European Politics « Business for New Europe Blog

The Future of the EU – Debate with Guy Verhofstadt MEP, Professor Anand Menon, Emma Reynolds MP, Martin Callanan MEP and Professor Simon Hix

By Phillip Souta

By Liam Murphy

With just over a year to go until the European elections, on Monday 3 June in London, Business for New Europe and the European Parliament Information Office brought together senior policy makers, journalists and economists to look ahead to next year’s European elections, the potential results, as well as the impact on the future of the EU from 2014.

Kicking off the panel discussion, Guy Verhofstadt, Leader of the Alliance of Liberals and Democrats in Europe, said a “new fundamental law for the EU” would be necessary to secure the bloc’s future stability. The former Belgian Prime Minister called for “a more integrated Europe” to address the inherent failure in how it is governed. He warned that in 20-25 years, not one EU country will be a member of the G8. The future of the EU, he argued, must therefore entail a reinvention of sovereignty at a European level if it is to prosper in an increasingly globalised world.

Professor Anand Menon of King’s College London, cautioned against a rushed push towards further integration. The EU, he said, is changing, and members need to change their relationship with it, not least because of the different regulatory requirements of those inside and outside the eurozone. Menon noted that the current political climate presented a golden opportunity for David Cameron and other European leaders to secure valuable reforms such as the repatriation of more powers to national parliaments. However, the PM’s strategy of distancing himself from the forums where decisions are made, while still saying he wants reform, was “barking mad.” He went on to say that though a referendum on UK membership of the EU is “unavoidable,” treaty change will remain unlikely due to the reluctance of EU leaders to go to the polls.

Emma Reynolds MP, the Shadow Europe Minister, agreed with Professor Menon that it was important the UK remains engaged with the EU, describing the constant talk of a referendum as a “distraction.” She argued that both economically and politically, it was in the UK and EU’s interests that the former did not leave the fold, touting Justice and Home Affairs as an example of an issue area the UK could lead to the benefit of all parties. Ms. Reynolds dismissed the most likely alternatives to full membership, describing the Norwegian model as a “fax democracy,” and the Swiss model as being entirely unworkable due to the number of bilateral agreements that would have to be signed. The shadow minister said that what the public really cared about were jobs, welfare, and the economy, and that an in/out referendum should only be held in the event of a significant treaty change.

However, for Conservative MEP Martin Callanan, the crucial issue facing the EU was the lack of a common identity, what he called a “demos.” He went on to say that “democracy means an affinity with institutions, a common space, but that doesn’t exist.” Despite this, Professor Simon Hix, Head of the Department of Government at the London School of Economics, suggested that next year’s European elections could help remedy this. While the election of MEPs usually serves as a sort of mid-term poll for the government, factors such as the eurocrisis, the rise of euroscepticism, and that there will be rival candidates for the European Commission presidency, should increase the salience of the EU in voters’ minds. He went on to say that the elections were an opportunity to change the debate on Europe and give people the opportunity to decide what kind of EU they really want.

There’s still time to get Cyprus deal right

By Phillip Souta

By Liam Murphy

Cypriots woke up on Saturday to the news that deposit holders would bear a significant amount of the burden in a deal aimed at rescuing the banking sector. Those with savings of less than €100,000 will face a ‘tax’ of 6.75 per cent, while those with holdings in excess of this figure will face a hit of up to 9.99 per cent.

The logic, if you want to call it that, behind the deposit ‘tax’ is clear, but it was an ill-advised move which sets a dangerous precedent.

There were very few other options for Cyprus to choose, faced with the scale of the problem. However, forcing savers of modest sums to hand over a significant portion of their savings will not only give the EU a bad name, but risk the faith of thousands across Europe, who have so far lived through bailout and austerity programmes with relatively good grace.

The Eurozone countries could never have agreed to pay out the full required bailout (€17 billion). Relative to the size of the small island nation’s GDP, this is an enormous figure, and it would have almost certainly defaulted. On top of that, the sorry state of Cypriot banks’ finances meant that some deposit holders were always going to be targeted.

