“Let’s leave the EU and join the EEA or EFTA – Norway and Switzerland are doing fine without EU membership!” It’s a perennial argument of a surprisingly large number of anti-EU types, and I’ve been meaning to do a proper post on it for (literally) years. It is, needless to say, a nonsense argument based on a fundamental misunderstanding of Norwegian/Swiss relations with the EU.

Norway has oil. Switzerland’s a tax haven. Both have far, far smaller populations than the UK, accounting for their far higher GDPs per capita (and hence relative prosperity). They are not comparable with Britain.

Even if they were – both also have to pay in to the EU budget proportionate to their economies. Norway currently pays c.340 million euros per annum. This is more than many EU member states – especially when you consider the fact that actual members get money back, reducing their net contributions.

In fact, judging from this chart of net contributions, Norway would – if included in the chart – be about the 10th highest contributor to the EU budget, despite not being a member.

Rough maths tells us that, all things being equal, as the UK’s GDP is approximately 5.7 times that of Norway’s, the UK would still need to contribute around 2 billion euros a year to the EU budget if part of the EEA/EFTA. While having no say in what EU laws and regulations we’d still have to follow.

Because both Norway and Switzerland also – without having any say in their formulation – have to abide by 80-90% of EU rules and regulations in order to be part of the Common Market.

Because you know what you need for a Common Market to function? Common rules and regulations.

That’s the whole reason *why* the EEC has been shifting down the path towards elements of political union over the last five decades – you need a certain amount of political harmonisation to enable functional, stable economic harmonisation. The lack of greater political cohesion (especially the lack of a common fiscal policy) is one of the major contributing factors to the current eurozone crisis, FFS.

Also worth remembering – these “we’d be better off in EFTA/the EEA” arguments used to have a third “look how well so-and-so’s doing” country included: Iceland.

We don’t hear much about how well Iceland’s doing in the EEA any more, do we?

You see – it’s all very well saying “let’s leave the EU”. But if you’re advocating ditching the status quo you’d better have a pretty bloody well thought-through alternative plan.

The vast, vast majority of EU withdrawalists, however, seem simply not to have done their research.

(This originally posted as a comment here, and now slightly modified with additional links)

Alerted by a rather simplistic, often factually inaccurate article over on Liberal Conspiracy, I’ve ended up checking out the new British campaign for a referendum on continued British membership of the EU, The People’s Pledge. More to the point, I’ve had a quick look at its five key arguments:

The choice concerning our relationship with the EU is now clear: either we accept being primarily and increasingly governed from Brussels or we decide to abandon membership and negotiate a new relationship with the EU based on trade and, where this makes sense, voluntary co-operation.

*sigh*

Herewith, a very quick and dirty demolition of their “5 key reasons why we must have a referendum on Britain and the EU”, originally written as a comment under that Liberal Conspiracy piece:

Update: The People’s Pledge campaign has responded to this post. Needless to say, they aren’t overly impressed with my responses to their claims – and I’m not overly impressed with their attempts to counter my arguments. I’ve started responding to their (long) response in the comments – and will add in links to the relevant comments below, as and when I finish replying to each point.

1) No one under 54 has had the chance to vote on our relationship with Brussels.

- And no one – full-stop – has had the chance to vote on the role of the House of Commons, House of Lords, Cabinet, Prime Minister, Civil Service, etc. etc. etc. On pretty much any aspect of the British constitution, in fact, since the Acts of Union 300+ years ago.

Update:Response to People’s Pledge objections to this point.

2) The European Union now makes a majority of the laws we must obey

- This is simply bollocks. See, for example, the recent House of Commons Library paper (PDF) on the issue, or my old What percentage of laws come from the EU post. The true figure is more like 10-20% of laws, with regulations coming in at around 20-30%. Both figures are declining year on year.

Update: Response to the People’s Pledge objections to this point, plus part 2 (on EU regulations) and part 3 (on UK Statutory Instruments).

3) The UK has less than 10% of the votes in the Council of Ministers and the European Parliament

- Our representation is (approximately) in line with our population size – with population taken into account on many votes in the Council, giving the UK a very strong position. Would anything other than that be fair on the other member states with whom we are cooperating? And how much relative say do we have in the WTO, NATO or the UN?

Update: Response to the People’s Pledge objections to this point and part 2

4) The EU is costing Britain more and more money

- This is justified by the classic £48m a day claim (it used to be £40m, but the exchange rate’s got worse), which is abject nonsense, based on gross rather than net, and rounded up, as shown in this old post – and is backed up by some nonsense about the cost of the Greek bailout (ignoring the British investment money that would be lost if Greece/Ireland/Portugal had been allowed to go bankrupt), and in any case ignores the wider impact of EU membership on the economy as a whole. Simplistic tosh.

5) The EU wants to give itself new powers of “economic governance”

- Erm… For the Eurozone. Of which Britain is not a member. Britain would only benefit by her neighbours (and major trading partners) being economically more stable and prosperous.

Utter rubbish, all five of them.

Just found an interesting response to my UK-EU trade post from a couple of months back, from what is a new blog to me, Brittopic.

It’s worth reading in full to see a few objections and some issues raised – notably about the British balance of trade and the nature of the UK’s service-driven economy.

Below the fold is what started out as a comment reply on that site, but which got too lengthy to post there. It ends with my (little bit) tongue-in-cheek advocation of Britain joining the Eurozone – something I don’t believe I’ve ever done before – simply because the Eurozone is a bit like the Gold Standard.

