Pro-EU camp must pick its arguments carefully

by Wolfgang Munchau | 04.03.2016

There are a hundred strong arguments for Britain’s membership of the EU – and almost as many ways to lose the debate. The arguments in favour fall into three categories – those that are strong and effective, those that are strong but not effective, and those that are weak. I find that many of the economic justifications fall into the last two categories. By contrast, the political reasons for continued UK membership are clear and powerful. The pro-EU campaign would be well advised to focus on those.

The main argument I would use for staying in the EU is that Brexit would cause so much damage to Europe as a whole that it would not be in Britain’s national interest.

Vladimir Putin’s Russia would emerge as the big power. We should not think that the falling oil price will force Moscow to its knees. The annexation of Crimea, Putin’s preferential energy agreements with Germany, his funding for anti-European nationalist parties and Russia’s intervention in the Syrian civil war on the side of President Bashar al-Assad drive multiple wedges through Europe. Putin would no doubt vote in favour of Brexit. The weaker the EU, the stronger his influence in Europe.

A vote to leave on 23 June would risk a political dynamic that surely cannot be in Britain’s interest. The EU is already struggling to deal with a refugee crisis, a battle it may well lose. If Britain votes No, watch out for what happens in Sweden and Denmark. The populists there will also demand referendums, encouraged by the victory of the Leave underdogs in the UK.

If voters still lean towards Brexit in the face of such a dreadful geopolitical scenario, no rational economic argument will ever convince them otherwise. If they don’t accept the political reasoning, they implicitly show a trust in the EU and its institutions that I lack. In this case, they would be mad to want to quit. If the EU survives its multiple crises in one piece, this would be a reason to celebrate the EU’s success, not to leave it. In short, it is hard to think of circumstances in which it would make sense to vote for Brexit on geopolitical grounds.

So what is the point of resorting to economic arguments when the political case is so strong? The problem with economic reasoning is that you always have to produce counterfactual outcomes. We can’t be sure where Britain would be today if it had never joined the EU. Nor can we be sure what would happen if Britain left. For starters, the terms of exit are negotiable under Article 50 of the Treaty on European Union. But there are no precedents to point to how the negotiations would unfold. My guess is that the EU, beset by so many other problems, would try to maintain friendly relations with  Britain.

But I may be wrong. The EU might argue that it needs to set an example pour dissuader les autres. If he had wanted to make this referendum a fair contest, David Cameron should have negotiated two parallel agreements – the one he brought home and an Article 50 Brexit deal. At least then the electorate would have had a choice.

Some of the economic arguments have another weakness. They may be exaggerated. Britain has clearly benefitted from EU membership, but the single market has left no visible trace in the macroeconomic statistics. The promises of the single market might have lured Nissan to Sunderland, but there must have been equally strong offsetting effects, otherwise we would have observed some improvement in aggregate productivity since the 1990s. We haven’t. There was neither a one-off shift nor an increase in growth rates. This is true not just for Britain but for most other EU countries too. The only way to postulate a net positive effect is to make up some counterfactual case where productivity might otherwise have fallen. But is that a realistic assumption? Did it decline in Norway or Switzerland? Both countries have access to the single market, of course. So they are not pure counterfactual examples. But this only goes to show how difficult and messy it can be to make a pro-EU case on narrow economic grounds. Any such arguments can be credibly debunked.

I find the spectre of Putin dominating western Europe a much clearer and more present danger than some possibly incorrect claims about the damage Brexit would do to UK trade.

Wolfgang Münchau is director of Eurointelligence Ltd, and a columnist for the Financial Times.

Edited by Alan Wheatley

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