There were also other forces at play in the background, not least election-year politicking in Germany. The Social Democrats have used the Cypriot bailout to put pressure on Chancellor Angela Merkel. At issue is that the island is a known tax haven for Russian deposit holders, and not a small portion of these holdings are seen as having been generated from illegal activities. That Germans would be ‘bailing-out’ Russian deposit holders is politically toxic, and Merkel could never have signed off on it.

The assertion by President Nicos Anastasiades that there was no option but to hit smaller savers and business owners (those with deposits of under €100,000) is hard to believe. The President himself had alluded to applying a higher ‘tax’ of up to 60 per cent on those holding more than the €100,000 threshold. Christine Lagarde, the head of the IMF, has also advocated the imposition of similarly high rates. The deal as it currently stands is regressive, making the poor suffer while the rich get away relatively lightly.

The Cypriot government will extend Monday’s bank holiday for an extra day so as to ensure there is no run on the banks before it meets tomorrow to debate the deal at 4pm (GMT). Yet, even if parliament ratifies the package, it will have done irreparable damage to recovery efforts in the Eurozone. The principle of deposit insurance has been disregarded and the security of holdings in other troubled Eurozone countries (Spain, Portugal, Greece, Italy) has been cast into doubt. There is no reason to assume that these measures can’t be implemented elsewhere.

In an environment of universal austerity, that large deposit holders are once again getting off the hook is not likely to sit well with European voters. The Cypriot government has until 4pm (GMT) tomorrow, when parliament meets, to negotiate a more progressive solution to its financial troubles.

Mr Anastasiades faces a difficult task to get the rescue package as it currently stands through parliament after four members of Diko, the junior partner in the coalition government, threatened to vote against it. He would do well to heed the advice of Panicos Demetriades, the central bank governor, who has said that small savers should be excluded from the levy to respect the EU guarantee on bank deposits up to €100,000. There is still time.

Britain and the Future of Europe – Debate with David Miliband, Liam Fox, Hugo Dixon and Andrew Lilico

By Phillip Souta

By Conor Brennan

David Cameron’s EU negotiating strategy is “putting a gun to our own heads” warned Former Foreign Secretary David Miliband, while Conservative MP Liam Fox would support Britain leaving the EU if the Prime Minister did not get a “good deal”.

Speaking at an event hosted by Business for New Europe and the City of London Corporation on Monday 11 February, Miliband argued that membership of the EU was good for Britain as we have done well out of the Single Market and have “never lost a vote on financial services.”

Photograph: Jeff Gilbert

Debating the future of Britain in Europe before an audience of 250 business leaders, academics, British and foreign journalists and members of the diplomatic community, Miliband said that the current strategy by the government was “putting a gun to our own heads” and he stressed the importance of local associations in the future of global competiveness.

Former Secretary of State for Defence, Dr Liam Fox stated that he did not want to remain in the EU “at any price”. He claimed that currently the EU project was “unsustainable” because it is seven per cent of global population and 25 per cent of GDP but spends 50 per cent of social welfare spending.“Europe needs to change” claimed Dr Fox, citing barriers to competiveness and the democratic deficit as areas in need of reform. He supported David Cameron’s pledge for an in/out referendum, adding that it is not an excuse to deny the people a say in Europe’s destiny because you may be scared of the outcome.

Editor-at-Large of Reuters News Hugo Dixon said the UK needs to be “an active member of a reformed union”. Highlighting three ways to pursue this agenda, Dixon stated that Britain needed to build alliances and “play the diplomatic game”; stop talk of unilateral repatriation of powers and instead seek to develop multilateral agreements;and finally understand the differences that still exist within the EU and how this is impeding a closer fiscal union.

Andrew Lilico, director and principal of Europe Economics, argued that the EU is foremost a political project and its “internal logic” is driving it towards a unified federation of states. He added that this will leave Britain outside the core of possibly 23 member states with little influence over decisions and rules that it is affected by. Lilico dismissed the idea that a federation of States is “just hearsay” and compared this to before the formation of the Euro currency – people did not think it would come to fruition.

