Corporate Business and the EU

Those in favour of freeing Britain from the EU will have to reckon with an all-out effort by the political-corporate class to avoid an in-out referendum on the issue, and if that fails to use every device to secure a vote against leaving.

The Single Market

Chief among the tactics will be to present the so-called “Single Market” as uniquely important to Britain’s trade with the EU countries.

The “Single Market” is much more than the famous four factors talked about at the time of the passing of the Single European Act 1986 which is the main legal basis for the avalanche of regulations[1] imposed on Britain in the name of the Single Market.  Of the four factors (capital, labour, goods and services) which the Single Market aims to make completely free to move between members, Britain has absolutely no interest in maintaining unrestricted movement of people, quite the reverse in fact.  The movement of manufactured goods has been effectively tariff-free within Europe (not just the EU) since 1980.  It is doubtful to say the least that German car exporters would permit any going back on this arrangement even to the limited extent permitted by the World Trade Organisation (WTO) since they would hurt themselves far more than Britain.  Capital movement is free anyway and trade in services is the subject of on-going negotiations under the auspices of the World Trade Organisation, not just for Europe but the whole world.

The Clean Break

What Britain needs is a “Clean Break”, not more distracting role-playing by politicians.  Not the least symbolic of the Clean Break will be restoration of the traditional blue-coloured British passport and elimination of the phrase “European Union”.  The Clean Break will mean that we will have exactly the same basic trading arrangements with the EU as have our fellow English-speaking countries Australia, Canada, New Zealand and the USA.  Interestingly these four countries have the same combined trade with non-UK EU as Britain has and they pay not a penny towards the EU, nor are they encumbered with an endless stream of restrictive regulations and directives.  Once free of these, Britain will be able to make practical trading arrangements with any country or trading bloc including the EU.

The Trade Minister, Lord Green, has confirmed that in the current EU trade negotiations with Japan, Canada, Singapore and Morocco, there is no question of these four countries having to accept EU laws and regulations governing the Single Market, but simply the world-wide supported International Standards Organisation (ISO).  This was set up in 1946 at the Institution of Civil Engineers in London and now has 164 national members and 2,700 technical committees.  Drawing as it does on the expertise of its members, ISO is vastly more competent than the EU CEN system.

Renewal of Faith in Ourselves

One of the most important, if not the most important feature of the Clean Break will be quite simply a renewal of confidence in ourselves, “an immense feeling of national renewal” as Boris Johnson put it, in the Daily Telegraph of 28th April 1994 at a time of political agonising about abolishing the pound sterling in part III of the Economic and Monetary Union (EMU) under the 1992 Maastricht Treaty.  There are three parts of this Treaty and under part III, the UK, along with Denmark and Sweden, obtained an opt-out from the obligation to adopt the euro currency, although it was and through its subscription of capital of around £700 million is still obliged to support the European Central Bank.

Big Business: Poor Judges of British Interests

The UK opt-out from the euro did not stop leading members of the CBI (Confederation of British Industry) – a grouping of multi-national British-registered companies[2] with substantial foreign shareholders – from advising the British people to opt in to the euro.  Typical was a letter to the Financial Times on 5th September 1996, as follows: “The suggestion that Britain should rule out participating in the European single currency (i.e. abolish Sterling) . . . is based on a serious misunderstanding both of the process of monetary union and of our interests as a trading nation.  We believe that self-imposed exclusion from negotiations over EMU would be deeply damaging (to the UK).  Many aspects of monetary union remain to be resolved.  Leaving an empty chair at the table would mean that British interests would be unrepresented as crucial decisions were taken.  Such a gesture of far from splendid isolation could leave British businesses at a competitive disadvantage for years to come.”  (Italics by this writer.)

Here we have all the familiar phrases used to frighten the British people, which we will hear again and again in the run-up to whatever referendum the British Prime Minister is finally persuaded to offer on membership of the EU: “isolation” in the world; an “empty chair” at the EU table; crucial decisions “to be taken with British interests unrepresented”, “deeply damaging”, etc, etc.

