The consequences of EU membership

This is the second in a series of posts on Britain’s membership of the EU. The first is here. As a companion to these posts, I’ll be referencing the book “Moored to the Continent” (MTTC) by Baimbridge, Burkitt and Wyman. This post will draw on chapter 4 of that book entitled “Consequences of EU Membership”. The authors write that:

“Successive governments claimed that the benefits of EU membership are ‘self-evident’, so that the UK must remain at the heart of Europe; otherwise it would lose crucial political influence and millions of jobs… Furthermore, the claim is repeatedly made that even a slight weakening in the trend towards greater unification would cost the UK jobs and influence, never mind what would occur if the UK voted to withdraw from EU membership. Yet, governments of all colours have been remarkably reticent to undertake an independent cost-benefit analysis of EU membership.

The reason for this apparent conundrum is that at least in purely economic terms, it is doubtful that the UK has received a net benefit from EU membership.”

So what are the consequences of Britain’s EU membership? MTTC outlines a number of consequences including:

Trade with the EU – It’s often said that the UK benefits massively from free trade with the EU, which might be lost were we to leave, but it’s a two way relationship. The UK has rather a large trade deficit with the rest of the EU, so all those countries desiring to sell their wares to the UK would probably suffer a lot more should a British withdrawal result in new trade barriers being thrown up. So the consequence of EU membership that we all benefit massively from preferential trade is somewhat overblown.

The Common Agricultural Policy (CAP) – In protecting EU agriculture by imposing an external tariff on food imports from outside the EU, consumers within the EU pay higher prices for foodstuffs. This exacerbates the ‘cost of living crisis’, but also encourages an inefficient transfer of resources into agriculture and away from manufacturing and services.

Single Internal Market (SIM) – The single internal market within the EU removes all trade barriers and allow free movement of capital, people, goods and services between members. Before it’s introduction it was claimed it would allow consumers to buy cheaper goods due to increased competition and the existence of greater economies of scale, creating 5 million jobs across the EU. The authors of MTTC argue however that although the removal of trade barriers between member states would have been attractive in the more protectionist 60s and 70s, by today, successive rounds of global trade talks have already drastically cut tariffs, and so the benefits of the SIM are now less clear cut.

MTTC makes a number of other arguments on the consequences of EU membership regarding the common fisheries policy, the historical costs of our membership of the ERM, and the consequences of the EU budget. Some of their arguments I find less convincing, but overall, I think they make the case rather well that the economic case for staying in the EU is anything but ‘self-evident’. At best there may be a neutral economic impact from being in the EU. At worst, EU membership is probably weakly negative. In economic terms, we are alright in and we’d be alright out. In my next post on this subject, I’ll look at some microeconomic and non-economic consequences of EU membership.

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One thought on “The consequences of EU membership

  1. For every business created by the EU membership there is at least one that is competed out of existence by businesses in other parts of the EU that would come back if the EU were silly enough to erect trade barriers. (We’d be able to make Feta cheese and Champagne for starters – its not an entirely free market as you can see).

    So I see it as a distributional argument, not a macro one (given that ‘comparative advantage’ is a bit of a canard). There would be change and the existing businesses are only heard because they exist. Of course the ones that would exist but for the EU cannot hire PR people to make their case since they currently have no income!

    But ultimately Germany is not going to let anything get in the way of their exports, so the change would be minimal in reality. The UK under WTO rules would trade with the EU pretty much as it does now.

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