Relationship Between the UK and European Union Presentation

Introduction

• The U.K Joined E.U, which was then the EEC, in 1973.
• The U.K was under the Conservative government under the leadership of Edward Heath.
• The Chief British negotiator was Geoffrey Rippon.
• The U.K entry in to the EEC was not popular among a large number of politicians in the country, especially the Labor Party members.
• A referendum was held in 1975 in which two-thirds voted in favor of remaining to be an E.U member.

The U.K became an E.U member, which was then referred to as the EEC, in the year 1973 under the Conservative Government led by Edward Heath. The Chief British negotiator was Geoffrey Rippon. However, not everybody in the U.K was in favor of this country joining the E.U. Many politicians were opposed to the idea. The Labor party was not in support of this and gave a promise to hold a referendum on withdrawing membership once it came to power. But when the Labor Party came to power, it had changed its mind concerning this issue and the two parties campaigned for remaining to be a member of the E.U. Following the referendum, which was held in 1975, two-thirds of the voters were in favor of remaining to be E.U member (Revised storyboard, 2005).

Why the U.K joined the E.U

• The global political issues were being controlled by the USSR and the US in the “Cold War climate” (Anon: The E.U and the U.K, n.d).
• The U.K founded the EFTA in 1960 which was aimed at boosting free trade without the EEC’s political or economical integration.
• The U.K applied for EEC membership in 1961 as it became clear to them that political influence in Europe rested in the hands of the EEC.
• Among the drawbacks of the EFTA was its members’ dependence on engaging in trade with EEC instead of with the other members of the EFTA.

The U.K formed the EFTA in the year 1960 in order to promote free trade without the political integration as well as economic integration of the EEC. The main reason why the U.K made a decision to join the E.U was the realization that that the political influence rested in the hands of the EEC. The EFTA encountered a stumbling block following the issue that the members were reliant on trading with the EEC rather than with other members of EFTA (Anon, The E.U and the U.K., n.d).

What the Media Said when the U.K joined the E.U

• The media was quite excited about the U.K joining the EEC and most of them are currently still excited.
• They include: The Sunday Times, The Financial Times, The Guardian, The Daily Mail, The Economist, The Daily Telegraph, The Daily Mirror, The Times, The Observer, and The Sun.

All through the run up to the day of joining “the daily news in Britain was delivered with a preposterous pro-EEC slant designed to suppress the truth to convince the public that without membership of the EEC, neither they nor their country had much of a future”(Coleman, 2006, para 6).

The Times

Made remarks that the negotiator, Geoffrey Rippon was behaving as if he was having something to hide.

The Daily Mirror

Was unrelenting in giving a description of the prizes of membership “as immense and warning readers that if they voted against membership of the EEC they would become mere looker-on from an off-shore island of dwindling insignificance” ”(Coleman, 2006, para 6).

Advantages of Joining the European Union

• Countries work together in solving problems.
• Presenting of significant economic opportunities.
• Freedom of movement.
• Opportunity to vote.

One of the advantages of joining the E.U is that the members of this union work together to ensure the world is a peaceful and safe place by dealing with common problems such as “nuclear safety, long-term employment, development of rural areas of its state members, integration of young people in to working life among other issues” (Anon: Advantages and disadvantages of European Union, 2005).

Another advantage is that, by a country joining the E.U, this will present it with economic opportunities in form of a bigger market. All the member nations will create the largest economic region in the entire world. People will freely move to other member states and may live, study, or work there. They are also able to set up businesses in any of the member country.Another advantage is that people are given the opportunity to vote in the member country where they live and they are even offered a chance to stand as candidates in the European elections as well as in the local elections.

Disadvantages of Joining the E.U

• Heightened rates of competition.
• People will leave their home countries.

The rates of competition may be heighted in terms of the market and coming in of cheap commodities from other member countries. Several people may decide to leave their home countries to go and find better paying jobs in the other E.U member states. As a result of this, the home country may experience a shortage of experienced and young specialists.

