Globalisation is killing the EU. Bring it on

Roland Smith
Oct 10, 2015 · 13 min read

In the coming EU referendum, we will face a choice of competing visions. Not of the status quo, but on the one hand a vision of Britain as part of a steadily-integrating EU (at whatever speed) or a vision of Britain outside it.

There may be some variations around those two themes but that is broadly it.

Now let me tell you my vision.

In mapping out where this country should go to, one must first consider where it came from and why. We are, after all, a member of the EU so one might ask the question: If it was so awful, why did we join in the first place and why is there still a significant lobby supporting it? Those questions are pertinent not least because it’s often said that if the UK government was proposing to join the EU today, the British would reject it by a large margin.

I’ll resist the temptation to show that we joined the then EEC on a false premise — I’ll leave that to the public record. Instead let’s look at the circumstances in Britain around the time we joined the EEC and then agreed to stay in as a result of the 1975 referendum.

Because back then Britain was a country beset by nagging economic problems that were coming to a head: The constant stop/go policies that seemed to only inch us forward while the likes of Germany and Japan seemed to leap ahead; strikes; power cuts; rations, even; and the 3-day week.

On a longer view, Britain was a country in decline. Since World War II and particularly since the Suez crisis of 1956, Britain’s empire and its confidence had continued to disappear. The USA and the Soviet Union were the two blocs that now mattered in the world, each having their own large economic trading zone (the USA itself and Comecon).

Indeed, protected blocs seemed to be the future and the EEC was apparently forging a third bloc and third way between these two giants, albeit aligned to the USA.

Then there were the walls.

The most visible walls were the Berlin Wall and the Iron Curtain separating the Soviet Union from the West but there were also significant tariff “walls” between blocs, countries and trading areas. These walls not only demarcated different geographic areas, they reinforced the separateness of those areas, limited trade, and ultimately put a limit on economic progress. The tariff walls in particular not only defined economic blocs but also made the case for them, creating an impulse for relatively like-minded countries to club together to at least forge a level of economic freedom among themselves.

Among British social attitudes at the time, there was a rich seam of opinion that defined ourselves against others. Each nationality and race had an unflattering nickname. Schoolboy jokes often centred on racism and xenophobia. On television, popular shows (‘popular’ in a kind of low grade sense) were “ The Black and White Minstrel Show”, “Love Thy Neighbour”, “The Comedians”, and somewhat satirically “Till Death Us Do Part”.

The flip side of all this was the increasing trend of taking holidays abroad. Steadily improving living standards helped drive this trend but so too did growing competition in the airline industry. The favoured destination was Spain and, if you were particularly exotic, the Balearic Islands.

Indeed, “economically advanced”, and “exotic” were the main words one would think of when considering “Europe”.

This then was the backdrop to the UK’s entry into the EEC in the early 1970s and its confirmation in a referendum in 1975.

Being “for Europe” symbolically represented a future, outward-looking, cosmopolitan and internationalist mindset. It confirmed that you were part of the new jetset or had aspirations in that direction. It was about “getting on”, just as a 1975 Yes campaign song spelt out: “You’ve got to get in to get on.”

Conversely, being “against Europe” seemed to mean you wanted to cling to the old or existing ways that were failing; that you were parochial, old fashioned , narrow-minded, unreasonable even, and the fact that the more extreme ends of the political spectrum were “against Europe” — a coalition of Tony Benn and Enoch Powell — just reinforced this narrative.

There was also a whiff of Colonel Blimp surrounding the Outers. Basil Fawlty’s passing comment in a 1975 episode of Fawlty Towers that he voted against EEC membership, further reinforced that “anti-Europeans” were barking mad, stuck in the past, and wanted to re-fight old wars. (In the same episode Mr Fawlty went on to goad some German guests, culminating in his famous Hitler goose-step march.)

And that narrative has largely stuck ever since. That’s despite some dramatic changes that have subsequently happened in the EU and in the world, sometimes behind the scenes.

As we now know, the 1970s turned out to be an odd period where many things that seemed like good ideas at the time turned out not to be. Indeed the whole “post-war” mindset from the 1950s up to the 1980s means very little now. It’s another culture that we can barely understand just several decades later and now look upon with open-mouthed incredulity. Along with the EEC, a fitting and lasting symbol of the era would be Jimmy Savile: a happy and kindly if eccentric fellow back then; a jolly uncle figure who helped children and the sick.

We now know different.

While there may have been an element of truth about EEC membership in the 1970s that seduced many subsequent sceptics— the blocs, the global tariffs, the strife and decline in Britain — we can now say that our timing for joining “the club” could not have been worse.

