Britain leaving the EU is a head versus heart decision

HEADLINE-grabbing events in SA sometimes don’t even get a mention in the UK as focus intensifies on the increasingly bitter debate on whether the UK should remain part of the European Union (EU) or opt for Brexit (British exit) and go it alone.

Analysts agree there is a seismic decision to be made in the referendum on June 23, and it is likely to have profound consequences for the UK, its position in the world, the EU and the global economic and political balance of power for generations to come. The stakes could not be higher given the bad place the world finds itself in now, and like it or not, the UK does punch above its weight in most strategic areas, so it should be of real concern to us all. The EU comprises 28 countries. In short, it was set up to ensure stability following the two world wars and to help spread development from the richer members to the poorer members, to contribute to stability, but also, to generate wealth and growth.

Countries pay for membership depending on economic strength. The UK is a net contributor of about £6bn. Members have to comply with EU-wide legislation and directives made by the European Parliament and Council of Leaders, where all countries are part of the decision-making process. Some opt-outs have been agreed with members such as the UK, but a non-negotiable is the free movement of people, goods and services.

In return, members get free trade access to the biggest single market in the world — about 500-million consumers — and the benefits of the EU’s negotiating strength and more than 50 free trade agreements with other nations and blocs. The EU returns funding to member countries based on need, qualification and policy; in the UK there is support for agriculture, universities, underdeveloped regions and a range of private sector projects.

Those supporting Brexit argue that the UK is economically constrained by the EU, resent a loss of sovereignty and a perception of ever closer union, claim it is undemocratic and does not give value for money, and believe the UK would thrive on its own. All this, despite the fact that 90% of EU decisions have been supported by the UK.

This situation has resulted in a bitter divide, with expediency and distortion of facts as politicians jockey for positions in the fractured governing Conservative Party.

Popular Prime Minister David Cameron, a brave and articulate advocate of “in”, did not help himself when he announced two years ago that he was stepping down at the end of next year, allowing party play to begin using this sensitive issue as an excuse.

The pro-EU Labour Party is as fractured, but for different reasons, not allowing it to so far give real leadership in this debate. It is a bad time to have this debate at all, given the circumstances the world finds itself in. Should the UK leave, it would be a huge body blow to the EU and the West as well as the UK itself, given the migrant and security challenges they face, and the need for co-ordinated solutions. These issues would not disappear with Brexit, and could intensify.

A broken EU is exactly what Russian President Vladimir Putin, the Islamic State and others wish for to further their own agendas. The US, Canada and other key allies have made this clear. They want the UK in not only because they consider it in the UK’s best interests, but also because of the stabilising influence it has on the EU.

The argument for the UK staying in — on balance, with all its imperfections and challenges — certainly seems the more compelling one. It is, in essence, a head versus heart decision. UK National Statistics confirm the EU is by far its biggest trading partner at 49% (£519bn) of total goods and services traded. Next is Asia at 19% (£204bn) and the US at 17% (£179bn).

Those supporting Brexit claim that the EU is getting less significant to the UK, which should focus more on China, India, Brazil and the Commonwealth.

But the stats confirm that the UK exports more to EU member Ireland (£28bn) than to China (£18.7bn) and India (£8.8bn) combined, five times more to Belgium than to Brazil, and twice as much to Sweden as to India. The value of EU free trade, movement of goods, services, people and investment is of paramount and unchallenged strategic importance to the UK.

Those wanting “out” claim that because the UK exports £229bn (44% of total exports) to the EU and imports about £290bn, the EU needs the UK more and will therefore allow a “soft” departure.

This is open for challenge: the reality is that 3% of the EU’s gross domestic product links to exports to the UK, but 13% of UK exports link to the EU. In fact, only 8% of EU exports go to the UK. This is important because should the UK opt out, there is a two-year period (extendable by agreement from all remaining EU members) during which exit terms are decided by the EU, with minimal entitlement for the UK to participate in the process. It is foolhardy to imagine the EU would make it easy for its first departing member, as this could encourage others.

