Eurosceptic versus Europhile. Should the UK stay within the EU?
By Daniel Sadler
Third Year, Runner Up Prize
The European Union is a political and economic union of 28 European countries. The
European Union has achieved its target of instituting a single market due to a system of
standardised laws that apply to all member states. Related to the European Union is the
Eurozone, a monetary union comprising 18 member states which use the Euro as their
official currency. ‘Eurosceptic’ is a term used to refer to someone who is critical of the
European Union and opposed to European integration. ‘Europhile’, conversely, refers to
someone who supports the European Union and is pro-European integration. The UK is a
member of the European Union but is not currently a member of the Eurozone. The issue as
to whether the UK should stay within the European Union or not is a hotly debated issue,
with either side offering substantial arguments in support of their view.
Context
To remain in the European Union, the member country contributes a certain amount of
capital to the European Union's budget, which is mostly composed of its member nations’
contributions. In 2011, the UK contributed €13.8bn in 2011 with the EU spending €6.57bn of
its budget in the UK.1 That works out as a Euro per person contribution of €180.38, ' while
the EU spend per person in the UK was only €105.12.2 This highlights the main criticism
proffered by Eurosceptics – that the contributions the UK has given to the EU have always
outweighed the amount spent by the EU in the UK. This is shown in figure 1, which makes
the point that in 32 years Britain has never received more than it paid in.
Figure 13:
One
the
within
advantage of
UK's position
the
European
Union
is that the
UK benefits extensively from the freedom of trade, which is a key doctrine in the foundation
1
Rodgers, Simon, ‘EU budget: how much does each country pay and where does it get spent?’ The Guardian
Datablog, written 22/11/2012, accessed 14/02/2014
http://www.theguardian.com/news/datablog/2012/nov/22/eu-budget-spending-contributions-europeanunion
2
Ibid
3
Sinclair, Nikki, ‘Not once, in 32 years, has Britain received more than its paid in’, Written 6/1/2014, Accessed
14/02/2014 http://nikkisinclairemep.blogspot.co.uk/2014/01/not-once-in-32-years-has-britain.html
of the European Union and European Economic Area. Free trade in essence it means that
there are very few restrictions on the trade of goods across nations/geographical areas. One
reason why free trade is, in theory, an economically beneficial policy lies in the concept of
comparative advantage, which is the idea that countries should specialise in producing
goods where there are the lowest opportunity costs, i.e., where they have comparative
advantage. If all countries did this in a trading block with free trade, it would enable
countries to devote fewer resources to making a wide range of goods, and instead allow
them, and their trading partners, to benefit from increased welfare as a result of this
specialisation.
Free trade unsurprisingly also results in increased trade among the members of the trade
agreement; the main reason for this is due to the reduction in trade barriers, such as tariffs.
The European Union 'evolved in the context of significant multilateral liberalization of trade
barriers, so that external tariffs were greatly reduced even as tariffs and other trade barriers
were dismantled among the members’.4 The effects of trade liberalization can be seen in
figure 1.
Figure 1: The Effects of removing a trade tariff
Supply-UK
Supply- World + Tariff
P1
1
P2
Q1
2
Q2
3
Q3
4
Q4
Supply- World
Demand
The removal of trade barriers shifts price from P1 to P2, resulting in an increase in consumer
surplus of areas 1+2+3+4. However, domestic firms will sell less than pre-free trade and will
lose producer surplus equal to 1. Furthermore, total economic welfare will increase by 2 + 4.