The value of British membership of the European Union

• The U.K was to increase its payments to the European institutions.
• It was expected that the U.K contributions in 2008/2009 would be two billion pounds.
• The E.U membership price was forecast to be 6.5 billion pounds and payments could be even higher since they are made in Euros and the pound has fallen to record lows.

It is indicated by the treasury figures that the U.K government would rise its payments to the European institutions. In 2008/2009 financial year, the net contributions of the U.K to the European budget were expected to be two billion pounds. It was also projected that in the financial year 2010/2011, the cost of E.U membership would be 6.5 billion pounds. These payments could eventually be even higher following the issue that contributions are made in Euros and the pound has fallen to “record lows against the single currency and continue to slide on currency market” (Kirkup, 2008, para 3).

Has the U.K Benefited From the E.U Membership?

• Trade Flows:
  • The E.U has benefited from the E.U membership in terms of trade.
  • The U.K trade with the E.U has increased by 7 percent.
• FDI flows:
  • E.U membership has boosted FDI flows.
  • Companies have restructured and promoted efficiency.
  • Significant inflows to the U.K is linked to the E.U membership.
• Labor flows:
  • Migration patterns not affected much by E.U membership.
  • 0.1% of E.U population move between member states every year.
• Fiscal Flows:
  • The U.K paid in more than it has taken in terms of tangible receipts.
  • The U.K currently pays the same amounts to comparable member states.
  • It receives smaller payments under the structural funds and CAP.

The U.K has derived benefits from being an E.U member “on accession in 1973 and also from increasing integration through single market” (Revised storyboard, 2005, p.16). The estimates that have been made indicate that the U.K trade with the E.U has been increased by 7 percent following the U.K joining the E.U.

The FDI flows in to and out of the U.K has as well been considerably improved by the E.U membership, making it possible for companies to restructure and promote efficiency. The global foreign direct investment took off towards the end of the 1980s and this was the same time the single market program took off. “Econometrics studies suggest significant inward flows to the U.K are linked to E.U membership” (Revised storyboard, 2005, p.17).

The migration patterns do not seem to have been affected to a great extend by the E.U membership, even this may begin changing with the latest accession. According to Revised storyboard (2005), “although data is limited, very little intra-EU migration appears to occur – 0.1 % of E.U population move between member states each year” (Revised storyboard, 2005, p.18). About 1 million E.U nationals stay in the U.K.

The “U.K has paid in more than it has taken in terms of tangible receipts, and increasingly so as we have got comparatively richer as a country…but overall fiscal balance is quite small in proportion to GDP” (Revised storyboard, 2005, p.19). In the current day, the U.K pays the same amounts to “comparable member states” (Revised storyboard, 2005, p.19). However, the U.K receives smaller payments under the structural funds as well as under the CAP. “With rebate, U.K’s effective net contribution only 0.25 % of GDP”(Revised storyboard, 2005, p.19).

Relationship between the UK and the European Union

• The U.K relationship with the E.U is complex.
• The complexity in the relationship stems from the way in which Heath sold to the U.K the reasons for joining the E.U
• The U.K citizens were still naïve at the time the U.K joined the E.U.
• The years that followed after the U.K joining the union were disruptive
• The people in the U.K still feel the E.U is a “drain of the U.K resources” (Stephen, 2007).
• The government is aware that closer union is essential for U.K’s survival
• Whenever something goes wrong, the E.U is the one that is blamed
• The E.U has been used as a scapegoat of the U.K government; contributing to big mistrust of the E.U within the U.K.

The U.K – E.U relationship is complex. The complexity in this relationship stems from “the way in which Edward Heath sold to the U.K the reasons for joining the E.U” (Stephen, 2007, para 1). Heath made it apparent that what the U.K was becoming part of was a trading club known as the Common Market. This was a guarded market within which this country could engage in trading and turn out to be successful.