Poor timing: The black vertical line is when the UK joined the EEC/EU

Events started changing the political and social climate in Britain very soon after we joined.

The first big change in the climate surrounding EEC/EU membership came during the 1980s with some significant (and unwelcome to some) changes in Britain under Margaret Thatcher. Towards the back-end of that period came the second significant change: the Soviet Union started creaking and then collapsed along with the Berlin Wall (1989) and later Yugoslavia (from 1991).

Around this same time we saw the Delors speech at the TUC conference followed by Thatcher’s speech to the College of Europe in Bruges (both 1988). And then came the Maastricht Treaty and sterling’s exit from the exchange rate mechanism in September 1992 (“White Wednesday”).

All of these served to change the backdrop to the EU membership debate. In fact the commentator Wolfgang Munchau now names this period, specifically the Maastricht Treaty, as the time when Britain began its long slow exit from the EU.

But another less well-known and less reported event in the early 1990s has profoundly affected the logic (or lack of it) behind Britain’s EU membership.

This was the Marrakech Agreement that gave birth to the World Trade Organisation (the WTO). It was forged in the early 1990s after 12 years of negotiations and finally confirmed on 1st January 1995. This agreement represents the moment globalisation was born, although as is customary with international organisations and accords, the effects took a few years to start filtering through into public consciousness.

A new phenomenon arising from globalisation — G8 protests. This one in Canada in 2002

Tariffs were then steadily reduced and “globalisation” — the word and the reality — began to take hold.

Note the fluctuating-but-consistently-high average tariff up to about 1972…….

The start of this massive global tariff reduction and freeing up of global trade just happened to coincide with the emergence of many new nations.

And it was a coincidence…but in different circumstances it might not have been. As the free market IEA observed in a recent discussion on states and other political entities in a globalised world:

“Now suppose trade barriers are reduced. This shifts the equilibrium: it is now possible for people to be part of the same economic area, without having to be part of the same political entity. They are able to trade with one another without having to agree on politics. This means the economic benefits of large markets can now be reaped without incuring the political cost of heterogeneity. Consequently, the optimal size of a political entity falls.

This is an exact reversal of the conventional rationale for EU-federalism, which holds that globalisation makes larger political entities necessary. Au contraire: it is the very globalisation that makes smaller political entities viable.”

Unseen and barely discussed in the 1990s, globalisation was beginning to eat into the logic of a political European Union at the very point it was striding towards statehood with a single euro currency.

Looking back, the EU was an old ideology in a hurry.

The event that was somewhat more attuned to freer globalised trading was the fanfare around the launch of the single market in 1992, except for the fact that it was and is tied to the EU’s political integrationist ambitions. But now, even the European single market is being rapidly eclipsed by the march of globalisation. A large and growing body of single market law is now made at global level and handed down to the EU which in turn hands it down to the member states.

The EU has become a pointless middleman as a vast new global single market takes over.

Through the 2000s — the “Noughties” — some service industries, particularly financial services, lagged behind in this globalisation process just as they lag behind at EU/single market level. But in the aftermath of the “global financial crisis” (the clue’s in the name), the shift to a globalised market with globalised regulation has accelerated, with the G20 now stepping up to a lead role.

With such a backdrop, one or two things have become very clear.

For example, the idea of the EEA (European Economic Area) being a stepping stone to full EU membership is finished. Pro-EU forces in Norway and Iceland have effectively or actually shut up shop. Of course that doesn’t stop Europhiles from those countries making interventions in the British debate in order to help prop up the EU.

However as every year passes, these nations have less and less need for that much vaunted “influence within Europe”. Laws and standards are now made over the head of the EU. As an independent nation, Norway has a seat at these global top tables alongside the EU and that’s where it exerts its influence. The standards and regulations are hammered out through intergovernmental cooperation. But stuck inside the supranational EU, the UK is effectively neutered on many global bodies courtesy of the EU’s common position. It is one of many ironies that the pro-EU position is to stay in the EU to be “at the top table”. The Brexiteer’s case to leave the EU is quite similar—to be at the “top table”. The difference is that Brexiteers at least know where the top table is.

That’s not all.

Globalisation has already made geography largely irrelevant. So has technology and the internet.

We are now less dependent than ever on our closest trading partners in Europe and this trend is marching relentlessly onward. For the first 40 years of our membership, the majority — over 60% — of UK goods exports went to the EU. But in 2012, for the first time, that figure dropped below 50%. It is now at 45% and continues to sink.