It has been estimated that, since the Single Markets inception, 'EU countries trade twice as
much with each other as they would do in the absence of the single market programme’. 5 In
the report it is further stated that 'increased trade from Europe since the early 1980s may
be responsible for around 6% higher income per capita in the UK.6'
4
Krueger, Anne, Free Trade Agreements versus Customs Unions, NBER Working Series Paper, Written April
1995, Accessed 15/02/2014 http://www.nber.org/papers/w5084.pdf
5
Literature Review- economic costs and benefits of EU membership Accessed 14/02/2014
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220969/foi_eumembership
_literaturereview.pdf
6
Ibid
Free trade also results in increased competition within the home country as foreign
manufacturers enter the home marketplace. Eurosceptics tend to argue that this
competition will result in losses for established UK manufacturers, which in turn would
result in job losses. If this were to happen, however, it would not be the fault of the UK
government for joining into the free-trade zone; instead, it would be the fault of bloated UK
businesses. If the UK really wants to compete in an increasingly globalised world, one could
easily argue that it would be better to allow the UK businesses to go head to head with
European competitors as opposed to enacting protectionist policies to save bloated
businesses from competitors outside the UK. It has also been suggested among Eurosceptics
that the UK's membership in the EU has led to missed opportunities for increased global
trading. Daniel Hannan, in an article for The Telegraph entitled ‘It’s precisely because we
want free trade that we should leave the EU’,argues that the UK may miss out on free trade
agreements with India because of the 'EU tariff wall, obliged to assume a protectionist
position because textile manufacturers in Southern Europe fear Indian competition’7 This is
a compelling argument, especially when coupled with the fact that 'India's economy grew by
5.4 per cent in 2012, while the EU's shrank by 0.3 per cent’.8
Europhiles suggest that another advantage of the UK's membership in the EU is that it has
led to increased investment in Britain. The UK has always been a strong destination for
foreign direct investment, and this investment gives UK businesses increased capital to
continue growing, which leads to increased growth and job creation, something which for
the UK, along with most other developed countries, has suffered through a decline since the
recession. The global trend for foreign direct investment has been negative since the height
of the recession, as countries and businesses have looked to add stability to their home
economies before pursuing gains in foreign economies. However, in 2012/13, 'while global
Foreign Direct Investment inflows declined by 18 per cent, inflows into the UK experienced a
22 per cent year on year increase’.9 More encouraging for the UK's stance within the EU is
that France and Germany, the biggest economies in Europe along with the UK, were some of
the largest contributors of Foreign Direct Investment. Even more encouraging is that these
foreign investments from France and Germany are increasing year by year: in 2012/13,
'investments from French and German companies have increased by 43 and 18 per cent
respectively’.10 It is difficult to quantify whether these investment trends reflect the UK's
stance within the EU, or whether an independent UK would still receive large investment
from France and Germany on the basis of geographical proximity. What is more certain is
that the UK could potentially lose large investors if they decided to leave the EU. Jennifer
Rankin, in her article ‘EU exit could see Unilever cut investment in UK’, and Tim Shipman in
his article Britain could miss out on billions of pounds of U.S. investment if it leaves the EU,
Obama officials warn suggest that, in leaving the EU, the UK would have a particularly
adverse impact on foreign investment in the UK. In the case of the Europe and US bilateral
7
Hannan, Daniel, ‘It's precisely because we want free trade that we should leave the EU’, Written 11/12/2013,
Accessed 14/02/2014 http://blogs.telegraph.co.uk/news/danielhannan/100250233/yes-to-free-trade-no-tothe-eu/
8
Ibid
9
Perria, Sara, ‘Why are foreign investments in the UK rising?’ Written 1/08/2013, Accessed 14/02/2014
http://www.newstatesman.com/business/2013/08/why-are-foreign-investments-uk-rising
10
Ibid
trade agreement which leaders hope to conclude later this year, 'Britain risks losing out on
£10billion a year in trade deals if the UK withdraws from the European Union.11'
Being a member of the 'world's largest single market’ brings large advantages to the UK. 12
Firstly, it allows the UK to be a larger player in the global economy. This is especially
important as 'the UK's ability to act globally on its own has waned since 1945 but our
interests have not ceased to be global’.13 The UK still has a large economic dependence on
the rest of the world, with the UK having the 'second largest share of world exports in
services’; moreover, 'one-third of our energy needs are currently met through imports and
that share will rise as our production of oil and gas continues to decline’. 14 This dependence
on outside nations means it is extremely important for the UK to have a voice and influence
with regard to international discussions on such topics as trade, energy, security and global
defence, to name just a few. Being a member of the EU allows the UK to 'exercise far
greater influence internationally than it could on its own’.15 With the EU's stance in taking a
common position on important policies, it allows its member states to exert greater
influence 'than any of its 27 members would have on their own’.16 However, being a
member of the EU also has its disadvantages in the sphere of global policies choices. One
such disadvantage might be that the UK may feel pressured into 'tow the EU line', i.e.