At the time the U.K joined the Union, the U.K citizens were still sufficiently naïve to hold a belief that that was the case. The years that followed were destructive for the U.K because of the emerging of the strikes, the 3-day working week as well as energy blackouts and a large number of families suffered and this was blamed on the EEC.

The U.K citizens still hold a feeling that the E.U is “a drain on U.K resources and is holding on U.K back, being one of the largest contributors to E.U funds” (Stephen, 2007, para 3).

The U.K government has full awareness that closer union is vital for the survival of the U.K as an active economy and to engage in trading in the progressively more global market. Such countries as the U.S, China and Russia are big economies and “the only way European countries can wield the kind of financial clout necessary to be taken seriously is by forming an ever closer union” (Stephen, 2007 para 4). There has been ensuring by the “successive government policies” that this has taken place. However, in case something is not right or when the government experiences pressure following such issues as immigration, the blame is directed to the E.U. This union has turned out to be the favorite scapegoat of the government and this has contributed towards having big mistrust of the EU within the U.K.

What the media say about the relationship between the UK and the European Union?

• Polls indicate that the British citizens are less happy about the U.K being an E.U member.
• If the U.K did not join the E.U, it could still be part of the most dynamic sector of the global economy
• Focusing trade to Europe by the U.K has become a one-sided deal.
• The U.K dealings with the E.U has run up staggering deficit of 300 million pounds
• Norway and Switzerland are still among the richest European countries despite them not joining the E.U.

The media reports that even if the major political parties in the U.K are fully “wedded” to the U.K’s membership of E.U, there was been constant indication by the E.U’s own polls that the British Citizens are less happy to be members of this union than citizens of any other European country.

It is pointed out that, had the U.K not joined the E.U, it could still have remained “a natural part of what has become the most dynamic sector of the global economy” (Booker, 2007, para 10). Booker further points out that “in taking that mighty gamble back in 1960s and 1970s, it has very much looked as though we backed the wrong horse, simply in economic terms, we have paid a colossal price for it” (Booker, 2007, para 11). It was reported that shifting the focus of the U.K’s trade to Europe, away from the English speaking world, has certainly become a one-sided deal.

In the last three decades, so much more of the U.K’s European partners sell to this nation than it sells to them that is has “run up a staggering deficit on our dealings with the E.U, amounting to three hundred million pounds” (Booker, 2007, para 13). Booker (2007) gives out the eventual proof of how well the U.K may have survived without being an E.U member by pointed out that even to this day, Switzerland and Norway, who are not members of the E.U, are two of the wealthiest nations in Europe and export a larger percentage of their commodities to the E.U than what the U.K exports without having to become E.U members.

Why the U.K Does Not Join the European Currency

Risk of higher unemployment and deflation

• Currency unions have been collapsing in the past and there is no guarantee that EMU will succeed.
• In case the ECB pursues a deflationary monetary policy, this may be a recipe for economic stagnation and high unemployment.

There has been collapsing of the currency unions in the past. There is no assurance that the economic and monetary union will succeed. “It may prove to be a recipe for economic stagnation and high unemployment if the ECB pursues a deflationary monetary policy for Europe to keep inflation within the 2 percent limit”( Tutor2u.net, 2011, para 2).

“The Euro is not an optimal currency zone”

• Euro Zone doesn’t meet required conditions for an optimal currency area
• There is geographical labor immobility within the Euro Zone nations
• No enough wage flexibility

“The Euro Zone does not meet the conditions required for an optimal currency area” (Tutor2u.net, 2011, para 3). This implies that within the Euro Zone nations, there exist “geographical labor immobility” and there is no enough wage flexibility “inside European labor markets to cope with external economic shocks” (Tutor2u.net, 2011, para 3).

Loss of monetary policy autonomy

• Joining a single currency reduces monetary policy autonomy
• The U.K might be better off if it still holds the flexibility to set the interest rates
• Joining the Euro Zone means a lasting transfer of domestic monetary sovereignty to the European Central Bank.

