both worlds' for many of its members, since they have a single currency but they don't have the kind of federal system that would balance that out. I don't see how that would effect the UK though - since it still has the pound. I also don't see how the UK could conceivably be said to be disadvantaged by the EU - given that financial services + co seem to depend upon EU membership.

Silhouette 9y ago
I know there's a conventional (and strong) argument against the EU in that it combines the 'worst of both worlds' for many of its members, since they have a single currency but they don't have the kind of federal system that would balance that out. Yes, that was essentially their position. The EU when it was smaller was mostly a group of member states in at least broadly equivalent economic situations. As it has grown, there are much wider disparities, and that undermines some of the original assumptions behind the Single Market. For example, if there is an incentive to have cheap labour move from a relatively poor economy to a relatively wealthy one, you have potential for abuse on the relatively wealthy side, and you also have a risk of a "brain drain" effect that holds back growth in the poorer economy. Likewise, trying to unify the markets across such widely different EU states is economically unsound. They aren't really one big market, because basic factors like cost of living and household income vary widely from one member state to another. Forcing businesses to treat all member states equally (which subsequent to that discussion the EU actually has been working to legislate) means you usually price the poorer member states out of the market, which is good for neither the potential customers in those states nor the businesses who would have been happy to supply them. I also don't see how the UK could conceivably be said to be disadvantaged by the EU - given that financial services + co seem to depend upon EU membership. The EU is mostly a good thing for trade with the EU. But by belonging to the EU, and in particular the Customs Union, the UK gives up the ability to negotiate its own trade agreements with non-EU trading partners. Instead, it is required to impose the EU's standard tariffs and other non-tariff barriers when trading outside the bloc, and the EU is rather protectionist in its stance there. Put another way, just as EU membership brings well-documented advantages in terms of tariff-free trade and ease of access to the EU market, it also imposes directly analogous disadvantages in terms of forcing tariffs and other barriers when trading with non-EU markets, and the UK has limited ability to change that situation while remaining in the Customs Union because any relevant trade agreements are negotiated via the EU and not the UK itself. The argument being made at the time was that since our foreign trade has been shifting steadily towards a greater proportion being with non-EU partners, the balance between the benefits on the EU side and the costs on the non-EU side was shifting in the wrong direction. (And if the EU did then suffer further economic troubles, that would reduce the benefits of continued membership significantly, pushing the balance further/faster in that other direction.)
- pasabagi 9y ago
  I don't know if I agree that the EU is fundamentally unsound. Federal systems work. Germany is one example of this. The US is another. States are stronger together. The unsound bit is half-assing it. I think the politics side is really where the UK will find the rub, though. The EU isn't going to be pleased with the UK for leaving. There's a great incentive on their side to make it turn out badly for the UK. Which means it's a little bit like if Mexico got on the USA's shitlist, just so they could get better trade deals with Brazil.
  - Silhouette 9y ago
    Speaking personally now, I'm in two minds about a lot of this. It seems clear that the inability of different EU member states to operate their own fiscal policies while tied to the same currency has caused harm (albeit of very different kinds) in recent years to both Greece at one end of the scale and Germany at the other, and to a lesser extent to various other member states. If the EU was a fully federal system, with combined political/legislative leadership to go with the combined economic/currency ties, maybe that wouldn't have happened. However, I doubt we'll see that level of integration any time soon, because it brings too much other baggage. That being the case, while I don't have the knowledge or experience to judge the odds myself, I can see why some economists might be wary of the same effects that caused so much trouble a few years ago doing so again in the future. As for the EU not being pleased about the UK leaving, that seems inevitable, but I'm hoping that cooler heads will prevail. Poisoning the well won't help either side, and clearly we're still going to be trading and collaborating in many other ways post-Brexit. We can dig in with red lines about this or that, but NI is still going to suffer economically just like Ireland if they mess the border arrangements up. They can make a fuss about blocking City financial services all they like, but it's their own big businesses using those services and they have no credible alternative based within the EU27, and those businesses weren't just spending all that money on those financial services out of charity. For myself, it saddens me that the whole affair seems to be characterised more by divisive rhetoric and mistrust now than by a constructive, amicable approach. I take the view that if we're going to have Brexit then obviously the UK-EU relationship will change, but it's still in our mutual interests to collaborate in numerous ways, and I think there were also numerous ways that these negotiations could have gone better if most of the political leadership on both sides hadn't been weak and hostile from day one.