backing policies that the EU supports even if it is in the UK's best interest to oppose these
policies. Similarly, one could argue that it is better for the UK to voice its own political
preferences rather than the EU's preferences because, if achieved, such policies would
benefit the UK more while also giving an impression of the UK as a global leader, rather
than a follower.
A key argument that is often presented by Eurosceptics is that the EU parliament has too
much legislative power that supersedes Parliamentary power in Westminster. In essence, if
one member state disagrees with proposed EU legislation, it has no bearing on the outcome,
as new legislation is put through either by consensus among members or by qualified
majority voting. Potentially, the UK could not block proposed EU legislation even if it were
to have a significant detrimental impact on the UK. Eurosceptics often present the argument
that 'we can govern ourselves better than 27 other countries can do it for us’, and that the
UK should be an 'independent country, trading with Europe, but governing ourselves’. 17 A
referendum has often been suggested as the course of action for the UK, to allow the
population to decide whether the UK should remain within the EU or not. The referendum
would provide some answers to the UK public's perception as to whether 'the EU providing
the results we are to expect from it? And are the people of Britain satisfied by the EU
11
Shipman, Tim, Britain could miss billions of pounds of U.S. investment if it leaves the EU, Obama officials
warn, Written 27/05/2013, Accessed 15/02/2014 http://www.dailymail.co.uk/news/article-2331753/Britainmiss-billions-pounds-U-S-investment-leaves-EU-Obama-officials-warn.html
12
‘The Economic Benefits to the UK of EU membership’, Euromove, Written December 2011, Accessed
16/02/2014 http://www.euromove.org.uk/index.php?id=15296
13
‘The Wider Benefits of UK Membership of the EU’, Euromove, Written February 2012, Accessed 17/02/2014
http://www.euromove.org.uk/index.php?id=17942
14
Ibid
15
Ibid
16
Ibid
17
Ibid
today?18' However, the counter argument would be that the EU rarely legislates on issues
that would affect an individual nation negatively. Instead, the EU rules primarily on the
issues of common trade, foreign policy and the environment, to which each member state
still has the option of voicing their opinion, even if such opinion rarely has an impact on the
proposed legislation.
Another strong argument presented by Eurosceptics is that the EU is a drain on the British
economy and therefore the UK would be in a better economic position if it left the EU.
There is some evidence to suggest this, with 'the general cost of EU regulation [being]
estimated at over £20 billion each year’.19 Also key EU economic policies that the UK is
contributing capital towards often have either a negative effect on the UK or no effect at all.
The EU's Common Fisheries Policy has 'decimated fish stocks, driven up supermarket prices,
minimised employment and may cost the UK up to £4.7 billion each year’, while the
Common Agricultural Policy 'drains upwards of £10 billion each year, both in direct costs
and by inflating food prices’.20 The Common Agricultural Policy (CAP) is an interesting case,
as a large proportion of EU spending goes towards CAP, whereas – with France as an
exception – agricultural industries contribute a very small proportion of GDP and jobs in EU
countries. Europhiles counter this argument by making the point that the EU acts like any
centralised government, redistributing from the richer areas to the poorer areas. They argue
that redistributing the wealth across the EU would allow poorer countries better
opportunities for economic development, which results in richer countries benefitting from
increased future exports to, and the potential for increasingly cheaper imports from, the
developing countries.
Immigration is, in theory a good thing for a country's economy. It will boost the labour
force: in times of economic boom spare capacity in the labour market will be reduced as
immigrants take on existing spare jobs. Similarly, more immigrants means (in theory)
increased tax revenues and increased consumption, as they spend their wages in the
adopted country – so long as the incoming immigrants find work quickly. Conversely,
immigration can also have a damaging effect on a country's economy if they cannot find
work quickly, as they may be forced to use the country's benefit system to survive.