(And yes, before you ask I *have* read a newspaper in the last year. I’m off to Greece on Sunday, in fact, and spend a good 30% of my day job focused on Ireland…)

—

First, agreed on the misuse of the “60% of UK trade is with the EU” claim as fact by pro-EU types. But no matter which way you look at it, our next biggest trading partner after the EU is the US, with the figures normally given as around 10-20% of our total trade. The various EU member states certainly amount to a lot more than 20% of our trade.

I also think that 60% is likely to be in approximately the right ballpark, (I tend to suggest “more than half” as a sensible alternative) – it makes logical sense for us to be trading most with one of the easiest blocs of developed countries it’s possible for us to trade with, especially when (as you note) we’re so reliant on exporting services. Trading with non EU/EEA countries is simply a lot more expensive – multiple different regulations/standards/exchange rates, plus greater transportation costs due to the greater distances involved, and many more logistical issues due to timezone differences (something I deal with daily, working in London but needing to communicate regularly with colleagues all over the world).

As an aside, the 60% trade claim is also certainly a lot less heinous a figure than the standard “75%-84% of laws come from the EU” claims coming from the other side… But enough of that…

On the two points you say I ignored, a quick reply:

1) Services and UK-EU trade

You have a point there when you say that “Given that the UK economy is largely service-based and that it is, at last count, the sixth most visited country in the world (tourism is an export and, yes, the report does exclude airport transfers), it is not sensible to rely only on goods trading as a measure of the UK’s economic relationships with other markets.”

However, as you brought it up, specifically on tourism there have been a number of reports from within the industry that tourists are increasingly avoiding visiting Britain thanks to it being outside the Eurozone (easier to use one currency on your holiday, after all). This has been partially offset in the last couple of years thanks to the weak pound, but it does sound plausible.

Regarding service industries more widely (and I stress, this is entirely off the top of my head – I’ve done no research into this at all), again the EU is a sensible place for most of our trade to take place. Similar timezone, for starters – you can run your service industry during normal office hours if you’re operating within the EU, while to deal with most English-speaking countries (the other logical customers for British service industries) you’re having to vary from GMT+12 for New Zealand to GMT-9 for Alaska. Of English-speaking countries, only Ireland and (the western part of) South Africa are in the same timezone, so it’s not overly practical.

2) The EU and regulatory costs

You also note that my earlier trade post “also ignores the cost of the regulatory burden on UK business of EU law (both in terms of money spent on compliance and profit foregone), which was estimated by the think-tank Civitas in 2004 at being between £17bn and £40bn a year.”

The reason I didn’t mention it is because I don’t see it as directly relevant, but also because I covered it here – note in particular the mention of the British Chambers of Commerce report, specifically the quote: “By value, EU legislation was only responsible for about 0.1% (£1.9m) of regulatory net costs in 2007/8″

The estimated cost of EU regulations varies wildly, depending on who you choose to believe. Eurosceptic-leaning people tend to believe the higher estimates, which often come from eurosceptic-leaning sources (like Civitas’ figures that you give, or Open Europe’s claims that the EU was responsible for £124bn of regulatory costs 1998-2009), while more pro-EU people incline towards the lower estimates (as I did in that quote above).

The truth is that, as with the trade figures, no one really knows how much of the regulatory burden can be attributed to the EU – and with estimates varying between c.15% and c.75% it’s not even clear whether it’s significant or not (not least because we have no way of telling what percentage of EU regulations would have been introduced even if we were not members). At least with the trade figures the estimates only vary between c.45% and c.65%.

A quick note on the balance of trade

Britain imports more manufactured goods than we export because Britain is no longer a manufacturing nation. So it makes sense to get the best prices we can on those imports.

Staying outside the Eurozone means that fluctuating exchange rates can work to our advantage (we can get cheaper imports if the pound is strong). However, part of the reason the UK’s trade surplus in services dropped from 2008 to 2009 is due to the weakening of sterling vs. the euro. If the pound is strong, Britain’s exports (services as well as goods) bring us less – but we get our imports cheaper.

But we have little real ability to influence exchange rates (short of drastic measures which would instantly set alarm bells ringing with any sensible investors and trading partners, and which could threaten major economic collapse). Which means the balance of trade is constantly shifting thanks to forces beyond our control.

You call on the government to rebalance our reliance on the EU to get a better trade balance. One of the easiest ways of doing this would be to standardise exchange rates with a bunch of our biggest trading partners in one go, thus allowing far better forward-planning. How to do this? Join the Eurozone.

Think of it as a modern-day equivalent of the Gold Standard. (Assuming the Eurozone survives, that is…)

As many of you know, I spend far too much of my (increasingly limited) spare time arguing with eurosceptics on the internet. Some are professional eurosceptics (recent discussions have included ones with Declan Ganley, founder of anti-Lisbon Treaty party Libertas, Nigel Farage of UKIP, and someone from American neocon thinktank the Heritage Foundation), others merely passing concerned citizens.