Addressing this point David Miliband argued that the Treaty of Rome proposed an “ever closer union of the peoples of Europe” and in this regard the EU has successfully offered free movement of people and improved tolerance of different cultures in Europe. Hugo Dixon disagreed Europe “was on the brink of greater integration”, claiming that even the banking union has rolled back on many fiscal union integration policies.

Concluding the debate chaired by Roland Rudd chairman of BNE, Dr Liam Fox criticised the Euro as a “flawed concept” by allowing the wrong countries to join. He also stated that people were told “the sky would fall in” if Britain did not join the Euro or the Schengen agreement, when clearly neither has happened, which should be borne in mind. Lilico added that Britain “had lost influence by not joining the Euro” and this was exactly problem that it will have in the future.

A serious week in Europe with budget cuts, progress in Ireland and common sense on fisheries

By Phillip Souta

By Phillip Souta

David Cameron and Angela Merkel worked together to cut the EU's 2014-2020 budget

It was not “standing up to the EU” that delivered the Prime Minister’s objective of a slimmer EU budget, it was pragmatism and alliance building.

We have been calling for radical reform of the EU budget since we were founded in 2006 and last year published a fully costed Alternative EU Budget which would have saved the UK over €10 billion.

David Cameron and Angela Merkel managed to deliver a 3.3 per cent cut in the 2014-2020 budget compared to 2007-2013. We are still spending too much on agriculture and the wasteful practice of recycling cohesion funds from rich members to rich members’ regions still continues. Spending on growth enhancing measures will go up by 37 per cent by €34 billion though. A budget that reflects economic hardships faced by voters across Europe and spends more on growth finally sends the right message.

The PM achieved this through strong arguments and building partnerships with Germany, Denmark, the Netherlands and Sweden. He was particularly succesful in getting the support of Sweden and the Netherlands which in turn made it far more likely that Germany would strongly back northern calls for a slimmer budget.

He ignored the theological Eurosceptics who would start with threatening a veto over demands in the full knowledge they could never be met. The outcome also provides a powerful argument for why the Tories should re-join the mainstream centre-right European People’s Party grouping in the European Parliament given that there is a good chance it may veto the deal in March. Outside it, they have less influence.

It was not just the European Council that made headlines this week. Ireland announced the liquidation of the failed Anglo Irish bank, easing the state’s debt burden and taking it a step closer to emerging from the 2010 bailout program by the end of this year.

Even the European Parliament, unloved even by EU standards, managed to get into the news for the right reasons by voting for an end to Common Fisheries Policy ‘discards’ – the practice of throwing unwanted fish back into the sea. Finally, fisheries quotas will be dictated by evidence of sustainable fish stocks designed to allow them to recover by 2020. The reform was passed by 502 against 127 votes.

Europe woke up to 2013 not with 15 or 16 eurozone members, but the full complement of 17. I won bets made at the height of the crisis with people who just couldn’t see the euro surviving. Now, money is flowing back to the periphery and Spain, Ireland and Portugal are seeing increased exports and competitiveness through albeit painfully lowered labour costs.

Amongst all of this, the importance of being practical and building alliances is a lesson which will not be lost on David Cameron when he tries to persuade our partners to allow some core competences to be repatriated back to Britain. He will be lauded next week by the eurosceptics of his party for bringing back a cut to the EU budget. The uncomfortable truth they have to face is that they would abolish the European budget and walk away from the EU tomorrow if they could, but their leader prefers to be in the thick of it.

Norway highlights need for UK engagement with the EU

By Phillip Souta

By Conor Brennan

Speaking at the All Party Parliamentary Group on the EU on Monday 5 November, Professor Fredrik Sejersted, director of European Law at the University of Oslo said that Norway’s relationship with the EU is based on “dynamic homogeneity” and “integration without representation.”

