PUBLISHED:16:39 EST, 16 August 2012| UPDATED:01:42 EST, 17 August 2012
After 13 years as an MEP, Daniel Hannan’s knowledge of the way Brussels works is second to none. Now he has written a forensic analysis of why it’s rotten to the core. Yesterday, in our exclusive serialisation, he examined how the euro has brought ruin to Europe. Today he argues that Britain must break with Brussels if its economy is to prosper again…
Every nation joins the European Union for its own reasons. The French saw an opportunity to enlarge their gloire, the Italians were sick of a corrupt and discredited political class.
The burghers of the Low Countries had had enough of being dragged into wars between their larger neighbours, and the former Communist states saw membership as an escape from Soviet domination.
One thing in common is that they all joined out of a sense of pessimism: that they couldn’t succeed alone.
Confident and prosperous nations, such as Norway and Switzerland, see no need to abandon their present liberties. Less happy nations seek accession out of, if not despair, a sense of national angst. Britain signed up in 1973 at what was our lowest moment as a modern nation. Ever since the end of World War II, we had been comprehensively outperformed by virtually every Western European economy.
Suffering from double-digit inflation, constant strikes, the three-day week, power cuts and prices-and-incomes policies, decline seemed irreversible.
It was during this black period that we became a member of the Common Market, with the electorate confirming the decision by a majority of two to one in a referendum two years later. Our timing could hardly have been worse. Western Europe as a whole had grown spectacularly since 1945, bouncing back from the war years with the help of American aid. But shortly after we joined, world oil prices quadrupled after a crisis in the Middle East, and this growth shuddered to a halt.
Far from joining a growing and prosperous free-trade area, the United Kingdom found itself confined in a cramped and declining customs union. We had shackled ourselves to a corpse. And in doing so, we foolishly stood aside from our natural hinterland – the markets of the Commonwealth and the wider Anglosphere, which continued to grow impressively as Europe dwindled.
These historic ties had always set Britain apart from the rest of Europe. Britain might be just 22 miles from the Continent, but her airmail letters and international phone calls went overwhelmingly to North America, the Caribbean, the Indian sub-continent, Australia and New Zealand.
We conducted a far higher proportion of our trade with non-European states than did any other member. We still do.
This was why France’s General de Gaulle vetoed our first two applications to the EEC. Perhaps he knew us better than our own leaders at the time did.
Twenty-five years later, Margaret Thatcher was to make the same argument when she observed that throughout her life, Britain’s problems had come from Europe and its solutions from the rest of the English-speaking world.
Nonetheless, in the post-war years, we were far from standoffish about the moves made by other countries towards greater European integration. Our leaders argued for the creation of a broad and flexible European free-trade area, doing business with the rest of the world.
What they opposed was a protected European sector, with prices regulated by the state.
That, though, was precisely what the clique of federalists were after – a tight community based on a common external tariff, industrial and agrarian subsidies and common political institutions.
Successive prime ministers refused to join a Common Market that precluded Britain’s trade links with the Commonwealth – until Tory prime minister Edward Heath came along.
A fanatical and uncritical Euro-integrationist, he was determined to get us in on any terms. He acquiesced in full to the EU’s agricultural and industrial policies, external protectionism and anti-Americanism.
He loudly applauded its ambition to become a single federal state – though he downplayed this aspect for domestic purposes. The case he made to the British people was on economic grounds – that Britain would be better off – and he expressly denied that our sovereignty would be affected.
This has been thrown back at the Conservative Party ever since. People felt, with reason, that they had been deceived, that we had joined on a false premise.
Instead of becoming members of a common market, based on the free circulation of goods and mutual recognition of products, we had joined a quasi-state that was in the process of acquiring all the trappings of nationhood – a parliament, a currency, a legal system, a president, a diplomatic service, a passport, a driving licence, a national anthem, a foreign minister, a national day, a flag.
There was further disillusionment when the common market itself never properly materialised. The European Commission turned out to be keener on standardisation than on free trade.
Rather than enabling mineral water from Britain to be sold in Italy, it preferred to lay down precise rules on bottle size, content and so on. Products were banned if they did not conform.
Instead of expanding consumer choice, the European authorities were restricting it. And we paid for it. All this over-the-top regulation was – and is – fantastically expensive, outweighing any of the benefits of the single market.
The Commission’s own figures show that the single market boosts the wealth of the EU as a whole by €120 billion a year, but this is dwarfed by the annual €600 billion cost of business regulation.
For Britain, the promised benefits of the European community have never been delivered. On the contrary, our pockets have been picked. In all but one year since joining, Britain has paid more into the EU budget than she has received back – the exception being 1975, coincidentally the year of our referendum on withdrawal.
Indeed, for most of those 38 years, there were only two net contributors – us and Germany. Every other country came out ahead of the game. We did not.
We were also penalised by the Common Agricultural Policy, a system designed for the needs of smallholders in France and Bavaria rather than an efficient farming sector like ours.
Once again, Britain paid in more and got back less.
As for the Common Fisheries Policy, that was openly anti-British. Its quota restrictions applied only to the North Sea and not the Mediterranean or Baltic.
Our trade suffered, too. Until 1973, Britain had run a trade surplus with the existing EEC members. It now went into deficit, where it’s remained to this day. Meanwhile the markets that Britain forsook – Canada, Australia, New Zealand – surged.
Today, while the eurozone remains stagnant, the Commonwealth is expected to grow at 7.2 per cent annually for the next five years.