UK goods exports

The demographics of the European continent, alongside the disastrous euro and its insidious effects across Europe have also played a large part in this change, but so has the resurging global confidence of Britain. The London 2012 Olympics may yet come to be seen as a timely and fitting symbol of a nation’s re-emergent global ambition.

Why is the UK locked in a union with a troubled & declining eurozone?

This situation and these trends are not going to change. They are only going to continue. Britain and the EU are diverging economically and where economics goes, politics generally follows. Eventually.

There are still some obstacles that need to be considered as part of Britain’s EU exit and full re-engagement with the world. For example, global tariffs have diminished but in so doing, a swathe of technical barriers to trade (TBTs) have been revealed — essentially regulatory differences between countries/zones that impede entry of a product, service or company into that country or zone. Tariffs are thus no longer the issue they once were; TBTs are. But firstly TBTs are a consideration for Britain’s method of exiting the EU, they do not prevent it. And secondly TBTs are being addressed globally over time.

Britain’s exit from the EU would be a journey out, not a one-time event. We would likely first move to a single market position outside the EU thus still being in economic union but not political union. And the journey out would continue from there, ending in a position out in the global single market.

The moment of Brexit is a turning-the-ship event. It is not the final destination. Accept that and much else falls into place.

So there is an inevitability about all this. The issue is not going to go away, even if the UK votes in 2017 to remain in the EU. The forces of globalisation mean the stresses in the EU-UK relationship will only increase. It may become a simple case of: Leave now or leave later. But leaving later just defers the inevitable and may well be worse when it comes.

Maybe Munchau was right when he suggested Briain’s long slow march away from the EU started back in the 1990s when we opted out of the euro.

But where is the issue of migration in this vision? There have always been wars in distant lands but with some exceptions, it hasn’t necessarily meant a huge influx of migrants into Europe or the UK.

In 2010, the United Nations reported that there were 214 million migrants around the world — an increase of 37% in just two decades. Observers of this subject suggest there’s more mobility now than at any time in world history.

One answer is that migration is possibly the third wave of globalisation, after goods and capital. Migration isn’t regulated in the way that goods and capital are but people in less developed countries are increasingly aware, if only in a vague sense, of an attractive world elsewhere. Such people may have even been impacted/employed by an international company in their country that exported back to the developed world. They know that there are ways and means to move and settle elsewhere and that the economics of immigration in the receiving country (especially if in poor shape demographically) will often triumph. Look at Germany.

Even after high immigration, Germany’s population pyramid is still in bad shape

The other aspect to this is that the ‘refugee’ migration that has caused so many issues in Europe is regulated by the 1951 UN Convention relating to the status of refugees, along with an 1967 amending protocol both of which are arguably out of date.

It would be ironic that an out of date convention is troubling an out of date EU, both born in the same out of date post-war period. To cap the irony, in 2009, the EU incorporated the 1951 convention into the Charter of Fundamental Rights and is thus also now part of EU law.

Without going too far into the rabbit warren that is the subject of migration, if one accepts increasing globalisation, one must accept the corollary of a high degree of migration. And manage it. If we as country regain the power to decide these matters, we can at least start having a grown-up debate about it which would be a major advance on where we are now.

As for this country’s identity — it has withstood far greater threats than 13% of the population being foreign-born. I might add that Switzerland and Australia with much higher proportions of migrants seem to manage OK. As Mo Farah (pictured at the start of this post) shows, newcomers usually come here because they love this country and its culture and can even pick up its timeless sense of self-deprecating humour (the famous “Mo-Bot”). The country and its institutions are too powerful to be “over-run”, and fear of this happening displays a misunderstanding of what Britain is about — ironic given that those most of those advancing this view claim to be the most British/patriotic.

The Brexit vision is therefore a global, outward-looking and ambitiously positive one. It eschews the backward-looking regressive outlook of both the EUphile and the shouty anti-immigration lobby.

So a parochial “little Europe” and a demographically declining one… ranged against an expansive, liberal and global outlook.

This vision certainly doesn’t want to go back to the past: of barriers, blocs, of narrow-mindedness, and of course a politics and a set of circumstances that actually got us into this current EU predicament in the first place.

The crux of the matter is that we in Britain want trade and cooperation; our EU partners want merger and a leashed hinterland. Are we prepared to spend another decade or more dancing around this basic fact while the rest of the world moves on?

My answer is an emphatic No. It’s time to leave.

Acknowledgements to Dr Richard North without whose insights, key parts of this post would not have been possible.

Roland Smith

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Fellow of the Adam Smith Institute. Brexitologist. Globalist. #Brexit