Co-author of a review of Norway’s model for European integration, Professor Sejersted said that the “Europeanisation of Norway was far more than people were aware of.” Talking about the political climate in Norway, he said “we don’t have right-side eurosceptics. Our eurosceptics are on the left, like the UK in the 1970s.”

Oft cited as a model the UK could adopt if they were to leave the EU, it is important to examine the relationship between Norway and Brussels. A report published in January 2012, entitled “Outside and Inside, Norway’s agreements with the EU” shows what the UK’s relationship with the EU may look like if it were to follow the Norwegian model.

It not only covers all the areas where the European Economic Area (EEA) agreement is integrated into Norwegian policy but also assesses the impact of the arrangement across Norwegian society.

Professor Sejersted said “dynamic homogeneity” meant applying the vast majority of EU rules without representation. He did not see it as a model for EU integration but “an accident of integration.”

The 6,000 EU legal instruments implemented by Norway impacts on all 17 government departments and 430 municipalities. The report concludes it would not be prudent for Norway to disengage with this kind of deep integration. Professor Sejersted said that the EU should be credited for modernising the Norwegian labour market and industrial sector over the last 20 years.

Looking ahead to future models which Norway could use and the UK could learn from, Professor Sejersted described the possibility of a Free Trade Agreement with the EU as “completely unrealistic.” He said that Norway’s integration with the EU has gone far beyond tariff-free trade in goods. Labour migration, free movement of capital and financial services are “very important and hugely beneficial” and require more than a FTA, he claimed. He gave as an example the fact that 50 per cent of Norway’s large Sovereign Wealth Fund worth over £400 billion in total is invested in the EU. Norway has an FTA with the EU signed in 1972 covering oil.

Professor Sejersted said that it would be easy to conclude from the report that Norway should join the EU and gain the representation on decisions at EU level. However, the mainstream political parties used the report to maintain the status quo because there are “suicide clauses” in every Norwegian coalition agreement that cause the government to collapse if any party raises the possibility of EU membership. The current economic climate in the EU and high oil and gas prices benefiting the Norwegian economy means there has not been an EU referendum debate.

Commenting on the comparison between Norwegian and British public and media reaction to EU integration, Professor Sejersted said mainstream political parties “did not want to wake the dragon” and stir the level of heated public debate which occurred at the time of the EU referendum in 1994. The referendum attracted an 89 per cent turnout and Norwegians chose to stay out of the EU by 2.2 per cent. Norway’s first attempt to join the EU was in 1972, at the same time as the UK was negotiating membership.

The review of Norway’s relationship with the EU was conducted by a panel of 12 independent experts, not civil servants, he explained. Professor Sejersted said it is important for the UK to form as clear a picture as possible of the realities of leaving the EU and moving towards alternatives. The audit of EU competences initiated by Norway is one of the few in depth examples of how such disengagement may happen. He said, “if this report had come at a different time in history when Norway was doing less well, this report could have sparked an EU membership debate in Norway.”

Nick Clegg calls for “engaged and balanced” approach to the EU

By Phillip Souta

By Conor Brennan

The UK will become “isolated and marginalised” if it is “pulled towards the edge” of the European Union stated Deputy Prime Minister Nick Clegg on Thursday 1 November.

Clegg criticised the “proposals doing the rounds” on repatriation of EU powers back to the UK. “A grand, unilateral repatriation of powers might sound appealing but in reality it is a false promise”, he claimed.

According to the Deputy Prime Minister taking this route would leave the UK in a “very dangerous” position and he outlined his vision for an “engaged and balanced” approach to the EU which he believes would benefit the UK. Clegg proposed a three prong strategy – “tough on the money, more jobs, more criminals behind bars”.

This involved, Clegg stated, supporting Prime Minister David Cameron’s aim to negotiation a real terms freeze on the EU budget, deepening of the Single Market and also not supporting the UK opt-out of EU crime and policing laws which benefit the domestic justice system.