Most of the time, I can point them to a post on this blog where I’ve already covered their concerns in detail. Sometimes I haven’t covered it yet. In a recent discussion with @ArnieEtc, I asked for suggestions of pro-EU myths. He responded with a classic eurosceptic complaint about a perennial pro-EU claim – one that I frequently make myself, but one which I’ve never explored or justified in any detail:

@ArnieEtc, 3rd Nov 2010: “The favourite [pro-EU myth] of mine is where europhiles insist that 70% of our trade is with the EU, so it’d be suicide to leave. This is a myth for two reasons – firstly, you can have free trade with the EU without being a member (EEA). But more fundamentally, it’s a deliberate manipulation of statistics – a lot of our world wide trade goes via Holland, as you get very good shipping links there. But because that involves goods being moved from the UK, to Holland (even though they only stay there for a few days), some pro-EU commentators use that to bulk up EU trade figures, and make it look like there’s more genuine intra-EU trade than there really is.”

I’ll come back to the EEA in another post, as it’s a far more complicated situation to explain – first, let’s take this claim that official statistics over-inflate the UK’s trade with other EU member states.

Is there any truth in it? Well, as with all the best euromyths, yes. Some.

Manipulation of statistics

First, where did this “deliberate manipulation of statistics to show EU trade as being more important” idea come from? It’s a familiar meme among certain sections of the anti-EU blogosphere, and is increasingly being used by anti-EU campaigners in the real world as well.

It all comes down to a phenomenon known as “the Rotterdam effect” – the existence of which is widely acknowledged (but the meaning and significance of which is equally widely misunderstood).

Oddly, the best explanation I’ve found comes from the Australian Bureau of Statistics:

“exports to the EU are often attributed to the Member State where the port of discharge is located, rather than the Member State of final destination. This particular mismatch is referred to ‘the Rotterdam effect’ because of the importance of Rotterdam as a transit port.”

The argument runs that many UK exports go via Rotterdam (or Antwerp) before heading off to the rest of the world (and vice-versa for imports) – and that as such, the trade for the Netherlands and Belgium are vastly over-inflated, which in turn over-inflates the UK’s trade figures with the EU as a whole.

Does this happen? Yes. But it’s a bit more complicated than that.

The eurosceptic case

So, we’ve established that trade figures are flawed. But *how* flawed?

The usual report used by Eurosceptics keen to use statistics of their own to support their argument against the claim that the EU is vital for British trade was compiled by Eurosceptic thinktank Global Britain (co-founded by former UKIP leader Lord Pearson).

This report (PDF) from Global Britain shows that the the EU accounted for something in the range of 47-52% of all UK trade in the years 1999-2007, yet concludes that, due to the Rotterdam/Antwerp effects,

“the real adjusted proportion is likely to be below 40%”

How does Global Europe come to this “below 40%” conclusion? The report explains in an appendix:

“The official ONS [Office of National Statistics] data significantly overstates the real level of UK exports to the rest of the EU, because of… the Rotterdam-Antwerp Effect… The Rotterdam-Antwerp Effect arises because the ONS and its fellow-bodies, in compiling their geographical registers of exports, record as the destination of the export the country of the first port of discharge of a consignment, even when the consignment is only in transit on its way to a different end-destination country… Even when recorded as exports to the Netherlands and Belgium, British goods may not even touch Dutch or Belgian soil, simply being transhipped in the ports of Rotterdam and Antwerp to container vessels bound for – say – Singapore.”

OK – fair enough. So why the 10% reduction?

Well, their argument for some kind of reduction is simple: The Netherlands accounts for £43bn of UK exports with a population of 16m, and Belgium £21bn with a population of 10.5m, where France only accounts for £47bn with a population of 62m, and Germany only £52bn with a population of 82m:

“Each Dutch or Belgian person apparently consuming three or four times as many British imports as a German or French person… On-the-ground observation suggests that the per-capita propensity of Germans, French, Dutch, Belgians & Luxemburgers to consume British imports is roughly similar.”

What are those “on-the-ground observations”? Where do they come from? Where do they get the 10% figure? No source or explanation is given.

We actually have *no idea* how much Dutch or Belgian trade is inflated by the Rotterdam-Antwerp Effect. The “below 40%” claim is unsubstantiated with any evidence beyond assertion, and appears to be based on little more than a hunch.

Could such small countries really account for so much trade? Well, based on the (unreliable) official figures, the Netherlands accounts for c.7.8% of all UK exports. But Ireland – with an even smaller population (just 4 million compared to the Netherlands’ 16 million) – accounts for 7.5% of all UK exports. And last time I checked, Ireland doesn’t have an equivalent of Rotterdam to allow that vast per-capita consumption to be written off as based on misallocation. (Update: See correction in comments.)

“The US is a more important trade partner for Britain”

It’s not just Global Britain that claims that the importance of EU trade to the UK is overstated. Similar assertions were made in Mark Baimbridge & Philip Whyman’s book Britain, the Euro and beyond, where they also address the argument that the EU accounts for the majority of UK trade:

“a detailed analysis reveals that only 48 per cent of the UK’s current account relates to the EU… Indeed, just as much trade takes place with the USA as France and Germany combined. Thus although the UK is deeply involved in trading to EU member states, it remains a minority of total trade.”

Here it’s necessary to go to HM Revenue & Customs (PDF), which in a 2005 report raised an important point which is often overlooked by eurosceptics who seem to think that the Rotterdam/Antwerp effect is peculiar to EU trade figures:

“The Rotterdam Effect is not confined to trade between EU Member States but can affect trade between any pair of countries where the goods are transported through one or more additional countries… it is not only where the country of transit is an EU Member State that the Rotterdam Effect can come into play and cause asymmetries.”

In other words, this phenomenon is not just confined to Rotterdam and Antwerp, nor just to the EU. Goods that go via *any* third party country before reaching their ultimate destination can be affected by the same phenomenon.

