19 June 2016

The EU Referendum - In or Out?

Ever since the referendum on whether the UK should remain in the EU or not was announced, I have been thinking whether an exit would be for the better or worse. Both sides have been making equally good and right out ridiculous arguments. And I have to admit that, on occasion, I oscillated between the one or the other side. But, having read all the arguments and having researched deeper into the whole issue, I have finally made up my mind on what to vote.

I apologise in advance for the long blog, but I always like to explain and back up my opinion with facts. So, everything I quote here has a link to the source of the facts, so you can check them out for yourselves.

My decision on the vote was, for me, mainly about two important issues: the economic/financial/commercial aspect and the human/humanitarian aspect.

Economic/financial/commercial aspect

From the start of the whole debate my opinion on this aspect remained unchanged: the UK is better off being in the EU. I explain why.

The UK contribution to the EU

One of the many complaints from the ‘exit’ side is about the tons of money the UK is contributing towards the EU budget. Apparently, this is wasted money that could be used for the benefit of the UK people. So let’s see whether the facts support the theory.

The UK’s contribution to the EU changes each year, depending on how well its economy is doing. According to the Office of National Statistics (you can read the figures here) in 2014 the UK’s gross contribution to the EU was £19.1 billion. But this was not the actual amount paid to the EU. Deduct from this the rebate of £4.4 billion which the UK receives each year (its size varies). Deduct also £1.1 billion which was given to the UK from the European Regional Development Fund and another £2.3 billion through the European Agricultural Guarantee Fund. 

This takes the UK’s net contribution to the EU to £9.9 billion. The estimated net figure for 2015 is between £8.5 and £10.6 billion. Given that in 2014 the UK Government’s total spending was £798 billion, the net EU contribution amounted to just 1.2% of the total spending! On average, the UK’s net contribution to the EU between 2010-2014 has been £7.1 billion. This represents 42p per person per day in the UK. 

What does the UK get in return for this contribution?

It is difficult to calculate how good or bad for the UK is its EU membership for business. But the Confederation of British Industry (CBI) has provided some figures on this issue, which are quite interesting. You can read them here:

  • A CBI review suggests that the net benefit of EU membership to the UK could be in the region of £62 - £78 billion a year.
  • The size of the EU economy is $16.6 trillion. There are 500 million consumers in the EU single market. UK firms have access to this market beyond a standard free-trade agreement. The EU has eliminated tariff barriers and customs procedures within its borders.
  • Around $1.2 trillion has been invested in the UK from the EU.
  • The net budgetary cost of the UK membership is 0.4% of GDP. But the net benefit of EU membership to the UK economy is in the region of 4-5% of GDP.
So, as you can see, for a ‘fee’ of around £10 billion a year, the UK receives a net benefit of around £62-£78 billion. Look at it as if you were a trader and you rented space in a large open market. The big difference being that in the open market you pay a set fee for your stall, no matter how much you make in sales. But in the EU membership, you effectively pay according to how well you are doing as an economy.

Does it really make economic sense to be in the EU?

Love the EU or hate it, it makes great sense to be in it. Why?

  • It is the world’s largest trading block and the world’s largest trader of manufactured goods and services.
  • It ranks 1st in the world in both inbound and outbound international investments.
  • It is the top trading partner for 80 countries. By comparison, the US is the top trading partner for a little over 20 countries.
So yes, it seems that it’s worth paying a comparable small fee to have your stall in the biggest market fare in the world! 

Yes, but the UK can easily establish trading agreements with other countries without being in the EU

This is again one of the arguments the ‘Exit’ side makes. “We can save our EU contribution. We are powerful enough to make trade agreements with other countries, on our own terms and for our own benefit”.

It’s a valid point, but fails to take into consideration some important facts. Switching back to the Office of National Statistics, we also see:

  • In 2015 (the latest year for complete figures) 44% of the UK’s goods and services were exported to the EU while 53% of UK’s imports came from the EU. So you can see that the EU is a major (if not the biggest) trading partner for the UK. And it is important to note that if the UK leaves the EU, it would not be able to make separate trade agreements with specific EU countries. It would have to make trade agreements directly with the EU as one entity. Do you think the EU would be rolling over on any such agreement, to a country which decided to say “goodbye”? I don’t think so.
  • Last year was the first year that UK exports to non-EU countries were higher. Specifically, 53% of UK exports were to non-EU countries. So, what is it more beneficial? To leave a market that you export 47% of your goods to and TRY to re-negotiate a trade agreement with it, while also trying to increase your export share in non EU-countries? Or to remain in the EU (since financially it is of benefit as I explained earlier) and play a major role in increasing the EU’s share of exports to non EU-countries?
  • Don’t forget that the US is a top trading partner of just about 20 countries. How many countries’ top partner do you think you can be on your own?