Big Business Views Repudiated

Fortunately the Editor of the Financial Times allowed this writer to point out to his readers the actual facts of monetary union as laid down by the Maastricht Treaty[3].  Because the CBI is again on the same tack (letter to the Times, 28th December 2012), it is worth reproducing my letter of 7th September 1996 repudiating what can be termed the business establishment view of the EU and the euro and its inability to read and understand incontrovertible facts: “The assertion by Mr Tony Hales[4] and fourteen other company executives (Letters, 5 Sept.) that Britain’s likely refusal to abolish the pound sterling is based on a “serious misunderstanding of the process of monetary union” is clearly based on their own misunderstanding of the Maastricht Treaty.

It is not true, as they say, that “many aspects of monetary union remain to be resolved”.  If they would take the trouble to read what they pronounce on so confidently they would find that all the important provisions of monetary union are set out in black and white in Articles 2 and 102-109 and in 12 protocols of the Treaty.

Protocol 3 alone runs to nine chapters and 53 articles.  In protocol 3 the operation and constitution of the European Central Bank, the handover of our gold and dollar reserves, which belong to the British people (Art 30), the capital subscription (£700M in our case) (Art 28), the transition arrangements including exchange and issue of bank notes (Arts 16, 52 and 53), membership of the Bank’s Executive Board (Art 50), its governing council (Art 11), the Bank’s responsibilities (Art 12) and so on are all completely laid down.

Only the name of the currency and the location of the Central Bank were left open and these have now been decided.

In November 1991 a similar group of CBI executives wrote to the Times saying how important it was for Britain to stay in the ERM.  A year later, after White Wednesday, they were writing to say how important it was to keep open an option to re-enter the ERM.

Four years on, after 800,000 lost jobs and £30Bn of lost output, from which we are only now slowly recovering, they are at it again”.  (End of quote.)

Interest Rate Manipulation

When Britain left the ERM, interest rates had gone to 15% in a vain attempt by the Bank of England to maintain the £ : Deutschemark parity in exactly the same manoeuvre being used today to keep Greece in the euro, i.e. maintain a fictitious parity between the Greek euro and the German euro, with exactly the same results – high unemployment and a real slump impending.  Thankfully, Norman (now Lord) Lamont took Britain out of the ERM in 1992, UK interest rates then halved over 2 years, the £ : deutschemark exchange rate dropped from its ERM parity of 2.75 to about 2.5 in 1994, then recovered to 2.87 in 1997 after 5 years of growth averaging 3.2% per annum.  At the same time, government net borrowing was a very manageable  3% of GDP (12% in 2010[5]).

As noted in our post of May 24th 2012 “Euro-political class is the problem – not Greece”, if Greece’s politicians had allowed it to leave the euro and re-establish the Drachma as their currency at 10-15% below the entry euro value, thus temporarily reducing their labour costs uniformly across the economy, it could well be on the way to recovery by now.  Instead the Greek people are subject to monetary ideology just as Britain was when the City insisted it went back on the Gold Standard in 1925 (provoking a General Strike in 1926) until the financial gales blew the pound off the Gold Standard in 1931.  As in 1992, Britain benefitted from a reduced exchange rate with its biggest trading partner (the USA), and the rest of the British Empire quickly followed suit (except South Africa which waited until 1934 so that its Afrikaner politicians could demonstrate financial independence from Britain while its farmers and factory workers suffered for this ideological vanity).

If the British people let them, British politicians’ and bankers’ vanity will triumph over British people’s true interests once again.

[1]  One estimate gives the number as around 200,000, mostly imposed in the last 25 years.  If you assemble 25,000 civil servants with nothing else to do, that is what you get.

[2]  E.g. Sir Michael Angus and 26 other members of the CBI, the Times 2nd November 1992, SFB’s reply 4th November 1992; Sir Patrick Sheahey, Chairman of BAT, 12th February 1995, SFB’s reply 19th February 1995; Tony Hales, Sir Richard Evans, Sir Richard Sykes and 12 others, letter of 5th September 1996 to Financial Times above.

[3]  See “The Meaning of the Maastricht Treaty” by S F and G M Bush, published by Prosyma Research Ltd in 1992 and circulated with the support of the late David Hill to every member of the 1992 parliament.

[4]  CEO of Allied Domecq plc.

[5]  The result of the wrecking of government finances by the incoming Labour government (1997-2010).

For a longer examination of the business issues re the EU, see also “Britain’s Future: Business, Industry and a New Relationship with the European Union by Stephen Bush, published by Prosyma Research Ltd, 1998.

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