Monday 24 October 2016

Cameron's extraordinary gamble could backfire

Plan to silence eurosceptics with vote now on knife-edge as Brexit begins to look like a possibility, writes Blair Horan

Blair Horan

Published 22/05/2016 | 02:30

David Cameron. Photo: PA
David Cameron. Photo: PA

The polls indicate that the UK referendum is on a knife-edge and Brexit is now a real possibility. Prime Minister, David Cameron took an extraordinary gamble on Britain's future in the EU in January 2013 when he promised to negotiate a fundamental reform of the EU, which he would then put to an In/Out referendum. It was designed to silence his eurosceptic backbenchers and outmanoeuvre UKIP, but it could well now backfire on him.

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His renegotiation did secure significant concessions, more than many expected, with an opt-out from 'ever closer union', protections for sterling and changes to in-work benefits to curtail access for other EU workers. However, fundamental reform of the EU, it is not, because that was never achievable by one member state. How did it all come to this? Both the Labour and Conservative parties stood apart from European integration in the post war years because the British preference was for a European free trade area, with limited sharing of sovereignty.

The structure of the EEC, agreed in 1955, was for a Customs Union with some harmonisation of social and economic policies which involved a much deeper level of political integration than a free trade area. In the late 1980s, Margaret Thatcher turned against the Community as it moved towards economic and monetary union and adopted the Social Chapter on workers' rights. Since then the Conservative party has turned increasingly eurosceptic.

Restoration of sovereignty and opposition to free movement of people is at the heart of the eurosceptic case for leaving the EU. They argue that the freedom to trade with faster growing emerging market economies offers the UK a bright future.

However, the type of goods that the UK produces along with its financial services means that the EU Single Market import profile is the best match for the UK's exports. The UK could leave the EU and stay in the Single Market but that would mean accepting all the regulations, including free movement, with no say in setting the rules. If it decided to trade under World Trade Organisation (WTO) rules, as many in the Leave campaign desire, it would face a difficult choice on tariff policy.

If it matched EU tariffs on food at 36pc for dairy produce, and up to 70pc on some beef products, it would significantly increase UK food prices. If it unilaterally lowered these tariffs, it would have to offer the same to all WTO countries, which would remove any leverage for the new free trade agreements it would need to negotiate.

For Ireland, it is the labour intensive indigenous sector that is most exposed to Brexit with over 40pc of food and beverage exports going to the UK. No existing EU trade agreement includes full free trade in agriculture. That would have negative consequences for Irish exports, even if it took some UK market share in the rest of the EU. Even if the UK remained in the Single Market, after Brexit, it would face customs' controls to ensure that third country exports could not bypass EU tariffs using the UK.

That would result in customs' controls on the land border between Newry and Dundalk. The necessity for these would increase, to protect Irish farming and the agri-food sector, when the UK eventually managed to negotiate free trade in agricultural products with other countries.

If the UK leaves the EU it is also likely to leave the Single Market because other member states will not put their economies at a disadvantage, by granting the UK preferential access. With the end of free movement, the common travel area is then a potential back door for illegal immigration to the UK. The EU has no compelling reason to require Ireland to join Schengen. The UK will then have to decide where to put the border for passport controls.

When the common travel area was suspended between 1940 and 1952, the passport controls were between Northern Ireland and Great Britain and not on the land border because that was considered too costly and ineffective. Brexit may have consequences in Northern Ireland very different to what many expect.

Blair Horan is Secretary of the trade union Charter Group

Sunday Independent

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