So, if the UK wanted free trade, it would still have to pay in, accept the free movement of people and comply with the legislation required by the market without having any input, a loss of a share of sovereignty in the world’s biggest market.

The EU has nearly 50 free trade agreements and is negotiating more. China, the US, India and others want us to remain part of the EU because they are not keen to negotiate with single countries. The UK last negotiated a free trade deal 40 years ago. If it were to leave, it would need to negotiate more than 70 within two years, failing which it would default to World Trade Organisation rules. This means, for example, 10%-20% tariffs on automotives.

The Swiss took 10 years to finalise their China free trade agreement and Canada is now on year seven with the EU.

Nissan, BMW, Hitachi, Airbus, Nifco, Jaguar, Ford, FTSE 100 bosses, leading banks, business organisations and others support “in”, because the UK is the best place to be to access the EU market, and caution that jobs, competitiveness and future investments could be affected by Brexit complications. A leading automotive business leader went so far as describe Brexit as “business suicide”.

The sovereignty argument is interesting because the UK (like most countries) gives up some sovereignty when it participates in international agreements and organisations such as the World Trade Organisation, Nato, the International Monetary Fund and many others. This is normally where it sees advantages, and the advantages of EU membership are clear.

The real issue, perhaps, is the claim by some who supported EU membership in the 1975 referendum that it was on the understanding that it was an economic union.

But this is debatable as economic union inevitably involves some loss of national sovereignty. This is replaced by a share of sovereignty in something much bigger. So, it comes back to head versus heart. In any case, the EU has recognised the UK will not be part of ever-closer union, and nor will it have to contribute to eurozone bail-outs in the future. So, what is the problem?

Swart is a former South African journalist who is now UK-based global sales director for a European manufacturing group, nonexecutive director of the North East of England Chamber of Commerce and executive director of Woodbury International. His views are his own.

Picture: THINKSTOCK

Picture: THINKSTOCK

HEADLINE-grabbing events in SA sometimes don’t even get a mention in the UK as focus intensifies on the increasingly bitter debate on whether the UK should remain part of the European Union (EU) or opt for Brexit (British exit) and go it alone.

Analysts agree there is a seismic decision to be made in the referendum on June 23, and it is likely to have profound consequences for the UK, its position in the world, the EU and the global economic and political balance of power for generations to come. The stakes could not be higher given the bad place the world finds itself in now, and like it or not, the UK does punch above its weight in most strategic areas, so it should be of real concern to us all. The EU comprises 28 countries. In short, it was set up to ensure stability following the two world wars and to help spread development from the richer members to the poorer members, to contribute to stability, but also, to generate wealth and growth.

Countries pay for membership depending on economic strength. The UK is a net contributor of about £6bn. Members have to comply with EU-wide legislation and directives made by the European Parliament and Council of Leaders, where all countries are part of the decision-making process. Some opt-outs have been agreed with members such as the UK, but a non-negotiable is the free movement of people, goods and services.

In return, members get free trade access to the biggest single market in the world — about 500-million consumers — and the benefits of the EU’s negotiating strength and more than 50 free trade agreements with other nations and blocs. The EU returns funding to member countries based on need, qualification and policy; in the UK there is support for agriculture, universities, underdeveloped regions and a range of private sector projects.

Those supporting Brexit argue that the UK is economically constrained by the EU, resent a loss of sovereignty and a perception of ever closer union, claim it is undemocratic and does not give value for money, and believe the UK would thrive on its own. All this, despite the fact that 90% of EU decisions have been supported by the UK.

This situation has resulted in a bitter divide, with expediency and distortion of facts as politicians jockey for positions in the fractured governing Conservative Party.

Popular Prime Minister David Cameron, a brave and articulate advocate of “in”, did not help himself when he announced two years ago that he was stepping down at the end of next year, allowing party play to begin using this sensitive issue as an excuse.

