The odds of Brexit, or a British exit from the European Union, seem to have increased this week as polls show that the “leave” campaign has gained ground. As I’ve written previously, British polling (in particular online polling) can be notoriously inaccurate, and the current polls may actually galvanize “remain” supporters to the polls next Thursday (June 23). However, this effect may not happen, given how voters feel that Britain could withstand the post-Brexit economic tumult. If Britain does vote to leave, one driving factor would be a desire to reassert London’s sovereignty, instead of allowing the EU to dictate policies and regulations.
There are legitimate debates and criticisms about how the EU should regulate industries and whether there is too much regulation. Nevertheless, these rules are designed to help create a single common market encompassing half a billion customers while preventing a “race to the bottom”. Without harmonized European regulations, companies would likely have to follow 28 different sets of fragmented regulations to trade across the continent, which would kill the concept of a common market. Having a single set of minimum standards for chicken processing, for example, allows producers to sell across Europe more easily, whereas adhering to 28 different sets of standards could become prohibitively expensive.
Common regulations can also help prevent protectionism. Because decades of trade negotiations have greatly reduced tariffs on goods, regulations have become the protectionists’ tool of choice. For instance, rules about what constitutes “fresh” milk may appear innocent but are actually designed to protect inefficient dairy farmers from cross-border competition. If protectionists can use regulations to inhibit trade after tariffs have been eliminated, a common market could die or exist in name only. Therefore, if Europe is to have a common market where companies can easily sell goods and services across borders, common regulations of some sort are necessary. But there may still be opportunities outside the EU for Britain to deregulate and prosper.
Open Europe, a think-tank which the pro-“remain” Economist has sometimes labeled “mildly Eurosceptic”, produced an excellent and extensive report last April about how Britain could prosper after Brexit. The most promising opportunity would be the UK’s greater freedom to negotiate new free trade deals faster without other EU countries objecting to issues which did not concern Britain, such as textiles or GMO foods. However, any economic gain would be slow to be realized because these deals would likely take four to ten years to negotiate and implement.
Helpfully, the Open Europe report analyzed how eliminating EU regulations focused on employment, health and safety, environment, and banking could help the economy grow faster. One conclusion was that households and small businesses would save money on energy costs if London scrapped rules that try to reduce carbon emissions and prevent climate change. Open Europe admits that their recommended deregulation (which sometimes sounds like a libertarian’s dream) would face stiff public opposition, whether from unions, environmentalists, or voters who don’t like bankers. Moreover, Britain has “gold-plated” several EU regulations beyond the minimum requirements, so London would have to eliminate not only the EU rule but also the stricter UK version. In one case, instead of placing the minimum EU-required €5 tax on each ton of carbon produced, London has implemented a £16 (€20) tax per ton.
On the whole, Open Europe’s report offers a hopeful vision for Britain outside the Union, but its optimism is limited. Because many of the needed deregulation would face stiff domestic pressure, it seems more likely that at least in the short term Britain would grow more slowly than if it remained in the EU. (Slower growth could, ironically, help reduce immigration, another major justification for Brexit.)
Interestingly, being part of the EU has not prevented the UK from competing globally. According to multiple competitive rankings, whether from the World Bank or World Economic Forum, Britain does very well. Even the conservative Heritage Foundation ranks the UK higher than the US in terms of economic freedom. Looking at some of these rankings’ details, Open Europe concludes that the areas where Britain can improve the most have nothing to do with EU interference. Take high property prices: they have everything to do with local and national policies and little to do with the EU.
It is unclear how well British voters understand how EU regulations affect them. According to Ipsos-MORI polling released this week, there has been widespread confusion about UK’s relationship with the EU, including how much the UK funds the EU and which regulations come from Brussels or from London. A widely-cited finding from the poll is that around 15% of respondents wrongly believed that EU rules prevented female bartenders from showing too much cleavage. More serious and troubling, nearly 40% of respondents did not realize that voters directly elect representatives to the European Parliament, which serves as part of the EU’s legislative body. (Americans are also well-known for not knowing much about their government, so there’s no room for smugness here.)
Even if Britain left the European Union, the UK would not escape the EU regulations which Brexiters assert violate their sovereignty. In 2015, the EU accounted for roughly 44% of British exports and 53% of British imports, and London’s financial industry is heavily reliant upon the continent. Retaining some kind of access to the common market would thus be vital after Brexit. The amount of access allowed would be directly linked to how closely the UK followed EU regulations because, as mentioned previously, harmonized regulations can be a key ingredient to a common market. Norway, which is not part of the EU but is part of the European Free Trade Association (EFTA), still has to follow almost all EU regulations (including those on free movement of people, working hours, banking, and climate change) plus contribute to the EU budget. Switzerland has a different arrangement, but changes in EU banking regulations have impaired Swiss banks. Neither Norway nor Switzerland can influence these regulations. A post-Brexit UK may negotiate a different deal, but the fact remains that in exchange for access to the common market Brits would have to follow many (maybe most) EU regulations without having influence over them.
In theory, a post-Brexit Parliament would have greater sovereignty to decide British policies. In reality, Britain would have less sovereignty to influence the policies that affect them. Instead of being a normal self-governing democracy, it could be one beholden to the whims of Berlin and Paris. There is a significant risk that the UK would exchange real sovereignty for an imaginary kind.
This irony should not be surprising or alien. In a republic like America’s, individuals ideally have supreme power to control their lives (i.e., sovereignty), including over their property. (Note, though, that the UK is not a republic because the monarch is technically sovereign.) Yet through taxes individuals can give up their property in exchange for public goods, like security. What society deems to be the proper level of taxation and the quality and quantity of public goods is in constant flux. Similarly on a larger scale, the UK surrendered some of its sovereignty to the EU in exchange for access to the common market. The question British voters must answer next Thursday is whether this transaction is worth continuing.
Though a post-Brexit UK would likely suffer slower economic growth and still have to follow many EU policies, leaving the EU does offer a possible advantage. Instead of blaming Brussels for their problems, voters and politicians would have to eventually blame London or their local governments. In the end, Brits may come up with the exact same regulations as Brussels sets, but they would perhaps have more ownership of them than if they were imposed from across the Channel.
While finishing this article yesterday, I received news notifications about Labour MP Jo Cox’s murder as she met with constituents in West Yorkshire, England. Our prayers go out to her friends and family, especially her husband and two children.
My prayers will also include the British people as they wrestle with these difficult and complicated issues.
Mark Melton is the Deputy Editor for Providence. He earned his Master’s degree in International Relations from the University of St. Andrews in Scotland and focuses on civil conflict and European politics.
Photo Credit: Prime Minister David Cameron and Chancellor of the Exchequer George Osborne speaking at B&Q Headquarters on May 23 about the importance of staying in the EU and the economic shock if there was a vote to leave the EU. Photo by Georgina Coupe for the Prime Minister’s office, via 10 Downing on Flickr. Crown Copyright.