Is the ‘awkward partner’ about to leave the EU? The UK’s relationship with the EU Mike Walsh Economics Academic Course Director Coventry University Ref: UK EU relationship March 2013

(1) Introduction The UK joined the EEC (EU from 1993) in 1973 Late: over 20 years after the EEC was formed! Within a year the UK had built up a reputation for being the ‘awkward partner’ ( George S, 1998) – opposed many EEC initiatives – took an independent view – was disruptive We will consider why the UK was considered to be the ‘awkward partner’ and why EU exit is on the agenda

UK attitudes These help explain the UK’s relationship with the EU. Generally, the UK : – Is pragmatic – Believes in free markets – Doesn’t want to give up sovereignty – Wants widening of EU – Wants less integration. No federalism Relevant today – Gordon BROWN (PM) signing Lisbon Treaty 2007 – EU splits some UK political parties

(2) UK and Europe: The early years

: Preparation Positions of countries – UK 3 circles UK condescending? intergovernmental approach ok USA Empire Europe

– France wanted decline in German industrial power – Germany wanted acceptance

European Coal & Steel Community (ECSC) Schuman Plan (9th May1950) – Monnet’s ideas sectoral approach – Iron & steel major sector – France - Germany ECSC – Treaty of Paris est – 6 members – Supranational from beginning UK not want to give up sovereignty

ECSC to EEC Messina (1955) – Extend Benelux model (Spaak) – Atomic energy cooperation (Monnet) – UK position: don’t get involved Treaty of Rome 1957 (effective 1958) – EEC Treaty – Euratom Treaty UK: don’t get involved

EEC Take off and early progress ( ) EEC economic success EFTA (1960) – EEC Rival – Included UK France vetoes UK entry to EEC Finally, success – Hague Summit 1969 – Agreement for UK to join the EEC – UK joined 1/1/73

(3) UK & The EU Budget A major issue for 40 years

Budget 2013 CAP Cohesion Competitiveness Rural development Admin External Relations Security & justice

1st EU enlargement 1973 UK rebate: major issue UK disruptive – Veto in Council Of Ministers (pre SEA 1986) UK major contributor but one of poorest states in 1970’s – Reasons CAP Common external tariff (CET) – Conflicts

High CAP expenditure (% budget share) when UK joined EEC in 1973

Fontainebleu Summit 1984 UK rebate UK rebate issue resurfaced 1998 onwards

2005: Blair wanted CAP reform in return for UK giving up budget rebate UK & France fall out! Outcome: UK gives up some of rebate – With conditions

Budget issues still exist today – David Cameron (UK PM) in EU budget talks – 2011: Opposed large increase in EU budget /13: Opposes real increase in EU budget for Financial Perspective Budget rebate AGAIN

(4) Economic and Monetary Union (EMU)

Monetary union ‘’launched’' 1979 – European Monetary System EMS EMS - 2 components – European currency unit (Ecu) – Exchange rate mechanism (ERM) 8/9 countries NOT UK UK eventually joined 1990 BUT, UK exit 1992 September 1992 ‘ERM crisis’

Maastricht Treaty 1991 – UK & Denmark opt out of Euro – Only countries to do so UK set 5 economic tests for joining – Failed 4 out of 5 (2003) – Political device, not economic

(5) Social Policy

UK generally believe in free markets, laissez faire – ‘Anglo Saxon’ approach – European interference in labour market – Social Policy raises costs for firms & makes them uncompetitive – E.g. Working Time Directive

Approaches by selected countries below – UK, Ireland – free market – Germany, Benelux countries– collective bargaining provides worker protection – France, Spain, Portugal, Greece- statutory framework to protect workers rights as weak collective bargaining

Social Charter 1989 – Social policy expanded – not legally binding – opt out by… Maastricht Treaty – Binding on EU States – Opt out by……

Answer these questions relating to Spain Is it easy for a firm to make a worker redundant? How much social tax (%) does a firm pay on wages How many days holiday does the average worker receive? Do you think working more than 48 hours / week is ok? If you lose your job what benefits can you receive?

(6) What does the UK want from the EU?

Free Trade Access to the SINGLE MARKET Very ‘Anglo Saxon’

Single European Act (SEA) 1986 All trade barriers to be eliminated Aims include – Bigger markets for firms – Increase efficiency of firms – Aid integration – Benefit consumers Generally regarded as successful

(7) UK: Even more awkward? Exit? David Cameron’s Europe Speech January 2013

UK renegotiate with EU? – ‘cherry pick’ policies – Drop which policies? – UK want which policies? Hold referendum to leave EU in 2018 if renegotiation fails Why?

Options if UK leave EU? Renegotiate agreements with EU? – Like Switzerland – About 200 bilateral agreements Join EEA? – Access to single market – Like Norway Be like rest of world? Scotland?

UK in Europe

(8) Conclusion After 40 years membership Europe still divides UK opinion & splits political parties UKIP is a new anti-EU party UK is still the awkward partner

References S George, ‘An Awkward Partner: Britain in the European community’ R Baldwin & C Wyplosz, ‘The Economics of European Integration’