Is the ‘awkward partner’ about to leave the EU? The UK’s relationship with the EU

Mike WalshEconomics Academic Course Director Coventry University

Ref: UK EU relationship March 2013

(1) Introduction• The UK joined the EEC (EU from 1993) in 1973• Late: over 20 years after the EEC was formed!• Within a year the UK had built up a reputation for

being the ‘awkward partner’ ( George S, 1998)– opposed many EEC initiatives – took an independent view– was disruptive

• We will consider why the UK was considered to be the ‘awkward partner’ and why EU exit is on the agenda

UK attitudes• These help explain the UK’s relationship with the

EU. Generally, the UK :– Is pragmatic– Believes in free markets– Doesn’t want to give up sovereignty– Wants widening of EU– Wants less integration. No federalism

• Relevant today– Gordon BROWN (PM) signing Lisbon Treaty 2007– EU splits some UK political parties

(2) UK and Europe: The early years

1945-57: Preparation• Positions of countries

– UK• 3 circles

• UK condescending?• intergovernmental approach ok

USA

Empire

Europe

– France • wanted decline in German industrial power

– Germany• wanted acceptance

European Coal & Steel Community (ECSC)

• Schuman Plan (9th May1950)– Monnet’s ideas

• sectoral approach– Iron & steel major sector– France - Germany

• ECSC – Treaty of Paris 1951 - est. 1952– 6 members– Supranational from beginning

• UK not want to give up sovereignty

ECSC to EEC

• Messina (1955) – Extend Benelux model (Spaak)– Atomic energy cooperation (Monnet)– UK position: don’t get involved

• Treaty of Rome 1957 (effective 1958)

– EEC Treaty– Euratom Treaty

• UK: don’t get involved

EEC Take off and early progress (1958-72)

• EEC economic success• EFTA (1960)

– EEC Rival– Included UK

• France vetoes UK entry to EEC• Finally, success

– Hague Summit 1969– Agreement for UK to join the EEC– UK joined 1/1/73

(3) UK & The EU Budget

• A major issue for 40 years

Budget 2013

CAP Cohesion

Competitiveness

Rural development

Admin

External Relations

Security & justice

• 1st EU enlargement 1973• UK rebate: major issue• UK disruptive

– Veto in Council Of Ministers (pre SEA 1986)

• UK major contributor but one of poorest states in 1970’s– Reasons

• CAP• Common external tariff (CET)

– Conflicts

High CAP expenditure (% budget share) when UK joined EEC in 1973

• Fontainebleu Summit 1984• UK rebate

• UK rebate issue resurfaced 1998 onwards

• 2005: Blair wanted CAP reform in return for UK giving up budget rebate

• UK & France fall out!• Outcome: UK gives up some of rebate

– With conditions

• Budget issues still exist today– David Cameron (UK PM) in EU budget talks– 2011: Opposed large increase in EU budget• http://www.bbc.co.uk/news/world-europe-11652601• 2012/13: Opposes real increase in EU budget for 2014-20

Financial Perspective• Budget rebate AGAIN

(4) Economic and Monetary Union (EMU)

• Monetary union ‘’launched’' 1979 – European Monetary System EMS

• EMS - 2 components – European currency unit (Ecu)– Exchange rate mechanism (ERM)

• 8/9 countries • NOT UK• UK eventually joined 1990• BUT, UK exit 1992• September 1992 ‘ERM crisis’• http://news.bbc.co.uk/player/nol/newsid_6560000/newsid_6563000/6563031.stm?bw=bb&mp=wm&news=1&bbcws=1

• Maastricht Treaty 1991– UK & Denmark opt out of Euro– Only countries to do so

• UK set 5 economic tests for joining– Failed 4 out of 5 (2003) – Political device, not economic

(5) Social Policy

• UK generally believe in free markets, laissez faire– ‘Anglo Saxon’ approach– European interference in labour market– Social Policy raises costs for firms & makes them

uncompetitive– E.g. Working Time Directive

• Approaches by selected countries below– UK, Ireland – free market– Germany, Benelux countries– collective bargaining

provides worker protection– France, Spain, Portugal, Greece- statutory

framework to protect workers rights as weak collective bargaining

• Social Charter 1989– Social policy expanded– not legally binding– opt out by…

• Maastricht Treaty– Binding on EU States– Opt out by……

Answer these questions relating to Spain

• Is it easy for a firm to make a worker redundant?• How much social tax (%) does a firm pay on wages• How many days holiday does the average worker

receive?• Do you think working more than 48 hours / week is

ok?• If you lose your job what benefits can you receive?

(6) What does the UK want from the EU?

Free Trade

• Access to the SINGLE MARKET• Very ‘Anglo Saxon’

• Single European Act (SEA) 1986• All trade barriers to be eliminated• Aims include

– Bigger markets for firms– Increase efficiency of firms – Aid integration– Benefit consumers

• Generally regarded as successful

(7) UK: Even more awkward?

• Exit?

David Cameron’s Europe Speech January 2013

• UK renegotiate with EU?– ‘cherry pick’ policies– Drop which policies?– UK want which policies?

• Hold referendum to leave EU in 2018 if renegotiation fails

• Why?

Options if UK leave EU?

• Renegotiate agreements with EU? – Like Switzerland– About 200 bilateral agreements

• Join EEA?– Access to single market – Like Norway

• Be like rest of world?• Scotland?

UK in Europe

(8) Conclusion

• After 40 years membership Europe still divides UK opinion & splits political parties

• UKIP is a new anti-EU party• UK is still the awkward partner

References

• S George, ‘An Awkward Partner: Britain in the European community’

• R Baldwin & C Wyplosz, ‘The Economics of European Integration’

• http://europa.eu/