The Left Case for Brexit

The following is my contribution to a pamphlet to be published early next month.

Readers of the centre-left or liberal press are constantly told that supporters of Brexit are not only inevitably right-wing, but ignorant, prejudiced, xenophobic, or just plain deranged.  The possibility that there is a perfectly rational case for reconsidering our future in Europe, a case that is not only consistent with a left-of-centre stance but actually required by it, is overlooked.  The debate is all the poorer for it.

I have been involved with this issue since, as a new recruit in 1964 to both the Labour Party and the Foreign Office, I worked on Common Market issues and later, from our Brussels embassy, helped to organise the Wilson-Brown tour of Common Market capitals as part of a further attempt to have the Gaullist veto on our membership lifted.

By the time I returned to the UK in 1968, I was clear that the issue was not whether we should or could be part of Europe, since no one could doubt that we were historically, geographically, culturally, and politically an integral part of that entity, however defined.  The question was not whether, but what kind of Europe?

I had come to the realisation that what we were offered was not “Europe” but a Franco-German deal guaranteeing free trade in manufactures to the Germans in return for subsidised agriculture to suit the French.  It was a deal that was directly inimical to British interests and, in particular, to the jobs and living standards of British workers.

It is often forgotten that joining “Europe” in 1972 represented for Britain a restriction of our trading opportunities and an abandonment of a rational and long-established trading pattern.  It meant a substantial increase in food prices and therefore in domestic costs, making British manufactured goods more expensive and therefore less competitive.  It also meant an end to the preferential markets we had enjoyed beyond Europe, and opened us up instead to direct competition from more efficient manufacturing rivals in a single European marketplace.

Yet we are told, in support of the constantly repeated refrain that Britain has no option but to stay in the EU because there are no other viable choices available, that we derive unmatchable trade advantages by virtue of the simple fact of our geographical proximity to the European market.  We cannot afford to turn our backs, we are told, on the market in which we now do most of our trade.

This argument is so full of holes that it is surprising that its proponents think it worthwhile to make it.  First, it would be hugely surprising if the figures did not show an increase in our trade with the EU and a comparative decline with the world outside.  What, after all, was the whole exercise about, if not to concentrate our trade in Europe and divert it from elsewhere?

If more than 40 years of managed (rather than free) trade, in which a European customs union on the one hand and tariff barriers against the world on the other have quite deliberately and systematically narrowed our trading opportunities, we would surely be able to sue for false pretences if something of the kind had not materialised.  But is that outcome necessarily to be welcomed?

The UK is surely the last country to be told that trade is something best done at close quarters.  No other country has enjoyed more extensive trade links or has a longer or more successful experience of the great advantages of trading on a world-wide scale.  It is surely a matter of regret rather congratulation that British goods are rarely seen today in markets such as Australia and New Zealand and that EU membership restricts our freedom to improve our trading prospects with some of the fastest growing economies in the world such as India.

The concentration of our trade in Europe, while markets elsewhere have been systematically neglected, may please the true believers but it has left our trade dangerously unbalanced and focused unnecessarily on a market where the evidence over four decades demonstrates that we are at a substantial disadvantage.

Let us put to one side the very large net annual contribution we pay to the EU (a continuing burden on our balance of payments and variously estimated at somewhere between £8.5 billion and £11 billion each year).  The crucial fact is that we have now run a trade deficit in every year since 1982, just, as it happens, when the full impact of EU membership took effect – hardly a coincidence, since the greater part of that deficit is with the other members of the EU, and much of it arises in the trade in manufactured goods­­.

That deficit continues to weigh on the whole economy and shows no sign of diminishing.  In the quarter to the end of January this year, it amounted £23 billion; in January alone, the deficit in our trade in goods with the EU amounted to £10.3 billion.

That trade imbalance does more than suck productive capacity and jobs out of the UK.   It means that we dare not expand our economy for fear that an increased level of activity will mean yet more manufactured goods sucked in from the EU, and an even higher deficit that can be financed only by increased borrowing and the sale of yet more assets – in addition, that is, to the more than £600 billions worth we have already sold in recent years.

The deficit in our trade with the EU in manufactures has meant that our manufacturing sector has shrivelled away, and now contributes just 10% of our GDP – a lower proportion than is to be found in any other advanced industrial country.   This dramatic loss of manufacturing capacity has meant that working people and their families, especially those in the regions, have lost out on jobs and decent pay – the steel industry is just one example among many.

And, with manufacturing prospects so poor, it is not surprising that our net investment in new manufacturing capacity is virtually nil, so that our ability to compete in the future is even further reduced.  These developments, with their serious implications for the living standards of working people, are, or should be, of major concern to the left.