The HM Revenue & Customs report in particular notes a Statistics Canada-Eurostat study from the year 2000, showing that most EU exports to Canada go via the US, which in turn can over-emphasise the importance of the US as an EU (and UK) trade partner:

“For Eastbound trade, the Canadians class the ‘indirect trade’ as exports to the USA, and the ‘transit trade’ as exports to the EU. The EU classes both of these as imports from Canada on a country of origin basis. Similarly for Westbound trade, the EU may record exports to the USA whereas Canada records an import from the EU due to country of origin.”

The report goes on to note a follow-up study by HR Revenue & Customs itself:

“In 2004, HMRC studied asymmetries with the USA and Canada (Terrazzano, 2004). Here it was discovered that crude oil is imported from the UK via Portland, Maine in the USA, and then sent by pipeline to Canada. This is recorded in Canada as in import from the UK, whereas the UK records an export to the USA. The USA do not record either flow, as it is simple transit. Thus the UK records more oil exports to the USA then they record importing, and recorded less oil exports to Canada then they record importing.”

So thanks to the Rotterdam effect, we can’t trust trade figures with non-EU countries either. And, perhaps, particularly not the US, due to the large amount of re-exportation that happens via America’s many major freight hubs.

In other words, the Rotterdam/Antwerp Effect could easily be referred to as the Portland/Baltimore effect (to randomly pick two major east coast US ports). Indeed, considering the importance of the British ports of Liverpool, Dover and Southampton, or the major global air freight hubs of Heathrow and Gatwick, perhaps we could call it the Heathrow/Liverpool Effect? How much does air freight passing through Heathrow boost the UK’s trade statistics with non-European countries?

As far as I can tell, there’s no real way of finding out for certain. Why? Because there’s no international standard for recording trade statistics.

A conspiracy to inflate intra-EU trade figures?

The Rotterdam/Antwerp effect is acknowledged by the EU itself, as well as by the official trade bodies of the various member states (and other countries around the world). The EU’s own official statistical body Eurostat even has a standard disclaimer on pretty much every document dealing with extra-EU trade (e.g. PDF ):

“Dutch imports, and therefore the trade deficit, are over-estimated because of the “Rotterdam effect”, where goods destined for the rest of the EU arrive and are recorded in harmonised EU external trade statistics in Dutch ports. This then has a positive effect on the external trade balances with China of those Member States to which the goods are re-exported, as these shipments would be recorded as intra-EU trade with the Netherlands, rather than extra-EU trade with China. To a lesser extent, Belgian trade figures are similarly over-estimated.”

Is this distorion deliberate? See, for example, that same HM Revenue & Customs report, “Analysis of Asymmetries in intra-community trade statistics with particular regard to the impact of the Rotterdam and Antwerp effects“:

“The aim of this study was to analyse the asymmetries in intra-Community tradestatistics with particular regard to the impact of the Rotterdam/Antwerp effect, and to provide recommendations on improving EU trade statistics and better align them with international definitions.”

In short, if goods are imported or exported to/from the UK via a third, EU country (like the Netherlands or Belgium), they could indeed be attributed to that transitory third-party country rather than their final destination. This could indeed distort the true figures for the UK’s trade, both with the EU and with the rest of the world, potentially over-emphasising the UK’s reliance on her EU partners.

But both the EU and the UK acknowledge this flaw. As that HM Revenue & Customs report shows, the UK has been actively investigating ways to improve the situaiton. So has the EU – see, for example, Decision No 1297/2008/EC on a Programme for the Modernisation of European Enterprise and Trade Statistics (gloriously boring PDF here).

Can we trust *any* trade figures?

To resort to cliche, when you’re asked if it’s a cock-up or a conspiracy, it’s almost always a cock-up. The same applies here.

Are the official statistics for the UK’s trade with other EU member states accurate? No. But then, neither are the official statistics for the UK’s trade with non-EU states – perhaps those relating to the US in particular, thanks to the Portland/Baltimore Effect.

What does this mean for the claim that the EU is vital for UK trade?

Even the lowest percentage for UK-EU trade that I’ve been able to find – Global Britain’s unverified, unsourced 40% figure – is still a much larger proportion than any other trading partner. The next largest, the US, comes in at around 14% of exports and 9% of imports.

Taken as individual countries, EU member states make up 8 of the UK’s top 10 import *and* export partners. Even taking into account the potential distortions caused by the Rotterdam/Amsterdam effect, the UK does a hell of a lot of trade with EU countries. (It would be insane if we didn’t, considering how geographically close and economically affluent they are…)

So even if you deny that the EU accounts for over half the UK’s trade – a claim that is impossible to verify, given the systemic flaws in the available data – it cannot be denied that other EU countries account for a *very* significant proportion of UK trade.

It is, therefore, an eminently sensible move for the UK to try to make trading with those EU countries as easy as possible – because the easier it is to trade with your major trading partners, the lower the costs, and the greater the potential profit margin. That’s just common economic sense.

From the perspective not just of Britain, but of every country in the world, as the EU continues to harmonise its product standards and trading systems via the common market, it becomes increasingly easy to trade with EU member states.

For the UK, being part of the EU, it is even easier – as long as the UK abides by EU standards, both for its exports to the EU (as British manufacturers can produce their products to just one uniform standard, rather than 27 different ones) and its demands for imports from the EU (as EU manufacturers don’t have to bother going to the trouble and expense of producing their goods to a different set of standards just for the British market).

(As an aside, how much money would electronics manufacturers save if they didn’t have to produce special 3-pin, 240 volt plugs for the UK market, or car manufacturers save if they didn’t have to bother with us driving on the left rather than the right?)

The Devil’s Kitchen argument

Finally, we have the ultimate fall-back – something I always think of as the Devil’s Kitchen argument, because British anti-EU blogger Devil’s Kitchen was the first I heard expound it:

“Britain’s trade is overwhelmingly internal, actually. The split is roughly this: 79% internal, 10% EU, 11% the rest of the world.”

Ignore the percentages, which were not intended to be overly accurate – this complaint does have some validity. It can’t be denied that the vast majority of business transactions that UK companies and producers deal with are with other UK-based companies and producers, not with foreign partners.

Why then, runs this eurosceptic train of thought, should *all* UK businesses be bound by EU rules designed to harmonise external trade when they don’t trade externally?

There are multiple answers to this question:

1) They aren’t. There are numerous specific opt-outs for small producers trading locally, where EU regulations don’t apply.

2) Having one set of regulations for both internal and external trade is a lot more cost effective, plus ensures a more efficient market by preventing the creation of barriers to trade (both deliberate and accidental).

3) It is in the interest of the economy as a whole that all businesses should have the ability to reach their full potential – and that full potential includes trading with foreign partners. Anything that makes this more difficult should be removed, anything that makes it easier (such as harmonisation of regulations across a broad geographic area) encouraged.

4) The reason most trade is internal is partly geographical (it’s easier to trade with people near to you, plus Britain is an island, making it logistically harder for a small British business to trade with a neighbouring country than, say, a small Belgian one), but primarily historical: the UK still has its own currency, making trading with other countries a lot more complex than trading with other British towns or villages, which puts off a lot of smaller businesses from even trying. If Britain joined the Eurozone, I’d expect trade with other Eurozone countries to increase dramatically.

(Note: On point 4, see the European Central Bank’s Working Paper No 594, “The Euro’s Trade Effects” (PDF), which concludes that by 2006, intra-euro area trade had been boosted by 5-10%. Though in the interests of fairness, see also ECB working paper No. 941 – “The euro’s influence upon trade: Rose Effect versus Border Effect” (PDF) – which notes that the situation may be a bit more complicated than that.)

The EFTA/EEA argument

When you get this far into a discussion about the importance of EU trade, it’s traditional for Eurosceptics to respond with the “but we could still trade with the EU from outside, like Norway, Switzerland, or the other EFTA countries that are part of the EEA but not the EU” line – as, indeed, @ArnieEtc did way back at the start of this post.

This is also a flawed argument, but one that I’ll have to return to later, as it’s also rather complicated – and at 2,800 words this post is already far, far too long.

As regular readers of this blog will know, my single biggest worry about the Conservative party taking office in the UK was the prospect of arch-eurosceptic William Hague taking over the Foreign Office (the man who, as leader of the party back in 2001, ran a last-ditch general election campaign on the slogan “7 days to save the pound”).

Hague has repeatedly rattled his sabre in the direction of the EU, making numerous references to “repatriating” powers from “Brussels”, and often seeming to believe numerous Europhobic myths about the way the EU operates.

After 13 years of a supposedly pro-EU government which repeatedly refused to constructively engage with our continental partners, my fear has been that the incoming Conservative government (even with the tempering effect of their more pro-EU Liberal Democrat partners, led by former Commission official and ex-MEP Nick Clegg) would pull the UK even further from Europe’s heart. This, I am certain, would be disastrous – both for Britain and for the EU itself, but mostly for Britain.

Today, Hague is giving his first major speech since becoming Foreign Secretary. So let’s have a quick look at some of the highlights – especially in relation to Britain’s future policy towards the EU. It must be said, there were a few pleasant surprises…

First, it’s interesting to see that despite acknowledging the world’s continued shift to multilateralism, Hague emphasises bilateral relations – with the United States highlighted as “our most important relationship”. Hague has long been an Atlanticist – but with Obama in the White House (especially with his recent Brit-bashing over the BP oil spill in the Gulf of Mexico), the period of insanely close UK-US ties we saw during the Clinton and Bush administrations seems to be stuttering to an end. Has Hague come to the party too late to keep the (always mythical) “Special Relationship” alive? (By this stage in the speech, about a quarter of the way through, Europe or the EU has yet to be mentioned at all):

“although the world has become more multilateral… it has also become more bilateral. Relations between individual countries matter, starting with our unbreakable alliance with the United States which is our most important relationship and will remain so. Our shared history, value and interests, our tightly linked economies and strong habits of working together at all levels will ensure that the US will remain our biggest single level for achieving our international goals.”

Later in the same paragraph, note Hague’s emphasis on the fluidity of multilateral / regional groupings and the insistence on the continued importance of individual states:

“Regional groups are certainly strengthening across the world, but these groups are not rigid or immutable. Nor have they diminished the role of individual states as some predicted. Today, influence increasingly lies with networks of states with fluid and dynamic patterns of allegiance, alliance and connections, including the informal, which act as vital channels of influence and decision-making and require new forms of engagement from Britain.”

But despite this somewhat anachronistic insistence on the role of the state, Hague certainly does seem to genuinely get that the old ways of international diplomacy are over:

“Relations between states are now no longer monopolised by Foreign Secretaries or Prime Ministers. There is now a mass of connections between individuals, civil society, businesses, pressure groups and charitable organisations which are also part of the relations between nations and which are being rapidly accelerated by the internet…

“So if the increasingly multipolar world already means that we have more governments to influence and that we must become more active, the ever accelerating development of human networks means that we have to use many more channels to do so, seeking to carry our argument in courts of public opinion around the world as well as around international negotiating tables.”

All good stuff – but what are these “many more channels”?

“In this networked world the UK not only needs to be an active and influential member of multilateral bodies but we also need to ensure that our diplomacy is sufficiently agile, innovative in nature and global in reach to create our own criss-crossing networks of strengthened bilateral relations.”

Being “an active and influential member of multilateral bodies” (such as the EU?) is to be welcomed – but why this continued insistence on bilateralism? Bilateral relations, as a rule, last only as long as the governments / ministers who create them. They are, more often than not, *personal* as much as they are political. Have an Anglophile American president, like Oxford-educated Bill Clinton, you’ll have a close UK-US relationship. Have a US president with no personal connection to the UK, like Obama (who actively models himself on Kennedy – the US president who brought the postwar “Special Relationship” formed under the Eisenhower administration to an ignominious end with UK-US clashes over Bluestreak and Arabian oil claims), that relationship will wane.

Then Hague – halfway through his speech – moves on to the EU. And here – to my surprise – is a lot of promise:

“within groupings such as the EU, it is no longer sensible or indeed possible to focus our effort on the largest countries at the expense of smaller members. Of course France and Germany remain our crucial partners which is why the Prime Minister visited them in his first days in office. But for the UK to exert influence and generate creative new approaches to foreign policy challenges we need to look further and wider. The EU is at its best as a changing network where its members can make the most of what each country brings to the table. We are already seeking to work with many of the smaller member states in new and more flexible ways, recognising where individual countries or groupings within the EU add particular value.”

Slightly patronising and paternalistic? Certainly. But also sensible (bar the implicit slight to France and Germany). I’ve long argued that, when it comes to the EU, “one size fits all” is not a sensible approach – what makes any economy or polity strong is not uniformity, but diversity. Only through diversity can you weather economic storms, and only through diversity will innovation be encouraged and prosper. Is this what Hague is after? Or is this just a drive back towards his old favourite of a Europe of nation states?

Either way, encouraging words about Turkey (referring to it as “Europe’s biggest emerging economy”, thus confirming the UK’s continued support for Turkish EU membership) as well as hints about active engagement with drives towards a common EU foreign and security policy (something previously strongly resisted by successive British governments) give some room for hope. And despite our different views on the role the EU should play, it is impossible for me to disagree with Hague’s take in this paragraph:

“we are determined as a Government to give due weight to Britain’s membership of the EU and other multilateral institutions. It is mystifying to us that the previous Government failed to give due weight to the exercise of British influence in the EU. They neglected to ensure that sufficient numbers of bright British officials entered EU institutions, and so we now face a generation gap developing in the British presence in parts of the EU where early decisions and early drafting take place. Since 2007, the number of British officials at Director level in the European Commission has fallen by a third and we have 205 fewer British officials in the Commission overall. The UK represents 12% of the EU population. Despite that, at entry-level policy grades in the Commission, the UK represents just 1.8% of the staff, well under the level of other major EU member states. So the idea that the last government was serious about advancing Britain’s influence in Europe turns out to be an unsustainable fiction. Consoling themselves with the illusion that agreeing to institutional changes much desired by others gave an appearance of British centrality in the EU, they neglected to launch any new initiative to work with smaller nations and presided over a decline in the holding of key European positions by British personnel. As a new Government we are determined to put this right.”

And about time too. Britain has been moaning about EU legislation for decades now – all the while being one of the largest EU member states, so more than capable of massively influencing that legislation before it even gets put to a vote, if only the UK could be bothered. Instead, we have always seemed to prefer to moan about “EU impositions” after the fact – because that’s far easier than actively engaging to ensure that those impositions comply more closely with our own wishes.

Active British engagement with the EU has long been overdue – even if that engagement is to be of the eurosceptic variety. Because, again, as I’ve long argued – the EU *needs* more critical voices to be raised at its heart if it is to have any hope at all of doing the best it can for the people of Europe.

OK, I was wrong – Prime Minister Cameron it is.

I just hope I’m also wrong in my dread of our new Foreign Secretary, William Hague – the most strongly eurosceptic person ever to hold that position, the mastermind behind the Conservatives’ withdrawal from the EPP in the European Parliament, and a man who, back in 2001, led an explicitly anti-EU general election campaign that revolved around the populist nonsense-slogan “Ten Days to Save the Pound”.

Recent devolopments have not been much more promising, an alleged draft letter from Hague leaked to last weekend’s Observer, promising “to demonstrate to the British people and beyond that the UK’s relationship with Europe has really changed… the British relationship with the EU has changed with our election… we will fight our corner to protect our national interests”.

Of course, there’s a good chance that Hague’s euroscepticism may be countered by former MEP and Commission employee Nick Clegg also attending Cabinet in the apparently-offered role of Deputy Prime Minister, but as of 11pm on Tuesday it remains unclear just what role the Liberal Democrats are going to take in this apparent new coalition.

I hope I’m proved wrong. In Hague’s favour, he’s certainly not stupid. And it’s always far easier to take tough, controversial stands in opposition than it is in government. He may yet temper his rhetoric and the Cameron government may yet start to take a more sensible, pragmatic approach towards the EU. I very much hope so – because I, for one, am convinced that the only loser in a “fight” between Britain and the EU (Hague’s phrase) would be the UK.

In the unusual Buckingham constituency*, UKIP’s Nigel Farage – advocating withdrawal from the EU – ended up in third place, despite a high-profile (non-fatal) election-day plane crash**.

The amusing news for pro-EU types? Farage was beaten into second place by an independent former Conservative MEP, John Stevens.

Why is this so funny? Stevens was the co-founder of the Pro-Euro Conservative Party.

Ha ha ha! Yes, an arch-eurosceptic beaten in a direct popularity contest by an arch europhile. In Britain.

So much for us all being anti-EU, eh?

My fuller post-election analysis can be found here.

* UK convention states that the major parties don’t run against a sitting Speaker of the House of Commons, leaving the way clear for various fringe parties to get high up the results list. Buckingham is the current Speaker’s constituency, hence the high placements for the likes of UKIP and independents.

** Get well soon, Nigel – but what were you doing going up in a plane with a UKIP banner anyway? Campaigning is expressly forbidden on election day…

Just back from Japan, from where I was closely following the UK election on Twitter (your best place for my day-to-day political commentary these days, though be warned they’re usually more jokey – and sweary – than here…)

After 30 hours offline, and 44 hours after the polling booths closed, the UK still doesn’t have a new government. As such, witness the wonders of my jetlag-inspired political guesswork!

I’d be surprised if this lack of a government lasted beyond Monday morning, largely because the next government will want to look responsible – and we had some serious global financial trouble on Friday for a variety of reasons (NY stock exchange hiccough, Greek crisis, UK election uncertainty, etc.). They’ll want to have a government before the markets open, if they can…)

Here’s what I currently reckon will happen, rejigged from a few comments on Twitter:

Lib Dem leader Nick Clegg’s playing this absolutely perfectly so far – he has solid offers to join coalitions from both Labour and the Conservatives, and significant policy differences with both, and has explicitly stated that the Tories – with more seats and more of the vote – should have the right to “seek to form” a government first.

But the Tories can’t get a parliamentary majority without Lib Dem support. At least, not a stable one. Not the sort of majority that they’d need to do, well, just about anything.

But Labour and the Lib Dems combined can’t get a parliamentary majority without other parties’ support either.

Clegg has also repeatedly mentioned “the national interest” and equated this with electoral reform (unsurprising, considering Labour got only 5% more of the vote than the Lib Dems, but 5 times the parliamentary seats).

The Tories are fundamentally opposed to the sort of Proportional Representation-style electoral reform that the Lib Dems want (usually single transferable vote) – which is hardly surprising, as it would almost certainly lead to a permanent Labour/Lib Dem coalition (there being very few other parties on the centre right that are likely to end up big enough to give the Tories the backing they’d need under such a system).

So, Clegg is giving the impression that he’s willing to work with the Tories – and probably is – but his one major condition is a deal-breaker for Cameron and co.

So I’m now fairly convinced that Prime Minister Cameron’s not going to happen. If Cameron rejects PR, as he must to keep his party behind him (there have already been dire warnings from the right wing of the Conservative Party about such a move, in the shape of Thatcher-era relic Lord Tebbit), then a Lib Dem/Labour/Scottish National Party / Plaid Cymru coalition has first dibs (SNP leader Alex Salmond has already openly proposed this).

Constituionally-speaking, Gordon Brown retains first right to try to form a government, as the sitting Prime Minister in a hung parliament. With Lib Dem, SNP and Plaid Cymru support, the coalition would have an outright majority – able to outvote the Tories and their allies on anything. As such, despite his unpopularity (and calls from within his own party to step down), Brown could yet remain as caretaker PM of a coalition expressly set up to bring in electoral reform.

This would actually be a very sensible option, for several reasons:

1) It would be constitutionally unprecedented for Cameron to form a minority government in the current circumstances – he is impotent until he has enough supporters to claim an outright majority. This looks to be impossible.

2) The constitution explicitly states that Gordon Brown remains Prime Minister, so using him as a figurehead for any new coalition is – constitutionally – the least harmful in the short term.

3) Anyone unhappy with Brown remaining as PM simply adds to the case for major constitutional reform with their objections.

4) This would also give both Labour *and* the Conservatives time to sort themselves out, as they are blatantly in a shambles at the moment.

So, what I’d suggest is a short-term multi-party national coalition *explicitly* for electoral *and* parliamentary/constitutional reform, as well as to maintain some form of stability in the midst of an ongoing financial crisis, keeping Gordon Brown as a figurehead Prime Minister for constitutional reasons alone, with an explicit promise that he will step down once the basic reforms are in place to have a fresh election under a new electoral system.

One final note: There’s nothing to say – constitutionally – that the Prime Minister has to be a party leader. Nor even that he has to be an MP… The question is, is there *anyone* who could be seen as a sufficiently impartial lynchpin to take on the task of leading a coalition of (at least) four parties?

Just a quick note for future reference, as most people who blame the EU for “uncontrollable” immigration (*ahem* UKIP *ahem*) tend not to know what they’re talking about – but also tend not to believe anything you say unless it’s from an “unbiased” (read, “eurosceptic”) source.