The number of immigrants in the UK has grown considerably in the past 20 years, 'from
about 4.8 million in 1995 to around 9 million in 2011’21. Also, 'between 2000 and 2011, the
net addition to the UK immigrant population was about 1.5 million for EEA and 2.9 million
for non-EEA immigrants’.22 There has, however, been a considerable increase in the
proportion of immigrants from EEA backgrounds compared to non-EEA immigrants. Data
from Dustmann and Frattini's paper shows that there have been significant increases both in
18
Ibid
‘Does the EU impede the UK's Economic growth?’ Citivas, Accessed 21/02/2014
http://www.civitas.org.uk/pdf/EUGrowthImpediment.pdf
20
Ibid
21
Dustman, C & Frattini, T The Fiscal Effects of Immigration to the UK, Centre for Research and Analysis of
Migration, November 2013 Accessed 17/11/2013 http://www.creammigration.org/publ_uploads/CDP_22_13.pdf
22
Ibid
19
EEA immigrants and non-EEA immigrants finding work, with EEA immigrants increasing
'fourfold’ and non-EEA immigrants increasing 'by almost 80%’.23
Immigration is a polarizing issue in the sphere of European politics. Eurosceptics argue that
the ‘open-door immigration’ that has been in place while the UK has been a member of the
EU is allowing immigrants to take jobs otherwise occupied by UK nations; they also argue
that a large number of immigrants are taking advantage of the UK health and welfare
system. 24 Undoubtedly there is some substance to these arguments: first, the presence of
more immigrants from EU countries has had, and will continue to have, a detrimental
impact on the National Health Service. Increasing numbers of immigrants have led to a
situation in which UK taxpayers have had to foot the bill for immigrants using the NHS.
Medical analysts have estimated that 'the health service faces a bill of an extra £1 billion
every year to treat immigrants and asylum seekers’.25 This is especially disconcerting for the
British public, as life-long UK tax payers are seeing their tax revenue being partly spent on
immigrants who have been in the UK forfew years. Eurosceptics argue that, with increasing
immigrants using the NHS, waiting times and quality of service have increased and
decreased, respectively. David Cameron recently made it clear how important immigration
can be for the UK and for the NHS, saying, in a recent speech, 'our country has benefited
immeasurably from immigration', later adding that 'if you go to any hospital you'll find
people from Uganda, India and Pakistan who are caring for our sick and vulnerable’. 26 Today
there are '85,000 immigrant nurses registered in the UK and recent Global Medical Council
figures suggest 37% of all NHS doctors qualified abroad’.27 It is therefore possible to make
the case that the NHS has benefitted greatly in the past from immigration and any
continued immigration would provide the UK with more qualified nurses and doctors.
In terms of jobs, it is only logical to conclude that increased immigrants in the UK with finite
jobs means that some UK citizens will fail in their job applications where immigrants
succeed. According to a government-backed report, 'migrants are filling a fifth of jobs in key
industries because of a lack of skilled British graduates’.28 One can infer from this report that
there is a either a lack of skilled British labour, or an excess demand for skilled labour within
the UK that British workers cannot themselves fill, which leads to the employment of foreign
skilled workers in the UK.
To conclude, I believe the UK should stay within the EU: the economic benefits from free
trade, increased foreign investment in the UK and the free transfer of skilled workers from
European nations largely outweighs the negatives of the UK's membership within the EU.
