Friday 19 September 2014

Why the Scottish ‘No’ vote makes UK withdrawal from the EU less likely

Steve Peers

Yesterday’s ‘No’ to Scottish independence is obviously significant first and foremost for Scotland itself, and then the rest of the United Kingdom, given the constitutional reforms that have been promised in its wake. But it also has broader consequences for the UK’s relations with the European Union. In short, the ‘No’ vote has, at first sight, significantly reduced the likelihood of the UK leaving the European Union in the near future.

Part of the reason for that is political. Scotland elects very few Conservatives, and is the least favourable ground in Great Britain for the UK Independence Party. So the ‘No’ vote means that the only two parties which (for now) favour an in/out referendum on the UK’s membership of the EU will have a smaller percentage of seats in the House of Commons. In particular, since it is less likely that the Conservative party will have a majority of seats or form the largest party, it is less likely that there will be a referendum in the first place.

In the event that a referendum is held, Scotland’s ‘No’ vote means that the relatively more pro-EU vote in Scotland would be counted in that vote, and the odds on a majority in favour of ‘Brexit’ are therefore reduced a little.  

But there is a further lesson to be learned from the Scottish result. While the ‘Yes’ argument could draw upon the patriotism of the Scottish people, and their antipathy to being ruled by a Conservative government which they had never voted for, the ’No’ side successfully raised concerns about the economic impact of withdrawal from the UK, and questioned whether the assumptions of the ‘Yes’ side about the post-independence scenario were accurate.

There are obvious parallels with the Brexit debate. Of course, some of the specific issues which loomed large in Scotland (currency and the introduction of border controls) would not be relevant to the Brexit debate, since the UK already retains its own powers on these issues. But the underlying economic uncertainty is the same. The debate as to whether Scotland could become an EU Member State if it left the UK would have a parallel in the debate as to whether the UK could obtain a free trade deal with the EU if it left.

While some appear to believe that the Treaties guarantee that a Member State which leaves the EU is automatically entitled to a free trade deal with the Union, this isn’t correct. Article 50 TEU (the rule which governs withdrawal from the EU) states that there must be an agreement between the EU and the withdrawing State ‘setting out the arrangements for its withdrawal’, merely ‘taking account of the framework for its future relationship with the Union’. There’s no guarantee as to what form those relations will take.

It’s likely that if a Brexit referendum were contemplated, at least some other Member States would indicate that they were unwilling to agree to a very generous free trade agreement with the UK. Arguably, they would be bluffing, since the UK has a trade deficit with other Member States, and so it would be in their interest to ensure continued access to the UK market. But similarly in the Scottish referendum, the ‘Yes’ side argued that the UK political parties were bluffing, threatening or scare mongering when they refused to agree to a currency union, and that all Member States would quickly agree to Scottish membership of the EU on the terms which the UK currently enjoys. Obviously they did not convince enough Scottish voters of this – and the opponents of the EU would face a similar hurdle in the Brexit referendum.

One feature of the Brexit referendum would have no equivalent with yesterday’s vote: the issue of the UK’s trade with third countries. Undeniably, after Brexit the UK would be free to sign any trade deals it wished with non-EU countries. In principle, then, the UK could sign trade deals with countries which the EU hadn’t signed an agreement with, as well as more favourable trade deals with those countries which did have a deal with the EU (the EU has free trade deals already with dozens of countries, if you count its association agreements, all of which provide for free trade).  

But of course, this would depend on the willingness of those third countries to sign such a deal. It’s hard to see why those third States who already have a deal with the EU would be willing to offer a more favourable version of the same deal to the UK. Those third States which didn’t have a deal with the EU might conceivably be willing to sign one, but they would probably be unwilling to make such an offer in advance of the referendum result, to avoid interfering with the UK’s and the EU’s affairs. So as with the Scottish referendum, the anti-EU side would have to build an argument for withdrawal upon a highly hypothetical set of circumstances.

Moreover, one segment of public opinion – those voters who dislike major free trade agreements, in particular with the USA – would have no real choice open to them. They would have to choose between the EU’s free trade deal with the USA (which would either be in the process of ratification or still under negotiation; the EU doesn’t usually simply cancel trade negotiations) on the one hand, and a UK/USA free trade deal, as negotiated by the Conservative party and/or UKIP, on the other.

One key factor which worked in favour of the ‘Yes’ side in Scotland – although obviously not enough – was the negativity of the ’No’ side. But in a Brexit referendum, the anti-EU side would suffer from this factor. The pro-EU side would (presumably) be able to point to a renegotiated arrangement with the EU, which is essentially a positive argument.

Finally, it might be argued that a crucial difference between the Scottish referendum and a Brexit referendum is the strength of the common bonds which many Scottish people feel that they share with the rest of the UK. Undoubtedly the British public as a whole does not have such warm feelings towards the EU. 

But then again, neither does the rest of the EU exercise as much as power over the UK as Westminster does over Scotland. The EU didn’t drag the UK into an unpopular war – the Blair government did that to itself. The EU doesn’t set tax rates and welfare rates for the UK, as the UK does for Scotland. In particular, the EU has never imposed a law which generated as much opposition as the early imposition of the poll tax in Scotland, when Scots became lab rats to test Mrs. Thatcher’s most unpopular policy. If the ill will created by that decision in Scotland can dissipate, it’s hard to see how a greater degree of anger could be generated against the EU.

Barnard & Peers: chapter 3

1 comment:

  1. Important to note that UK trade deficit with rest of EU applies to goods, not services and the UK has a service driven economy.