Regarding the current EU budget negotiations, the Deputy Prime Minister said “it’s our job to make realistic, responsible and hard-headed decisions on behalf of the British people”. He was adamant a “real terms freeze was a good offer”, suggesting a cut to the budget in real terms may be unrealistic.

The speech by Clegg came the morning after parliament passed a motion calling for a real terms cut to the EU budget. A total of 53 Conservative MPs rebelled against the party whips and with the support of Labour defeated the government by a 13 vote majority.

Labour were being “opportunistic” and scoring party political points, claimed Clegg. Shadow Chancellor Ed Balls, he continued, does not even believe a real terms cut is possible.

One in ten jobs in Britain, according to Clegg, rely on trade between the UK and the Single Market. He continued his robust defence of the UK’s role in the Single Market by stating “one of the reasons big multinationals come here is because we offer a launching pad to the world’s largest borderless marketplace”.

Finally the Deputy Prime Minster summarised his thoughts on the upcoming decision on the EU crime and policing laws opt-out. He stressed a final decision has not been made regarding the 130 measures which is due in 2014.

Clegg challenged those who do not believe the EU crime and policing laws are needed, telling them to “prove it”. He reiterated his belief that crime and terrorism was a cross-border problem and thus should be confronted at a transnational level.

This was a speech aiming for the centre ground and full of pragmatic rhetoric. Whether the Deputy Prime Minister’s speech outlining his vision for future engagement with the EU will shift the debate towards pragmatic terms is yet to be seen. As Clegg stated, expectations should remain couched in realistic terms. He will need to work hard to force the debate towards these terms and the UK away from the edge of the EU.

Protecting and Harnessing the Benefits of Intellectual Property

By Phillip Souta

By Conor Brennan

The knowledge based industry, reliant on intellectual property rights (IPR), is among the fastest growing sectors in the EU – growing four times faster than the rest of the economy over the last decade. Nearly seven million people are employed by small and medium sized businesses in the creative industry alone. Intellectual property remains the cornerstone of continued innovation, research and creativity.

Yet there continues to be a fragmented EU policy on IPR which costs jobs and businesses revenue. It is predicted that at least €8bn and over 100,000 jobs are lost annually due to piracy in the film, music, TV and software industries in the EU. Cases of counterfeit goods suspected of infringing IPR rose from 26,704 in 2005 to 43,572 in 2009 – an increase of more than 60 per cent over five years.

There is no doubt IP and counterfeiting theft is a growing transnational problem. However this should be seen as a great opportunity for the EU to implement a single policy which will harness the huge benefits of a thriving knowledge based sector.

This summer saw the Anti-Counterfeiting Trade Agreement (ACTA) rejected in the European Parliament by a comprehensive majority. ACTA was designed to tackle online piracy and counterfeiting crime but was viewed by many as an infringement of personal internet freedoms. The principal of IPR of businesses and individuals in the EU was not the deciding factor which led to the failure of ACTA but instead the possible infringement of rights for internet users. The fundamentals of protecting IPR should be viewed as a positive for member states, the European Parliament and the European Commission to build on and gain consensus around.

In October 2012, a leaked copy of the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada drew speculation over similarities between it and the buried ACTA proposals. Lessons should be learnt from ACTA and the EU should engage with businesses and organisations and revisit the central issue of protection against IP and counterfeit theft.

The benefits to the UK and the EU of a common policy against IP and counterfeiting theft and simplified regulations are enormous. At the moment if a company wants to maintain a patent protection over the 27 member states for 20 years it would cost the company €200,000. New proposals which would see an 80% decrease in costs should be supported – many of the barriers which would be overcome are regulations on language translation. Advancements in attaching Geographical Indicators (GIs) to a product are continuing and a clear protect policy of geographically specialised products is at the early stages of implementation.

These advancements are welcome progress but there is still much to do in the protection of IPR. In the UK alone the creative industries deliver around 1.5m jobs and contribute over £36 billion to gross value added (GVA) and companies invest £16 billion annually in the UK economy by building brands. The UK can reassure innovators their ideas are protected by urging the EU to revisit the complications of IP and counterfeiting protection. The knowledge-based industry continues to grow rapidly and is a huge contributor to the economy. This is why all participants should seek consensus on the protection IPR.

