Sunday, May 03, 2015

How does Switzerland matter for the British elections?

Published on NZZ am Sonntag and

On 7 May, Britain will vote for a new Parliament. The stakes are high, and not just for the UK. Conservative PM David Cameron has promised a referendum on whether Britain should remain a member of the EU, if he’s re-elected as Prime Minister. Even if he needs to form a coalition again, we can be certain that he’ll keep this promise. Also the Liberal Democrats, his current coalition partner, have indicated they won’t block such a referendum.

Cameron wants to host the referendum in 2017. Not right after the election, as demanded by anti-EU party UKIP. During those two years, Cameron wants to try to get concessions from other EU countries to reform the European Union.

What precisely does he want? He has stopped short of a detailed “shopping list”, but broadly speaking he has three sets of demands.

First of all he wants to increase democratic accountability at the EU level, which can be achieved by returning powers to member statesor providing national parliaments with the opportunity to veto EU legislation.

Secondly, he wants to prevent that Eurozone integration endangers the EU’s single market, specifically when it comes to free flows of capital. A so-called “banking union” was established a few years ago. This means common supervision and regulation for Eurozone countries and other EU member states willing to join, which the UK won’t do. This may one day serve as an excuse to prevent British – but also Swedish or Danish – banks from being active in the Eurozone. One way of preventing this from happening is to allow a majority of non-eurozone states to block Eurozone measures endangering the single market. Such a measure has been agreed within the framework of the European Banking Authority, an EU institution tasked to oversee banks in the EU.

Finally, Cameron also wants the EU to become more of a vehicle to boost economic growth, instead of being than a drag on it. This means establishing effective mechanisms to cut EU red tape, new initiatives to open up Europe’s services market, an old UK demand or reforming the EU budget, which amounts to almost 1.000 billion euro over seven years, by cutting wasteful agricultural or regional subsidies.
It’s of course very well possible that Cameron won’t be re-elected. According to certain seats projections, a Labour government led by its leader Ed Miliband and supported from the opposition by the Scottish National Party may even be on the cards. This won’t signify a sudden end to UK demands to reform the EU. Labour’s EU-policy isn’t radically different from what the Tories want. Labour is asking to “protect the interests of non-Euro members” and “tougher budget discipline” in the context of the EU budget. Last but not least, on the sensitive issue of immigration policy, it wants member states to have more control over in-work benefits for migrants, which is also a key demand of the Tories. The biggest difference is in terms of strategy: using a referendum as leverage or going for a more piecemeal approach.

In a way, a Labour government, especially if unstable, may make a British EU-exit even more likely. If Cameron would lose the upcoming elections, he’s likely to be replaced by someone else as Tory party leader, perhaps London Mayor Boris Johnson, who may promise once again a referendum and then campaign for “Brexit”. Unlike Cameron, Boris has already said that “if we don't get the reform that we need in 2016 or '17, then I think we should campaign to come out”. Such a referendum may even take place before the next planned elections in 2020, in case an unstable minority government would fall before then.
In any scenario however there will be negotiations, something which the UK’s “better-off-out” campaign does not sufficiently appreciate. With Open Europe, we want the UK to pursue a strong renegotiation agenda, exploiting the appetite among the public for EU reform which is more and more prevalent in Continental Europe as well. In every opinion poll, British voters express they prefer to stay in the EU if UK reform demands are met. It’s likely that German Chancellor Merkel and her colleagues will concede something, but the question is what will be sufficient for the British public.

We’ve also calculated that in case the UK would leave, it could still benefit from this, but only if it takes a lot of hurdles, including pursuing domestic liberalization and closing trade deals, in the first place with the European Union. Given that automatically adopting EU rules, as Norway does, will never be an option for the UK, Switzerland and its bilateral deals really is the model for the UK in case of Brexit. The British can therefore learn from how Swiss negotiations with the EU are playing out.

There are of course differences. The UK has a much bigger economy, but is also currently dependent on guaranteed access for the City of London to provide its services to the EU. Switzerland doesn’t enjoy the same kind of guaranteed access for its services sector, so it has less to lose.

The inflexibility shown by the EU so far with respect to the outcome of the Swiss immigration referendum and its suggestion that the Swiss should vote again are not only regretful, but should serve as a warning that leaving the EU wouldn’t be an easy path for the UK. Undoubtedly, EU officials are aware of this when dealing with Switzerland.  On the longer term however, these EU officials should be aware that public consent for the European idea will only survive if we have a flexible Europe, built around the core of a single market. Even proponents of migration, to which I count myself, should find it reasonable for a country like Switzerland, which welcomes 2 million foreigners on a population of 8 million, to want to control migration somehow. Having a single market can be perfectly reconciled with that, as it was before 2002, when Switzerland still maintained restrictions on freedom of movement from the EU. We shouldn’t have a European Union where countries are forced or blackmailed to participate into cooperation. This is the message that more and more voters across Europe, often people who are very keen on travelling and working across the continent, are sending to Brussels. That will also be the message from the UK, whoever wins the election.

No comments: