The PCES held our first event of the second semester on the topic of “Britain’s Future in the EU”. We felt that the economic arguments needed clarifying for such an important decision for the UK. The event seen us joined by Dr Swati Dhingra, a lecturer at the London School of Economics and John Springford, from the senior fellow from the Centre for European Reform which is a think tank that wants to make the EU work better. Both were in favour of the EU, though this was not by choice but rather necessity, with speakers from the Brexit side of the EU being either unavailable or unwilling to speak at our event.
The event began with Dr Dhingra talking about the economics of the single market, stating that the “economic consequences of leaving the EU are less contentious than the political ones”. The focus was on the referendum of the past and what we have learnt from it through the data. Consumers, businesses and workers have benefited from when the UK joined the single market in 1973 through a decrease in prices for consumers, the easier access to the European market for businesses and the rise in wages for workers.
The analysis then moved on to UK trade, centring around the EU being the UK’s biggest trading partner when looking at exports . It was argued that the comparable advantage that the UK has in services and the growth of the services industry and that in the years to follow the EU services industry will grow which will lead to further increases in exports to the EU . Leaving the EU would potentially reduce trade by increasing not only tariffs but also non-tariff barriers, such as regulatory divergence between countries. This divergence from the research conducted by Dr Dhingra would lead to a fall in trade with the EU and a decrease of between 1.2% – 2.3% in GDP. Dr Dhingra finished on a point regarding the economics of immigration. The data tell us that there is a correlation of close to 0% between immigration and UK born wages, meaning that immigrants are not reducing native wages. We need to assess both the demand and supply changes caused by immigration and the skill set of immigrants – simply falling back on the argument that wages are affected by downward pressure from immigrants is only scratching the surface.
Springford opened with his disappointment that we were not joined by a Eurosceptic but then refused to stick the knife in any further about their absence. He then spoke about the Eurosceptic critiques, most of which amount to (a) EU regulations and (b) the UK being a net contributor to the EU by giving 0.5% of its GDP to the EU. A gravity model was used by Centre for European Reform to assess whether the UK has a larger trade relationship with certain countries than one might expect, the idea being that countries further away should have less trade with the UK (a homage to Isaac Newton and his work on gravitational forces being lesser on objects further away). Disintegration was a main focus of Springford’s speech, with the fundamental trade-off between regulation/trade barriers and the single open market. He raised the point that the EU would insist on the UK meeting certain conditions if we were to remain in the free market. If we have further barriers/regulation and want to still have access to the single market, we may find ourselves disappointed. It was then argued that the Norwegian model, held up by Eurosceptics as something of an end goal, would lead to less sovereignty in exchange for smaller budget contributions. Springford’s final point was that the UK could join the World Trade Organisation and what the impacts of joining such an organisation was ; the example of Nissan, situated in Sunderland was raised as possibly leaving the UK if tariffs were to increase due to a Brexit.
What followed in the Q&A was both interesting and built on the discussion that had already taken place. Alex, who was chairing, raised points that would be raised by Eurosceptic’s such as Patrick Minford and they were debated with intelligence by both of the speakers. Dr Dhingra firstly disagreed with the idea that all regulation is bad which is an argument often raised, she instead opted for the arguing that regulation from the EU can be good. She also disagreed on the idea that a Brexit would suddenly lead to the UK becoming more competitive, since countries such as Germany and France are more competitive with more regulation. For those interested it would be worth looking at the dreadful productivity data for the UK compared to other countries. The irrationality came in the way of a question regarding whether the UK could join the Euro in years to come, this question was met with an unenthusiastic response from both of the speakers and other members of the audience. Further integration by way of a banking union and other mechanisms could however one day see the tide swing in favour of the UK joining the euro. What followed was questions regarding the leverage the UK could gain from a Brexit vote and the increased efficiency of integration in the EU if the UK left the EU as other countries want more integration, not less.
The link to the recording is https://soundcloud.com/postcrasheconomics/britains-future-in-the-eu-event.
Thanks again to our speakers and to our attendees, when voting on the referendum we would advise people to assess all of the facts that are at your disposal and make then your own mind up.