The seriousness of these downsides of the current arrangement is not usually denied, since the facts cannot be gainsaid.  Apologists try instead to distract attention from them by framing the debate in terms of rival pessimisms; we are constantly told that the burdens of membership are unfortunate but are outweighed by the risks of being left out in the cold. We are solemnly warned that our EU partners will refuse to trade with us if we upset them by pressing for a different and better Europe.

But – while blood-curdling warnings designed to deter us from reaching a rational decision are only to be expected – are our partners really going to turn their backs on a one-sided trade relationship that has been so much to their advantage?  Once we decide to re-negotiate our relationship with the EU, it will no longer be a case of issuing dire warnings but of grappling with a real situation.  Talk of retribution and punishment for daring to take a decision in our own interests will no longer be relevant. The focus will inevitably be on optimising the trade opportunities for both the EU and the UK, and our own interest in maintaining access to the EU market will be at least matched by the European unwillingness to lose access to ours.  It beggars belief that valuable trading opportunities would be passed up in a fit of pique.

We should take in any case take courage from the lessons of our own experience.  Similar arguments were made about the supposedly disastrous consequences of leaving the European Monetary System and of not joining the euro.  Most people in Britain will offer daily thanks that we had the courage to reject those arguments and to stay out of the euro.  Our euro-zone partners rapidly decided that they needed us at least as much as we are said to need them, and then simply got on with it, on the terms that we had decided.

The issue of the EU’s response to a Brexit is of course an interesting test of the real purpose of the EU.  Is that purpose really free trade, in which case they would do their utmost to keep trade links open?  Or is it really the creation of a European super-state, run in the interests of the dominant economies?  It is only on that latter assumption that we might expect that, even at the expense of the EU’s own economic self-interest, defectors would be punished pour encourager les autres.

A decision in favour of Brexit would not in any case produce, as is so often alleged, the complete rupture of our relations with the EU.  It would not mean turning our backs on Europe.  It would signal instead the real possibility of a new European agenda, aimed not only at a better deal for the UK but also at a better and more constructive Europe, and one with a greater chance of success.

A new Europe would not operate, as it has done since its inception, against the interests and instincts of the left.  It would no longer operate as a manifestation of free-market capitalism, providing an intervention-free zone so that market forces can always prevail and serving the interests of big business rather than those of ordinary people.  It would not, in thrall to neo-classical economic doctrine, impose a policy of austerity across the continent, trashing the interests of working people across the euro zone and requiring them to bear the burden of free-market failures – ask Syriza and the people of Greece.

It would not run a hugely diverse economy in terms of a monetary policy that suits Germany but no one else.  It would not attempt to impose a political structure decided by a small elite, but would allow the pace of cooperation and eventually perhaps integration to be decided democratically by the people of Europe.

There are those on the left who urge the UK to remain in the EU on the ground that we are lumbered with a Tory government for the foreseeable future and that to leave would mean giving up any chance of defending social and employment provisions, in both UK and European law, that would be vulnerable to Tory attack.  But to treat as a plus the fact that a body of law cannot be overturned by democratic decision or through the exercise of the powers of self-government is surely an extraordinary position for the left to take; such a defeatist and anti-democratic argument should not be countenanced by any democrat or anyone prepared to work for a Labour government.  The left was keen to oppose Mrs Thatcher when she asserted that “there is no alternative” but we are invited to acquiesce when a similar message is delivered by the EU.

Even if it had any merit, it is in any case outweighed by the much more powerful and democratic argument that an incoming Labour government would find it much easier not only to defend but also to advance the interests of working people if it were untrammelled by EU commitments.

It would not, for example, be unable – by virtue of the EU’s injunction against state intervention or giving priority to domestic suppliers – to defend the jobs of steel-workers.  It would not be obliged, given the EU’s outlawing of subsidies for public services and its predilection for privatisation, to sell off the Royal Mail.  It would not be bound by a Transatlantic Trade and Investment Partnership to concede to international corporations the power to sue a Labour government if its policies threatened to reduce their profits.  It would not be powerless to stem the inward flow of cheap labour which has done so much to lower the floor that underpins the level of wages.  And it could view the threatened fall in the value of sterling following a Brexit as an opportunity rather than a handicap.

The left’s failure to understand these issues speaks volumes for its loss of intellectual self-confidence and the reduced level of its ambitions.   But the removal of the EU as both crutch and straitjacket could change all that.  Among the many economic benefits of a Brexit, we might also find the restoration of the left’s confidence, optimism, vision and momentum.

Bryan Gould

25 April 2016