The pro-EU Labour Party is as fractured, but for different reasons, not allowing it to so far give real leadership in this debate. It is a bad time to have this debate at all, given the circumstances the world finds itself in. Should the UK leave, it would be a huge body blow to the EU and the West as well as the UK itself, given the migrant and security challenges they face, and the need for co-ordinated solutions. These issues would not disappear with Brexit, and could intensify.

A broken EU is exactly what Russian President Vladimir Putin, the Islamic State and others wish for to further their own agendas. The US, Canada and other key allies have made this clear. They want the UK in not only because they consider it in the UK’s best interests, but also because of the stabilising influence it has on the EU.

The argument for the UK staying in — on balance, with all its imperfections and challenges — certainly seems the more compelling one. It is, in essence, a head versus heart decision. UK National Statistics confirm the EU is by far its biggest trading partner at 49% (£519bn) of total goods and services traded. Next is Asia at 19% (£204bn) and the US at 17% (£179bn).

Those supporting Brexit claim that the EU is getting less significant to the UK, which should focus more on China, India, Brazil and the Commonwealth.

But the stats confirm that the UK exports more to EU member Ireland (£28bn) than to China (£18.7bn) and India (£8.8bn) combined, five times more to Belgium than to Brazil, and twice as much to Sweden as to India. The value of EU free trade, movement of goods, services, people and investment is of paramount and unchallenged strategic importance to the UK.

Those wanting “out” claim that because the UK exports £229bn (44% of total exports) to the EU and imports about £290bn, the EU needs the UK more and will therefore allow a “soft” departure.

This is open for challenge: the reality is that 3% of the EU’s gross domestic product links to exports to the UK, but 13% of UK exports link to the EU. In fact, only 8% of EU exports go to the UK. This is important because should the UK opt out, there is a two-year period (extendable by agreement from all remaining EU members) during which exit terms are decided by the EU, with minimal entitlement for the UK to participate in the process. It is foolhardy to imagine the EU would make it easy for its first departing member, as this could encourage others.

So, if the UK wanted free trade, it would still have to pay in, accept the free movement of people and comply with the legislation required by the market without having any input, a loss of a share of sovereignty in the world’s biggest market.

The EU has nearly 50 free trade agreements and is negotiating more. China, the US, India and others want us to remain part of the EU because they are not keen to negotiate with single countries. The UK last negotiated a free trade deal 40 years ago. If it were to leave, it would need to negotiate more than 70 within two years, failing which it would default to World Trade Organisation rules. This means, for example, 10%-20% tariffs on automotives.

The Swiss took 10 years to finalise their China free trade agreement and Canada is now on year seven with the EU.

Nissan, BMW, Hitachi, Airbus, Nifco, Jaguar, Ford, FTSE 100 bosses, leading banks, business organisations and others support “in”, because the UK is the best place to be to access the EU market, and caution that jobs, competitiveness and future investments could be affected by Brexit complications. A leading automotive business leader went so far as describe Brexit as “business suicide”.

The sovereignty argument is interesting because the UK (like most countries) gives up some sovereignty when it participates in international agreements and organisations such as the World Trade Organisation, Nato, the International Monetary Fund and many others. This is normally where it sees advantages, and the advantages of EU membership are clear.

The real issue, perhaps, is the claim by some who supported EU membership in the 1975 referendum that it was on the understanding that it was an economic union.

But this is debatable as economic union inevitably involves some loss of national sovereignty. This is replaced by a share of sovereignty in something much bigger. So, it comes back to head versus heart. In any case, the EU has recognised the UK will not be part of ever-closer union, and nor will it have to contribute to eurozone bail-outs in the future. So, what is the problem?

Swart is a former South African journalist who is now UK-based global sales director for a European manufacturing group, nonexecutive director of the North East of England Chamber of Commerce and executive director of Woodbury International. His views are his own.

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