The UK's position within the EU is by no means entirely positive – with UK businesses being
23
Ibid
Maclellan, Kylie, ‘Immigration rise embarrasses UK's Cameron before election’, Written 27/02/2014,
Accessed 27/02/2014 http://uk.reuters.com/article/2014/02/27/uk-britain-politics-immigrationidUKBREA1Q0TS20140227
25
Mail Online, Sickly Immigrants add £1bn to NHS bill, Accessed 27/02/2014
http://www.dailymail.co.uk/health/article-185768/Sickly-immigrants-add-1bn-NHS-bill.html
26
Joseph, Gillian, NHS: Has immigration saved the health service? Written 17/10/2013, Accessed 28/02/2014
http://news.sky.com/story/1155532/nhs-has-immigration-saved-the-health-service
27
Ibid
28
Paton, Graeme, Immigrants fill one in five skilled British jobs, Written 3/11/2013, Accessed 28/02/2014
http://www.telegraph.co.uk/education/educationnews/10424148/Immigrants-fill-one-in-five-skilled-Britishjobs.html
24
more susceptible to foreign firms undercutting them and taking sales and profits – but,
nevertheless, the UK cannot expect to be a global economic leader if it relies on
protectionist policies to safeguard its businesses and the jobs of its citizens.
References
Rodgers, Simon, ‘EU budget: how much does each country pay and where does it get spent?’
The
Guardian
Datablog,
written
22/11/2012,
accessed
14/02/2014
http://www.theguardian.com/news/datablog/2012/nov/22/eu-budget-spendingcontributions-european-union
Sinclair, Nikki, ‘Not once, in 32 years, has Britain received more than its paid in’, Written
6/1/2014, Accessed 14/02/2014
http://nikkisinclairemep.blogspot.co.uk/2014/01/not-once-in-32-years-has-britain.html
Krueger, Anne, Free Trade Agreements versus Customs Unions, NBER Working Series Paper,
Written April 1995, Accessed 15/02/2014 http://www.nber.org/papers/w5084.pdf
Literature Review- economic costs and benefits of EU membership Accessed 14/02/2014
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220969/f
oi_eumembership_literaturereview.pdf
Hannan, Daniel, ‘It's precisely because we want free trade that we should leave the EU’,
Written
11/12/2013,
Accessed
14/02/2014
http://blogs.telegraph.co.uk/news/danielhannan/100250233/yes-to-free-trade-no-to-theeu/
Perria, Sara, ‘Why are foreign investments in the UK rising?’ Written 1/08/2013, Accessed
14/02/2014
http://www.newstatesman.com/business/2013/08/why-are-foreigninvestments-uk-rising
Shipman, Tim, Britain could miss billions of pounds of U.S. investment if it leaves the EU,
Obama
officials
warn,
Written
27/05/2013,
Accessed
15/02/2014
http://www.dailymail.co.uk/news/article-2331753/Britain-miss-billions-pounds-U-Sinvestment-leaves-EU-Obama-officials-warn.html
‘The Economic Benefits to the UK of EU membership’, Euromove, Written December 2011,
Accessed 16/02/2014 http://www.euromove.org.uk/index.php?id=15296
‘The Wider Benefits of UK Membership of the EU’, Euromove, Written February 2012,
Accessed 17/02/2014 http://www.euromove.org.uk/index.php?id=17942
‘Does the EU impede the UK's Economic growth?’ Citivas, Accessed 21/02/2014
http://www.civitas.org.uk/pdf/EUGrowthImpediment.pdf
Dustman, C & Frattini, T The Fiscal Effects of Immigration to the UK, Centre for Research and
Analysis of Migration, November 2013 Accessed 17/11/2013 http://www.creammigration.org/publ_uploads/CDP_22_13.pdf
Maclellan, Kylie, ‘Immigration rise embarrasses UK's Cameron before election’, Written
27/02/2014, Accessed 27/02/2014 http://uk.reuters.com/article/2014/02/27/uk-britainpolitics-immigration-idUKBREA1Q0TS20140227
Mail Online, Sickly Immigrants add £1bn to NHS bill, Accessed 27/02/2014
http://www.dailymail.co.uk/health/article-185768/Sickly-immigrants-add-1bn-NHS-bill.html
Joseph, Gillian, NHS: Has immigration saved the health service? Written 17/10/2013,
Accessed 28/02/2014 http://news.sky.com/story/1155532/nhs-has-immigration-saved-thehealth-service
Paton, Graeme, Immigrants fill one in five skilled British jobs, Written 3/11/2013, Accessed
28/02/2014 http://www.telegraph.co.uk/education/educationnews/10424148/Immigrantsfill-one-in-five-skilled-British-jobs.html