Switzerland – Norway – Iceland

The above three countries have been given as examples of how a country can be outside the EU and still benefit as an EU trading partner. And yes, these countries are not in the EU, but for different reasons benefit in a similar way to that of being a paying member. But there are big differences between them and the UK:

  • Norway is NOT a non-paying member. Although it’s not an EU member, it joined the European Economic Area (EEA) – an association of all EU members, plus Norway, Iceland and Liechtenstein. So, although not an EU member, it still benefits from free movement of goods, services, people and capital; and pays for that benefit. In addition, it has NO voting right so, in effect, it still pays but cannot influence or vote. Considering that the ‘exit’ side does not want to pay and does not want free movement of people, would it accept these without having a say in what legislation is passed? Norway is a very rich country due mainly to its oil reserves. So this arrangement suits it. But I don’t know how the ‘exit’ side is even considering it!
  • Do I need to talk about Switzerland? The country is a bank for every rich person, drug-lord, money launderer, mafia boss, etc. It couldn’t really care less if it was or wasn’t in the EU. Free flow of capital suits it, obviously. And it never takes sides. It simply says ‘I’ll keep your money safe, I will not tell whose money it is, but don’t ask me to take part in any war, attacks, etc.’. Does anyone think the UK would ever decide to revert to such a neutral country?
  • I admire Iceland for its stance against the dodgy bankers that bankrupt it in 2008. The ‘exit’ side mentions it as an example of a country that made a trade agreement with China on its own, without the need of the EU. I agree. It is an example. But do they say what sort of agreement this is? Well, it is the first free trade agreement between a European country and China. And you can read it all from the website of Iceland’s Ministry of Foreign Affairs. It is a very good agreement for tiny Iceland, which tries to find ways to grow further its recovering economy. Its main exports to China is fish, while China imports, well, almost anything. The major point for China is a foothold in the Arctic, which could become the main shipping passage between China and Europe if the ice continues to melt (not to mention the vast resources of gas, oil, etc.). So, my question to the ‘exit’ side is this: “Since you’re complaining about China’s cheap imports and the effect it has on UK jobs, would you make a free trade agreement with them?” 

Do we really want EU to be making laws the UK has to implement?

That’s another good question. And believe me, I know what a beaurocratic and illogical elephant the EU can be! But following my market stall example again, do you think that a market trader would be allowed to open his stall without following the rules set up by the company organising the market? Do you think the trader would simply pay the fee and open up shop without agreeing to specific obligations? Would he be allowed to sell any kind of meat, for example, without the need to keep records of supplier, condition of meat, proper refrigeration, etc.? I don’t think so!

So, the UK cannot expect to take part in the largest trading market in the world without following some rules. I say ‘some’ because only about 13.2% of the UK’s Acts are EU related (check this here, from the website of the House of Commons library). 

This doesn’t mean that only 13.2% were laws the UK had to implement because the EU decided so. There were other EU laws that the UK did not have to change in the UK, because the Acts were already in place. And this is a very important point, because it is THIS very fact that the ‘exit’ campaign uses. 

The ‘exit’ campaign counts every law passed by the EU between 1993 and 2014 as a law imposed by the EU on the UK. This brings the percentage to around 65%. But this is why this percentage is not correct. Because if a law passed by the EU is ALREADY a UK law, then it has not been imposed on you – it is already a UK law!!! In other words, the EU has adopted a UK law, not the other way round!

But the most important question I have to ask on this point, is why the UK did not do more to persuade the EU to change/amend/not implement a number of laws it was not comfortable with? The reason, I think, is below:

“Them and us”

From the time I first moved to the UK, in 1988, until now the majority of people (and governments) in the UK never felt like a European. They always referred to Europe as “us and them”, “the UK and the Continent”, “those Europeans”, as if geographically the UK was in the middle of the Atlantic rather the north of Europe!

The UK always had far stronger ties with the USA, rather than Europe. At times, it felt and still feels as if the UK is the 51st state of the USA! And I’m sure you’ll agree that the UK has always been the US’s little puppy (rather than brother); I mean, who in their right mind would go against a UN resolution and instead agree with the most stupid ever US President (George Bush) to start a war against Iraq, without any evidence of involvement in terrorism or weapons of mass destruction??!! (and we all know how that ended).

And this disregard for anything European ‘rubbed off’ in the European Parliament too. The UK seemed to be simply content to pay the EU fee in order to have access to the EU free market, but didn’t really bother taking an active role in influencing the EU law making. It rather irritated the rest of the EU members by taking positions against them, to satisfy US positions.

So, we’ve come to the point where a strong economy such as the UK’s has been put to the side when it comes to making decisions for Europe, and Germany now runs the show! Those Germans again, I hear you say. Well, they always wanted to be in charge of Europe, so I guess that’s something imprinted in their DNA. But the UK, instead of playing the part of the ‘other big fish in the pond’ has allowed things to develop into the EU pond having just a big shark; and now the other big fish which may put some order, is thinking of leaving.

I don’t accept, therefore, that the EU simply overrun the UK. The UK is as much at fault, by not playing an active role in the running of the EU. 

And to exit this situation now would be very wrong. Why? Because if you’re not happy with how the EU is run, you don’t simply leave. You stay and work your way up and make sure you become a big player again to make those changes. The UK still has a great influence and had it shown interest especially during the Eurozone crisis of the past few years, it would now have many EU countries on its side. 

It’s not a surprise that Nigel Farage is more popular in Greece and the rest of the south, rather than any other British politician. And this is not because the southerners have suddenly turned right-wing. It’s because Farage was the only British politician really ‘giving it’ to the EU for its treatment of the countries in economic distress and the wrong actions it had taken. Obviously he didn’t do this out of his kind heart; he has his own agenda, being anti-EU in general. But it shows that if Cameron had played a more active role in making the UK a stabilising force in the EU during the crisis, rather than being a watching bystander, the tide would have turned. We would not have the current EU, which feels more like the United States of Germany.

To leave now would mean that the UK would remain even more in the periphery of Europe and having as the only option to look across the Atlantic to the US for help. I don’t want that!

Human/Humanitarian aspect

This is the part that made my opinion on exit/no exit fluctuated up to now. After all, numbers mean nothing, no matter how good they look, if humans suffer. And the way the EU handled the Eurozone crisis, the way it treated Greece (and the other southern countries) and still treating it, the way it handles the current Syrian crisis, really tested me. 

Do we really need to be a part of a group where, if all is going well, everyone is family, but when the shit hits the fan we leave each one to their own devices? Do we have to stay in a group that prays its open borders, but in the first sign of a refugee crisis allows its members to close their borders between them and look the other way? What’s the point of congratulating ourselves for being a common market, with common laws, if there is a clear economic and humanitarian divide between the North of Europe and the South, which widens rather than closes?

Even before the crisis I never subscribed to the notion of a United States of Europe. Let’s be honest. I, as a Greek, would never want to live like a German, in the same way a German wouldn’t want to live like an Italian, or an Italian like a British, or a British like a French, and so on. Each European country has its own language, history, tradition, values and this is what makes Europe a great continent to live in.  Embracing and encouraging this difference should be the way forward, not trying to make everyone fit in the same book of laws, tradition, values. 

But to do this, to be able to effect and affect this in the EU, you have to be a part of it. If you’re not, you don’t get a say. 

Then let the UK leave so it can preserve its values, tradition, laws

A very good point. And, ideally, I would have preferred an EU where there is just a common, free trade market, without too much mingling in the other aspects of a country’s way of life, etc. But we’ve gone past this point now.

My concern with the UK going its own way, however, is great. Especially in the current times when people seem to have forgotten the two world wars and have suddenly taken a liking to nationalism. And they think that being a nationalist is the same as being a patriot. Wrong! If you don’t know the difference, then you become a big part of this growing problem. Because a patriot loves his country; a nationalist hates everything and everyone else.

Let’s be honest here. The rise of nationalism across Europe is not a result of the immigration crisis. It’s a result of the financial crisis of 2008, which burst the Eurozone bubble and made a number of countries within Europe suffer. When money is plenty and everyone has a job and money to spend, they don’t really care if their country has 1 million immigrants. But when money is tight, you lose your job, you start looking for someone to blame.

Look around the EU countries and you’ll find that the bigger the crisis, the bigger the percentage of nationalist party support in that country. The UK has nowhere near the problems the south has. But the cuts in public spending implemented in the past few years, together with the crisis in 2008, has hit the north (especially) big time; and guess what happened there….

So, in the current climate, the last thing I want is to see the UK leave the EU and start the process of law-making to “take our country back”. Any guesses what this may include? Will the UK still abide by the European Human Rights Act? Even now there are clear signs it might not. 

And don’t start me on some suggestions that, to revitalise our industry, we need to start changing laws such as abolishing the 35hr working week. It seems to me that the UK, if outside the EU, would attempt to adopt a US-style employment system. You know. The one where a 60 hr working week seems the norm. The one where a 25-day fully paid annual leave sounds like a fairy tale! Do I want the UK to turn into a European US? Hell no! I have always been very good at my job, whatever that job was, but I NEVER lived to work. There has to be the right balance between work and living a life. 

Those dodgy foreigners

A lot has been said about the impact of ‘foreigners’ in the UK welfare system and the NHS. I will not refer to non-EU immigrants here, since they are not here as a result of EU membership. In other words, whether in or out of the EU, it is up to you to allow/refuse entry to the UK to a non-EU immigrant.