Conservative Party Conference Blog: Is Europe part of the problem or part of the solution?

By Phillip Souta

By Ariane Poulain

Our final panel discussion in the ‘Europe: From Crisis to Growth’ series, hosted in partnership with the Centre for European Reform and Open Europe, and sponsored by JPMorgan, was held last night at the Conservative Party Conference in Manchester. The panel was moderated by Mats Persson, Director of Open Europe and included David Lidington, Minister for Europe, Harriet Baldwin MP and Charles Grant, Director of the Centre for European Reform.

David Lidington, leading the discussion, stated the UK does not have much room to be complacent because “Europe faced both an immediate crisis and a long-term strategic challenge” – respectively, the unsustainable debt levels across EU member states and the growing emergence of the rising powers. Lidington recognised the economic crisis was not necessarily homogeneous across EU member states but emphasised that “reducing debt and boosting competitiveness faces us all.”

When the world looks back at the 21^st Century, Lidington is certain that the shift of global economic influence will be seen as fundamental. To prevent being left on the sidelines of history, the EU must focus on three key things to prevent long-term decline: control and reform EU-level spending, boosting trade ties and restoring public faith in the EU.

Firstly, taking control of EU-level spending requires the EU re-focusing on what it really needs to spend funds on. At present, “money is being spent that does not focus on jobs and competitiveness in the long term and this applies to both large and small member states.”

Secondly, the EU single market is essential to the UK and Lidington said, the UK must push to complete the single market, particularly the increasingly important digital single market as well as ensuring the EU remains “outward looking.” He strongly emphasised the importance of the UK pushing the EU to seek a transatlantic trade deal after the US presidential election, “it would be two giant markets coming together and really effectively setting global standards.”

Thirdly – and more widely in Europe – Lidington called for public faith to be restored and the worries about the democratic deficit to be addressed. He also voiced concern over the current domestic, political developments across EU member states – such as in Greece, Hungary and Finland – which “indicate movements that have a nasty tinge to them and remind us of some of the darkest times in European history.”

Overall, Lidington recognised there are historic challenges taking place in the EU right now but, on several fronts, we must not take for granted valuable policies, such as those which secure social and employment rights. He concluded that we need to have “a serious and grown up discussion about the political architecture of Europe” and “we [the UK] has a relationship with Europe which will not cease to exist.”

Charles Grant focused on growth, the eurozone crisis and the UK’s position in the EU for his contribution to the panel discussion. On a whole, his views on restoring the eurozone and the role of the EU in the UK’s ability to secure growth were in line with the Minister’s.

On growth, Grant stated the importance, firstly, of the EU’s “weight to collectively secure beneficial external trade deals” and secondly, “the single market as a major part of growth.” Grant recognised that the EU single market is not perfect, nor complete but pushing the agenda further is vital. He also placed particular significance on the importance of the digital single market and used Nokia as an example because they currently have to cooperate with 27 different telecoms/digital domestic markets.

Moving forward, Grant considered the future of the eurozone and strongly believed that if the euro falls apart it would lead to competitive devaluation, a surge in protectionism and the European economy would spiral downwards which, all in all, the single market would unlikely survive. With this in mind, Grant praised measures by the ECB and said that Mario Draghi has taken important steps forward and said he had faith that buying debt, a banking union and greater economic integration in the eurozone would help the EU move from crisis to growth.

However, he said “there are excessive austerity measures being pushed on Southern Europe from Germany and this is creating negative sentiment and feeding into the anti democratic views” and that there is a “great dirth of leadership in Europe” but three good, sensible leaders emerging at the moment are Mario Draghi, Radik Sikorski and Mario Monti.

