Wednesday, 18 November 2015

What is the EU ?

Or rather, this blog will attempt to correct some of the common assumptions made about the  EU, by defining what it is NOT - I will attempt to describe the EU in later posts.

The EU  is not  Europe

 A constant refrain in the media is that the referendum is to decide whether "Britain should leave Europe", whereas in fact the EU does not comprise the whole of Europe.

There are 51 internationally recognized sovereign states with territory located within the common definition of Europe, and all except Belarus, Kazakhstan and Vatican City are members of the Council of Europe,  an "intergovernmental" organisation created by the 1949 Treaty of London.

There are currently 28 member states in the EU.

The EU is not  The Single Market

Similarly, the media tends to confuse the EU with the European Single Market.  

More accurately, the European Economic Area (EEA),  is the European Single Market.  As can be seen in the diagram above, the EEA comprises the 28 member states of the EU and 3 of the European Free Trade Area (EFTA) states (Norway, Iceland & Lichtenstein) - these 3 states have full access to the European Single Market but are outside all the political entanglements of the EU.

Nor is the EEA the only way other European states outside the EU access the European Single Market:
  • Switzerland, the fourth EFTA state, rejected the EEA in a referendum, but has instead negotiated a series of bi-lateral treaties with the EU that provide access to the Single Market whilst remaining outside of the EU.
  • Turkey is inside the EU Customs Union but outside the EU - hence has access to the Single Market for some goods but must adopt the EU's external trade policy.
  • Most other European nations have association agreements with the EU.  In 2014, Ukraine and Moldova signed association agreements with the EU, leaving Belarus as the only one European state that does not access the European Single Market.

The EU is not a Free Trade Bloc

In a free trade bloc, member countries sign a Free Trade Agreement (FTA) to reduce or remove trade barriers  (e.g. import quotas and tariffs) between member countries.  Goods, services, capital and sometimes labour then circulate freely between member countries. Examples are NAFTA in North America, EFTA in Europe and ASEAN in South East Asia. 

A customs union, by contrast, surrounds itself with a common external tariff, and conducts all trade talks on behalf of its member nations.  The EU Customs Union comprises All 28 EU member states plus other states who have joined the Customs Union but are not in the EU (Turkey for example).  In practical terms, being inside the EU Customs Union has following impact on the UK:

  • The EU sets a Common External Tariff for all member states.  In 1973, the UK joined  the European Economic Community (EEC) as it was known then, before becoming the European Union in 1993.  The UK was required to abandon existing trading arrangements with Commonwealth nations and adopt the EEC's high external tariff, resulting in increased prices for UK consumers and reduced trade for Commonwealth partners (Australia and New Zealand being the most heavily affected).  
  • The UK has been unable to negotiate its own free trade deals since 1973.
  • The EU speaks for all member states on world trade bodies (e.g. WTO) - the UK has no independent voice or vote on these increasingly important bodies.

The EU is not an “intergovernmental” organisation like the UN or NATO

There are essentially 2 different forms of international organisation:
  • “Intergovernmental” - where member states co-operate on areas of common interest, but retain an individual veto or opt-out, e.g. UN, Nato.  The Council of Europe works on an entirely intergovernmental basis.
  • “Supranational” – where member states transfer powers to overarching supranational institutions.
The EU evolved from the European Coal & Steel Community (ECSC) a "supranational" organisation created in 1951, whose architects (Monnet & Schuman) rejected the "intergovernmental" model of the Council of Europe.  The EU today exercises power over a whole range of economic and political areas.  Most decisions are made via Qualified Majority Voting (in which the UK has approx. 12% share), increasingly so since the Treaty of Lisbon (signed 2007).

The EU is not what the UK envisaged

It is a commonly-held view that the UK took an isolationist view of international events in the post-war world before finally joining the EEC in 1973 after much foot-dragging and only when the British Empire had faded away.  In fact, the UK (along with America) launched many international organisations which shaped the post-war world and beyond.  In the European arena, the UK was the leading founder of the Council of Europe and European Free Trade Area (EFTA) as well as numerous other intergovernmental initiatives.   

The UK has always envisaged a Europe based on free trade and an “intergovernmental” approach – “Trade and Co-operation” in short.  By contrast, the European Union is based on a Customs Union and transfer of powers to a “supranational” institution – in short, “Political & Economic integration leading to Federal Union”.

The fundamental difference in these approaches helps explain why the UK has never felt comfortable inside the EU and why the UK is seen as the “awkward” member.  Needless to say, it is critically important to understand these differences ahead of the Referendum.

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