The ’exit’ side claims that EU immigrants are a problem. As they are free to enter, live and work in the UK, they put a strain in the welfare and NHS systems. But is this correct?

According to research by University College London and the University of Milan (published in the Economist), between 1995 and 2011 ‘those dodgy EU foreigners’ made a positive contribution of more than £4 billion to Britain, compared with an overall negative contribution of £591 billion for native Britons! Between 2001 and 2011, the net contribution of the arrivals from Eastern European countries amounted to almost £5 billion. Even during the crisis years of 2007-11 they made a net contribution of £2 billion. This contribution of these foreigners, versus the negative contribution of the natives, is mainly because as many as 37% of natives received some kind of benefit between 1998 and 2011.

It is interesting to note that the only major critic of this report, David Green of the think-tank Civitas, did not actually criticised the actual findings as to their accuracy. He simply added that they do not account for the cost, to the country of origin of those foreigners, of losing those educated and energetic people. So, the only criticism has to do with the fact that the country of origin of those people loses their net contribution to the economy, something the UK gains.

Similar findings come from Full Fact, an independent fact checking charity. Its conclusions are that:

  • Immigration makes a relatively small difference to the UK’s public finances overall, costing or contributing less than 1% of UK GDP.
  • If we compare similar foreign-born and UK-born people, foreign born people are more likely to use education and less likely to use health and social care services.
  • EU immigrants make up about 5% of English NHS staff and about 5% of the English population. Immigrants from outside the EU make up a larger proportion.
  • Non-EU net migration has historically been higher than EU migration.
  • Research shows that EU migrants are less likely to claim out of work benefits, compared to people from the UK. They are more likely to be claiming in-work benefits like tax credits.
So, generally speaking, the evidence suggests that EU nationals are not a drain on UK’s welfare or NHS system; they rather contribute to it. 

Let’s now take the example of a prominent name in the British industry: Sir Philip Green, whose retail empire includes names such as Topshop, Arcadia and, until recently, BHS. Sir Green is a billionaire. But is also quite famous for his tax avoidance tactics. For example, the holding company of all his businesses resides in an offshore jurisdiction, meaning that he avoids paying massive amounts of corporation tax. His wife is a Monaco resident, meaning that her income is tax free; as a result, in 2005 Arcadia paid the biggest cheque in corporate history, a whooping £1.2 billion in dividends. This payment was paid directly to his wife so the UK received, yes – you’ve guessed it! – zero income tax from it!! So, instead of targeting the EU-born workers in this country, wouldn’t it be better and more fulfilling for the tax man to target the so-called ‘examples of British entrepreneurship’ instead?

Border control

Another argument has to do with border control; the UK’s concerns that the free movement within the EU is of great concern to the safety and security of this country.

Well, for starters, I have an easy solution for you, UK! Stop bombing other countries left right and centre!! Stop being the US’s buddy in the training and weapons supply of anti-government forces whenever you want to overthrow one dictator to put in place one of your liking. Because the very people you trained and supplied guns too, will one day come after you!

So, for starters, if we don’t want people coming our way let’s stop mingling with their own affairs at their backyard. 

Secondly, the free movement of people in the EU applies to EU-nationals only. And, to be honest, since the UK is not a member of the Schengen Agreement, passport control still takes place in UK borders for all EU-nationals. 

Therefore, EU or not EU, what takes place currently is still the same as what would take place if no longer a member of the EU. Unless we decide to close all entry to the UK and become North Korea’s best buddy instead. But for a country so much pro-globalisation as the UK, it’s a bit of an irony to praise globalisation but criticise the globalisation of human movement. You can’t expect to be free to sell goods to a foreigner but close your doors to him if he decides to come visit.

My decision

There are so many more I can say here. But I only put forward the basics. As I said, the economic aspect was always a no-brainer, but the more important human aspect kept me oscillating for quite some time.

But I came to the conclusion that you can’t change the world for better by shutting yourself indoors. You can never go back to the past if you want to go forward. You can only take lessons from the past to build a better future. And to do that, for the good of the UK and the EU, you need to stay in AND start playing an active role in order to change things. Right now many EU countries see the EU as a one-man, German show. They look for another big player to enter, to give them alternatives. If you run away from it, you’ll be missing a great opportunity. The biggest opportunities come from the biggest of crises; In a country fixed on globalisation, to go its own, single way would be an anathema.

Therefore, I will be voting for the UK to stay in the EU.

PS: I know that some Greek friends of mine, when reading this, would question my decision on the basis that I always said and still do that Greece should leave the Eurozone. And this is exactly the difference. I never said Greece should leave the EU – only the common currency joke called the Eurozone.

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