Grant concluded by considering the above in relation to the UK’s position in the EU. “Whether or not the EU goes down the road of new institutions, the eurozone will have a euro agenda” he stated and advocated that “the UK must ensure that new institutions are limited at the euro-level because it is very important not to impose rules on the City of London” beyond our control but at the same time, the UK should not stop others going ahead of treaties to restore the eurozone because that would be very damaging to the single market. Grant continued, “we need friends and allies to ensure European deals made are in the UK’s best interests; if we throw our toys out of the pram then this is less likely and we are not going to benefit the single market.”

Harriet Baldwin MP began by stating that she was very happy the UK maintained monetary sovereignty because the euro was deeply flawed and when member states joined the single currency they benefitted from the boom. Today, they are dealing with the after effects. Baldwin said eurozone members are “now in a deflationary process and there is no ability for currencies to adjust to the real economy of previously booming countries.”

Baldwin moved on to identify the two flaws of the eurozone and what she viewed as the three possible options to move from crisis to growth. The eurozone, stated Baldwin, has no real lender of last resort and the budget deficits have all varied significantly and to resolve the crisis she first considers “what is the best scenario for her constituents and the most economically beneficial.”

The three possible options are: the EU gives up on the eurozone and the single currency breaks up, the eurozone “carries on lurching” or the design flaws in the euro are fixed. Baldwin accepted that a break-up of the eurozone would be a“ghastly economic shock to the economic system” and that for the eurozone to continue in its current form is beyond what a democracy can suffer.

Baldwin recognised that fiscally responsible countries are pretty annoyed that they will have to underwrite the debt of profligate counties and stated that “economically, the best possible outcome was clearly to have eurobonds and the UK should not stand in the way but, in fact, encourage as much as possible because it is clearly in the UK’s best interests.”

She was also in agreement with Grant that Draghi is helping to restore the euro with the direction he is moving the ECB towards as a lender of last resort. Once the eurozone is restored, Baldwin considered what the UK’s position in the EU would be and said that “monetary sovereignty combined with single market access would be a great place for the UK to remain.”

Making sense of the government’s Balance of Competencies review

By Phillip Souta

By Conor Brennan

Director of Business for New Europe, Phillip Souta, said businesses were “worried the UK is becoming isolated from the EU” at a Review of the Balance of Competences event at the European Parliament offices in the UK this morning.

Speaking alongside a panel which included Baroness Sarah Ludford MEP, Sajjad Karim MEP and David Seymour (currently Consultant Editor to Nucleus), Phillip Souta said that talk of an exit from the EU had now become “mainstream in the UK.” He stated the reason the review had come about was because of political pressure and it should be remembered the review cannot be entirely divorced from a political context.

Phillip Souta highlighted the campaign for EU reform lead by Andrea Leadsom MP and described the suggestion of a rolling in / out option for progressive UK Governments as “a recipe for legal uncertainty” and would have a negative impact on businesses. Concluding, he argued that reforms were needed in the EU and that the review could be a positive exercise.

Baroness Sarah Ludford MEP conceded she had initial reservations when the government announced a review of the balance of competences between the EU and the UK but was more positive about the assessment “by the day” and believes this could be an “extremely valuable exercise.”

Using the European criminal justice system as an example, Baroness Ludford highlighted the advantages of the UK using the EU where it was best deployed. The recent European Arrest Warrant issued for Jeremy Forrest, a teacher who had absconded with his 15 year old pupil to France, was a perfect example, she claimed.

Baroness Ludford praised a recent speech by Polish Foreign Minister, Radosław Sikorski, which called for the UK to re-engage with the EU.

The Review of the Balance of Competences should be fed into the decision making on the possible opt-out of the crime and policing laws in 2014, according to Baroness Ludford. She continued, a mass opt-out of these laws should not be made on “knee-jerk political dogma.”

Finishing, Baroness Ludford stated she remained enthusiastic about the review and on completion it could become something which is offered to the UK’s European neighbours as a model for their own engagement with the EU.

