EU referendum plan a high-risk endgame for UK


OPINION:A striking moment in Steven Zaillian’s wonderful 1993 film Searching for Bobby Fischer occurs when child chess prodigy Joshua Waitzkin extends his hand to offer his astonished opponent a draw in the middle of a tournament chess final, explaining: “You’ve lost. You just don’t know it yet.”

Some might see faint echoes of that scene in the arguments rumbling over David Cameron’s promised speech on the EU, in which, for largely domestically-driven reasons, he is expected to commit the UK to a referendum that risks “Brexit” – British exit from the EU.

Economist Wolfgang Münchau has downplayed the significance of the Brexit debate. The first reason is his Waitzkin-like advice that the game of keeping Britain at the heart of Europe has in any case long been lost. The second is his view that the macroeconomic significance of any potential UK exit will in any case be very limited.

It is undoubtedly the case that much British influence in Europe has already evaporated. The most significant step in this regard was John Major’s 1991 negotiation of a single currency opt-out, arguably a long-term strategic error.

The euro zone is gradually being sculpted into a functioning economic entity capable of supporting the world-ranking reserve currency the euro has now become. As the largest united bloc within the EU, the euro zone will inevitably become the union’s decision-making core.

Participation will increasingly have practical advantages to recommend it – not least of which will be a place for member states at the table, rather than on the menu: noticeably, hungry eyes have recently been cast from within the euro zone in the direction of UK-based trade in euro-related securities.

Loss of British influence has been exacerbated by other decisions. The UK’s adoption of the European Union Act 2011, requiring referendums even for minor relinquishments of sovereignty, leaves British negotiators with little to offer in future European-level treaty negotiations.

More fundamentally, the decades-long cultivation by both media and many Conservative politicians of a confrontational approach towards the EU has created an impossible situation for British politicians. As Tony Blair reputedly complained, if they win in Europe, they lose at home and if they lose in Europe, they win at home. The positive domestic reaction to Cameron’s December 2011 diplomatic debacle – which produced merely ill-will and a fiscal treaty without British involvement – was a good recent example of this.

Currently-reduced British influence is no argument for the even greater loss a complete exit from the EU would bring, however. The EU is a global soft-power colossus. Within it, the UK remains a major player, notably in foreign affairs co-operation.

All such influence would be jeopardised by Brexit. A worried Obama administration publicly briefed journalists of its concerns, and its desire for a “strong British voice in the EU” last week.

What of the macroeconomic significance of Brexit – an aspect Ireland has a particular interest in, given economic links with Britain and (especially) Northern Ireland?

Münchau argues that the EU budget is tiny and that free trade and capital movements would continue under any conceivable scenario.

However, much would depend on the terms the UK negotiated. A Norway-type relationship with the EU with full access to the single market is conceivable, but would not be guaranteed. Its domestic political acceptability would be questionable since it would come at a cost, both financially and in terms of sovereignty: Norway is effectively in a “fax union” with the EU – accepting EU regulations without any say in their shaping – as the price for single market access. Moreover, there would be other macroeconomic implications to Brexit. Over time, investment and financial services activity would likely gravitate from the UK towards the euro zone.

David Cameron might protest that he seeks merely referendum approval for a more arm’s length relationship with the EU, not Brexit. But, as Henry VIII discovered in seeking to annul his marriage to Catherine of Aragon, political decisions frequently lead to consequences far removed from the original intentions of their authors.

Ireland, Denmark, France and Holland have experienced how unpredictable European referendums are. Furthermore, Cameron’s intention to renegotiate the UK’s relationship may founder either on objections by other member states to a perceived attempt to blackmail them at a time of crisis, or because of concerns that making special arrangements for the UK may begin a process of unravelling the EU.

A referendum strategy is a high-risk endgame for a UK already down several playing pieces in the game of maximising its influence.

Dr GAVIN BARRETTis a senior lecturer in the school of law, UCD, specialising in EU law

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