This fact seems to escape Euro-enthusiasts. In a debate last year, a former Europe Minister, Labour’s Denis MacShane, told me condescendingly that what I failed to appreciate was that Britain sold more to Belgium than to the whole of India.
That, I replied, was precisely our problem. Which of those two markets represented the better long-term prospect?
Yet, four decades on from the disastrous decision to join the European project, Britain still has alternatives. There is still a world beyond the EU – if only we would separate ourselves from what amounts to a restrictive, protectionist and high-tariff customs union rather than a proper free-trade area.
And the good news is that we can. There is nothing to stop us pulling out and going our own way.
Unlike other parts of the EU, such as Germany, we are not held back by a reservoir of European sentiment, desperately clinging to some notion of unity and union for historical reasons.
Our institutions, temperament, size and experience equip us to seek a fundamentally different relationship with Brussels. As the euro crisis deepens, seceding increasingly seems the right way to go. So what precisely is the alternative to EU membership? Well, several countries – ranging from the Channel Islands and Liechtenstein to Iceland and Turkey – are already part of the single market without being full members of the EU.
While each has its own particular deal with Brussels, all have managed to negotiate unrestricted free trade while standing aside from the political institutions.
The best model is Switzerland, which rejected membership in a referendum in 1992. Although its main political parties had campaigned for a Yes vote, they accepted the verdict of their people and negotiated a series of commercial accords covering everything from fish farming to the permitted size of lorries on highways.
The Swiss have all the advantages of commercial access without the costs of full membership. Switzerland participates fully in the four freedoms of the single market – free movement of goods, services, people and capital – but is outside the ruinous Common Agricultural Policy and pays only a token contribution to the EU budget. Swiss exporters must meet EU standards when selling to the EU – just as they must meet, say, Japanese standards in Japan.
But they are not obliged to apply every pettifogging Brussels directive to their domestic economy.
Critically, Switzerland is also free to sign trade accords with third countries, and often does so when she feels that the EU is being excessively protectionist.
The result is that the Swiss export four times as much per head to the EU as we do.
So much for the notion that our exports to the Continent depend on our participation in the EU’s institutional structures.
But what, you may ask, if we leave and the other member states turn on us? What if they decide to discriminate against our exports?
This is hardly likely to happen since we import more from the EU than the EU imports from us.
They would be cutting off their noses to spite their faces if they restricted the cross-Channel commerce from which they are the chief beneficiaries.
Overnight, Britain would become the EU’s largest trading partner and most important neighbour. Love us or hate us, they wouldn’t turn their backs on us. And nor would we turn our backs on them.
As well as our trade links with the Continent, we would want to continue intergovernmental cooperation, our military alliance and the like. We cannot but be interested in the affairs of our neighbours.
At the same time though, we would raise our eyes to more distant horizons and rediscover the global vocation that our fathers took for granted.
There are those who argue that we as a nation are too small to survive on our own in this way, but such a notion rests on a misconception.
The most prosperous people in the world tend to live in tiny countries, such as Liechtenstein, Qatar, Luxembourg, Bermuda and Singapore. The 10 states with the highest GDP per head all have populations below seven million.
If seven million Swiss and four million Norwegians are able not simply to survive outside the EU but to enjoy arguably the highest living standards on Earth, surely 60 million Britons could manage?
And anyway, what matters to a modern economy is not its size but its tax rate, its regulatory regime and its business climate.
What has changed most radically of all in the 21st century is technology. In the 1950s when the European economic community was launched, regional blocs were all the rage. So were conglomerates of every sort – in business, in politics, in the trade-union movement.
Wise-sounding men asserted authoritatively that the world was dividing into blocs, and that it would be a foolish country that found itself left out.
Nowadays, though, distance has ceased to matter. Capital surges around the globe at the touch of a button. The internet has brought the planet into a continuing real-time conversation. Geographical proximity has never mattered less.
A company in my constituency in south-east England will as easily do business with a firm in Dunedin, on the opposite side of the planet, as with one in Dunkirk, 25 miles away. More easily, indeed.
The New Zealand company, unlike the French one, will be English-speaking, will have similar accountancy practices and unwritten codes of business ethics. Should there be a dispute, it will be arbitrated in a manner familiar to both parties.
None of these things is true across the EU, despite half a century of harmonisation. Technological change is making the EU look like the 1950s hangover it is.
So, if the United Kingdom pulls out of the EU, if we can negotiate an amicable divorce, we can be reasonably certain of one thing – that we will be better off.
But that’s not all. The European dynamic would be wholly altered too – and for the better, as other nations demanded a similarly reformed relationship.
The exit of the United Kingdom would tilt the balance fundamentally in favour of the core federalist states. But many of the nations on the periphery would become uneasy.
There could well be a separating-out into a compact European Union – based around Germany and France, with a single currency, a common finance ministry and the full panoply of fiscal union – and a European Community, of which Britain would be a member.
This Community would be linked to the European Union through a free market and enhanced inter-governmental collaboration but its members would remain politically independent.
This separation might well be beginning anyway as a result of the euro crisis. The centre is finding it harder and harder to maintain its hold.
European integration rests, to a far greater degree than its supporters like to admit, on a sense of inexorability. People might not have chosen political union but, since it is happening anyway, they shrug and go along with it.
But if one of the four largest member states were to opt out, that sense of inevitability would evaporate and Europe would be able to regroup in ways that make more sense.
In my opinion, getting out is now the greatest gift Britain could give not only to ourselves, but Europe as a whole.
If we set the precedent, others will surely follow – and troubled Europe might yet be rescued from her current discontents and economic woes.