As such, from today’s Daily Mail – one of the most fervently anti-EU newspapers in the UK:

“Officers told the migrants that, under EU rules, if they haven’t worked for the last three months they can removed from their host country…

“People from EU countries have a right to travel freely in the EU and can live in the UK for up to three months if they can support themselves.

“After that time, they can only stay in the country if they are working, they are registered students or they are self-supporting.”

See also the (eurosceptic) Daily Telegraph:

“Migrants who have not found work and are sleeping rough will be deported because they are not protected by the EU rules on right to free movement…

“Under EU rules, citizens have the right to stay in another member state for up to three months but after that time they must be able to support themselves either through working, studying or be self-sufficient.

“If not, they can be deported to avoid them becoming a burden on the state and taxpayer.”

And more from the decidedly anti-EU Daily Express:

“Migrants from EU countries can travel freely in the EU and live in the UK for up to three months with no questions asked if they have the funds.

“After that they are only ­entitled to stay here if they are working, are registered students or are self-supporting.”

And finally the (violently anti-EU) Daily Star:

“People from European Union countries can travel in the EU and live in the UK for up to three months.

“After that, they can only stay here if they are working, registered students or self-supporting.”

(And yes, it’s safe to say that I never thought I’d use the Mail, Express and Star to prove a point about the EU…)

If you want to understand Britain’s rather odd relationship with the EU, you could do far worse than read this really rather good overview in this week’s Economist, especially considering its focus on the Conservative party – likely to form the next British government in a little over six weeks’ time.

There are only a couple of flaws (e.g. mentioning a figure of 50% for the number of European laws stemming from the EU, when readers of this blog will be aware that it’s more in the region of 10-30%, depending), and much insightful analysis that tallies 99% with my own views. It also provides one of the best short summaries of the last 40+ years of UK-EU relations I’ve seen.

Below the fold, a few highlights.

Update: It should also be read in conjunction with Charlemagne on eurosceptic think tank Open Europe and the nature of the British press to give the full picture on why the UK is so insistent on remaining utterly ignorant on all matters EU-related.

On Tory (and British) euroscepticism:

“all the signs are that the new intake of backbench Tories will be bursting for a row over Europe. Back in the years of Margaret Thatcher and John Major, the Conservative Party was divided on the subject, but now it is largely united—in Euroscepticism. Almost the only divide is between those who dislike the EU but think it would be better to stay in, and those who would prefer to leave. According to a survey last July by ConservativeHome, a website, over 40% of prospective Tory candidates favour either a “fundamental” renegotiation of Britain’s EU membership or outright withdrawal. The strength of backbench opinion makes a Tory bust-up with the EU a lot more likely…

“The explanation for such views is to be found partly in the country’s geography and history, partly in its experience as a member and partly in ignorance and prejudice.”

On the reasons for British euroscepticism:

“The average Eurosceptic in Britain has acquired an impression of constant rule changes that always increase the power of EU institutions. This reinforces their existing prejudices, such as the belief that what Britain joined in 1973, and what Britons voted yes to in 1975, was in essence a free-trade area that only later transmogrified into a putative political union. True, the British government did not exactly spell things out (its white paper in 1971 said there was no question of losing essential sovereignty), but the European project, with its promise of ever-closer union, always had an overtly political dimension.

“Making things worse is a profound ignorance of what the EU does and how it works. The mistaken belief that the EU is responsible for as much as 80% of all legislation in Europe… and a lack of understanding of the role of national governments, including Britain’s, in passing EU laws, have fostered the belief that an unaccountable and undemocratic machine in Brussels is somehow usurping the ancient role of Parliament. The media reinforce this belief, especially such Eurosceptic newspapers as the Sun and the Daily Mail (neither of which troubles to keep a staff correspondent in Brussels).

“Ignorance of how the EU works is, of course, to be found right across the continent. But it is deeper in Britain. Charles Grant, director of the Centre for European Reform, a London-based think-tank, notes that Britain is unusual in that “people can get to the top in the media, business and the City without knowing anything at all about the European Union.” Such knowledge can, he suggests, even be a career obstacle. The contrast between Westminster and Whitehall is telling. Parliament is full of people who are proud to have little or no understanding of the EU.”

On the Tories’ approach to the EU under David Cameron:

“The mistake over leaving the EPP was not that the Tories have had to switch their seating arrangements in the European Parliament (although the party has always underestimated the significance of that body in EU lawmaking). Nor was it that the Tories are now tarred by association with some apparent extremists, notably from Latvia.

“The real problem is that a majority of EU heads of government, including Germany’s Angela Merkel and France’s Nicolas Sarkozy, as well as José Manuel Barroso, president of the European Commission, belong to the EPP. This group now holds regular meetings ahead of all EU summits. When it came to choosing a new president of the European Council last November, it was the EPP that pushed Belgium’s unknown prime minister, Herman Van Rompuy. Because of his walk-out from the EPP (which infuriated Mrs Merkel, in particular), Mr Cameron as prime minister would be excluded from such discussions.

“His exclusion will also make it tougher for him to achieve his EU goals. Two things will make these especially tricky. One is that any general opt-outs from social policy or from the charter of fundamental rights would require treaty change. But after the long struggle to ratify Lisbon, most EU countries are allergic to any suggestion of a new treaty in the near future. The second is that the Tories have no obvious bargaining chips that they can play to sway their EU colleagues, who will be reluctant to concede any further opt-outs to a Britain that many consider to be already far too semi-detached from EU policies.”