Another reason for not joining is loss of monetary policy autonomy. By joining a single currency, this brings down the level of the monetary policy autonomy of Britain. This nation might be better off if it still holds the flexibility to set the interest rates in order to meet the country’s own economic goals and objectives. By the U.K joining the Euro Zone, this implies a lasting transfer of domestic “monetary sovereignty to the European Central Bank” (Tutor2u.net, 2011, para 5).

“Demand for European Fiscal Transfers”

• Fiscal transfers will be needed to help the poorer E.U member nations
• The U.K may not feel able to meet such large-scale intra-European transfers expense.
• It can continue attracting capital inflows while being outside the Euro Zone.

Considerable fiscal transfers will be required to assist the poorer nations which are E.U members together with activist “European Regional Policy” to bring down the level of the “structural economic inequalities” (Tutor2u.net, 2011, para 6). The U.K may not feel being in a position to meet the expense of the large-scale “intra-European transfers” like this. “The change over process to the introduction of the Euro will involve substantial menu costs for businesses and banks…these menu cost will bear heavily on small-medium sized enterprises” (Tutor2u.net, 2011, para 7). The U.K can go on attracting capital inflows while being outside the Euro Zone. “Favorable supply-side factors in both product and labor markets make the U.K an attractive venue for foreign investment” (Tutor2u.net, 2011, para 7).

The U.K Leaving the E.U

Majority of the people suggest that the U.K should leave the E.U and the reasons given for this include:

• To bring the drain on U.K’s finance to an end.
• To introduce authority of Westminster again.
• To enforce British policies on fisheries as well as agriculture.
• To capitalize on the U.K’s individual strengths.

It is suggested that the U.K should leave the European Union. Several reasons are given of the need for the U.K to leave the union. Some these reasons include; to bring the drain on U.K’s finance to an end, to introduce authority of Westminster again, to enforce British policies on fisheries as well as agriculture, to take advantage of the U.K’s individual strengths among other reasons.

What the media said about the U.K leaving the E.U

• 55 percent are in support of U.K leaving the E.U.
• The consequences of leaving can not be clearly known.
• The other European nations would want to make a deal to have continued access to the U.K market.
• Other people warn of a more upsetting split over trade.

It was reported in the BBC News that 55 percent of the people who were contacted in British opinion polls support the idea of Britain leaving the E.U. It is hard to clearly know the consequences of the U.K leaving the European Union. It would depend on “the mood in which it is done; cooperative or acrimonious” (Bowlby, 2009).

It was reported that Sir Stephen Wall who was once the top official of Britain in Brussels and Tony Blair’s adviser of the European matter agreed that the rest of the European nations “would certainly want to do a deal, especially for continued access to British markets” (Bowlby, 2009, p.1). However, he also gave out a warning that they would as well want to make the U.K to “pay a price just as the French made us pay a huge price for joining in the first place” (Bowlby, 2009, p.1). This implies that, even after leaving the E.U, the U.K would go on paying in to the E.U budget for a period of time as being a part of a deal.

There are those who warn of a more upsetting divide over trade. It was reported that Simon Hix, who is an Economics professor at the London School of Economics gave a suggestion that cheap flights to the European Union member nations could be under threat in case there was imposing of fresh costs on the British airlines.

References

Anon., 2011. Advantages and disadvantages of European Union. Web.

Anon, n.d. The E.U and the U.K. Web.

Booker, C., 2007. What if Britain hadn’t joined the E.U. Web.

Bowlby, C., 2009. If the U.K left the E.U what would the consequences be? Web.

Coleman, V., 2006. How the British media lied and tricked us in to joining the E.U. Web.

Kirkup, J., 2008. E.U membership cost to Britain taxpayers will treble to more than 6 billion pounds, Treasury says. Web.

Revised storyboard., 2005. The economic effects of E.U membership for the U.K. Web.

Stephen, H., 2007.Understanding the relations between the U.K and the European Union. Web.

Tutor2u.net., 2011. Arguments against the U.K joining the Euro. Web.