Sajjad Karim MEP stated that everybody agreed there was a case for reform in the EU but previously there has not been a mature debate in the UK on the EU. He said that he believed the review, initiated by the government, will support a mature debate on the role of the EU in Britain. According to Sajjad Karim this review is an assessment on the “grandest scale” and he hoped people in the UK would engage with the review and submit evidence.

In the following discussion, Baroness Ludford said she hoped the review would highlight benefits of the EU which many people may take for granted. For example, she highlighted that one million people from the UK live within the EU and exercise the free movement of people benefits associated with the EU.

Phillip Souta stated that 50% of the UK automotive industry exported to the EU and uncertainty on the role the UK has in the EU would not bode well for this industry.

Chairing the panel discussion, David Seymour said that often businesses were accused of blackmailing the UK if they publicly supported the EU and he was glad to hear Phillip Souta relay concerns of UK businesses.

The introduction of a single European Parliament seat in Brussels was an important reform that needed to be enacted in the EU replied Baroness Ludford to a question regarding reform in the European Union.

However, Mr Souta said he believed a change in the electoral process of MEPs would have a greater impact on the democratic deficit experienced in the UK on European matters.

Speaking before the panel discussion, a representative from the Foreign and Commonwealth Office outlined the general premise of the review set up by the government and confirmed more information will follow in the coming months.

Kia takes gold in auto imports, France cries foul

By Phillip Souta

Photograph: Kia Motors

By Phillip Souta

Kia, the South Korean car manufacturer proclaims in its advertising that it has the “power to surprise.” Dramatically living up to that, sales of South Korean cars have surged 24 per cent in the last year. France, perhaps less pleasantly surprised, has requested that the European Commission demand advance notice of South Korean car exports into Europe.

South Korea’s exporting success is on the back of the recently signed EU-South Korea Free trade Agreement. The French request is a potentially worrying development.

The European Commission is considering the French request, which comes as cheap but solidly built cars from Kia and Hyundai increasingly give struggling French brands such as PSA Peugeot Citroen a run for their money.

This is especially true in central and Eastern Europe, where cheaper South Korean brands give people with weaker purchasing power the opportunity to buy quality new cars which they would otherwise be hard pressed to afford.

The French argument is couched in terms of having an “industrial policy” which is not “naïve.” Peugeot has recently announced that it will close a factory near Paris, meaning 8,000 will lose their jobs. The two may be related.

Arnaud Montebourg, the French Industry Minister, has said the rise in South Korean car imports has been caused by a 10 per cent drop in import duties to zero over five years.

The FTA includes provisions for the re-imposition of duties if “sensitive industries” are hit by a surge in imports. If the test for that is whether an industry employs people or not, that could apply to any sector. That was not the purpose of the provision.

The EU spent years in negotiations which will mean that European dairy producers – just one sector France is strong in – will save an estimated €380 million in scrapped duties annually.

In total, EU exporters are estimated by the Commission to be in line for an annual €1.6 billion saving. Trade is expected to more than double, and according to a study by Copenhagen Economics, the deal will create new trade in goods and services worth €19.1 billion for the EU and €12.8 billion for South Korea.

Talking about not having a “naïve” trade policy is thinly veiled code for protectionism. France’s priority should be to focus on the competitiveness of French companies. In the long run, protectionism never works, and is an ultimate betrayal of the people whose jobs it seeks to protect.

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BNE Blog

The Future of the EU – Debate with Guy Verhofstadt MEP, Professor Anand Menon, Emma Reynolds MP, Martin Callanan MEP and Professor Simon Hix

There’s still time to get Cyprus deal right

Britain and the Future of Europe – Debate with David Miliband, Liam Fox, Hugo Dixon and Andrew Lilico

A serious week in Europe with budget cuts, progress in Ireland and common sense on fisheries

Norway highlights need for UK engagement with the EU

Nick Clegg calls for “engaged and balanced” approach to the EU

Protecting and Harnessing the Benefits of Intellectual Property

Conservative Party Conference Blog: Is Europe part of the problem or part of the solution?

Making sense of the government’s Balance of Competencies review

Kia takes gold in auto imports, France cries foul

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