Silhouette 9y ago

I know there's a conventional (and strong) argument against the EU in that it combines the 'worst of both worlds' for many of its members, since they have a single currency but they don't have the kind of federal system that would balance that out. Yes, that was essentially their position. The EU when it was smaller was mostly a group of member states in at least broadly equivalent economic situations. As it has grown, there are much wider disparities, and that undermines some of the original assumptions behind the Single Market. For example, if there is an incentive to have cheap labour move from a relatively poor economy to a relatively wealthy one, you have potential for abuse on the relatively wealthy side, and you also have a risk of a "brain drain" effect that holds back growth in the poorer economy. Likewise, trying to unify the markets across such widely different EU states is economically unsound. They aren't really one big market, because basic factors like cost of living and household income vary widely from one member state to another. Forcing businesses to treat all member states equally (which subsequent to that discussion the EU actually has been working to legislate) means you usually price the poorer member states out of the market, which is good for neither the potential customers in those states nor the businesses who would have been happy to supply them. I also don't see how the UK could conceivably be said to be disadvantaged by the EU - given that financial services + co seem to depend upon EU membership. The EU is mostly a good thing for trade with the EU. But by belonging to the EU, and in particular the Customs Union, the UK gives up the ability to negotiate its own trade agreements with non-EU trading partners. Instead, it is required to impose the EU's standard tariffs and other non-tariff barriers when trading outside the bloc, and the EU is rather protectionist in its stance there. Put another way, just as EU membership brings well-documented advantages in terms of tariff-free trade and ease of access to the EU market, it also imposes directly analogous disadvantages in terms of forcing tariffs and other barriers when trading with non-EU markets, and the UK has limited ability to change that situation while remaining in the Customs Union because any relevant trade agreements are negotiated via the EU and not the UK itself. The argument being made at the time was that since our foreign trade has been shifting steadily towards a greater proportion being with non-EU partners, the balance between the benefits on the EU side and the costs on the non-EU side was shifting in the wrong direction. (And if the EU did then suffer further economic troubles, that would reduce the benefits of continued membership significantly, pushing the balance further/faster in that other direction.)

pasabagi 9y ago
I don't know if I agree that the EU is fundamentally unsound. Federal systems work. Germany is one example of this. The US is another. States are stronger together. The unsound bit is half-assing it. I think the politics side is really where the UK will find the rub, though. The EU isn't going to be pleased with the UK for leaving. There's a great incentive on their side to make it turn out badly for the UK. Which means it's a little bit like if Mexico got on the USA's shitlist, just so they could get better trade deals with Brazil.
- Silhouette 9y ago
  Speaking personally now, I'm in two minds about a lot of this. It seems clear that the inability of different EU member states to operate their own fiscal policies while tied to the same currency has caused harm (albeit of very different kinds) in recent years to both Greece at one end of the scale and Germany at the other, and to a lesser extent to various other member states. If the EU was a fully federal system, with combined political/legislative leadership to go with the combined economic/currency ties, maybe that wouldn't have happened. However, I doubt we'll see that level of integration any time soon, because it brings too much other baggage. That being the case, while I don't have the knowledge or experience to judge the odds myself, I can see why some economists might be wary of the same effects that caused so much trouble a few years ago doing so again in the future. As for the EU not being pleased about the UK leaving, that seems inevitable, but I'm hoping that cooler heads will prevail. Poisoning the well won't help either side, and clearly we're still going to be trading and collaborating in many other ways post-Brexit. We can dig in with red lines about this or that, but NI is still going to suffer economically just like Ireland if they mess the border arrangements up. They can make a fuss about blocking City financial services all they like, but it's their own big businesses using those services and they have no credible alternative based within the EU27, and those businesses weren't just spending all that money on those financial services out of charity. For myself, it saddens me that the whole affair seems to be characterised more by divisive rhetoric and mistrust now than by a constructive, amicable approach. I take the view that if we're going to have Brexit then obviously the UK-EU relationship will change, but it's still in our mutual interests to collaborate in numerous ways, and I think there were also numerous ways that these negotiations could have gone better if most of the political leadership on both sides hadn't been weak and hostile from day one.