Britain and its role in Europe

Australian readers of this blog will be wondering what the latest headlines about the UKs’ relationship with Europe are all about.  The complexities of Europe’s institutional structures are hard enough to follow if you’re living there, let alone observing the continent from 10,000 miles away.

In essence, the latest developments flow from the problems of the Eurozone, the group of 17 countries (out of 27 total members of the European Union) who have chosen to pool their currencies. In order to restore the Eurozone’s credibility, its members have agreed to tighten fiscal discipline within the bloc. This requires them to share even more of their sovereignty.  They could either do that by a separate agreement among the Eurozone members, or by an EU treaty which covers all 27 countries.

Britain is not a member of the Euro. This is giving us much greater flexibility to tackle our economic problems and reduce our deficits. But we have every interest in a strong, stable Eurozone, since more than 50% of our exports go there. So we would have been content to join all 27 countries in an EU treaty, if we could ensure appropriate safeguards to protect our vital national interests.  Without such protection, parts of our economy could have suffered from new rules that are not actually necessary for a country which is outside the Eurozone.  That matters to the UK, as financial services comprise 10% of our GDP. So when the necessary safeguards were not forthcoming, Prime Minister David Cameron was unable to support a treaty of the full EU membership.  Instead the Eurozone countries will go ahead with separate intergovernmental arrangements.

Some suggest this could lead to a “two speed Europe” with an inner and outer core. It’s not as simple as that. European governments work together in a whole range of areas. In some cases like Defence it is Britain which is at the forefront of cooperation, with others playing a less active role. For example we worked closely with France and other partners in a very successful campaign to protect the citizens of Libya this year.  That’s what the academics mean when they talk about “variable geometry”.

Older Australians may recall that when we joined the EU in 1973, some suggested we were turning our back on Australia. This hasn’t turned out to be the case.  Australia’s ties to its Asian neighbours are important to it. And of course Britain’s membership of the EU is important to us, it enables us to achieve things together by combining our weight in the world.  And as my European friends readily acknowledge, the EU benefits from having Britain, the world’s sixth largest economy, as a member. We have been a driving force for implementing the Single Market. But we don’t believe Britain has to choose between remaining a committed, influential member of the EU, and working closely with other key international allies like Australia and the US.  That’s why our Prime Minister, Foreign Secretary , Defence Secretary and 6 other ministers have made their way to Australia this year.

Other Australians may suggest a sluggish Europe is, in any case, increasingly irrelevant in the Asian Century.  I wouldn’t be so quick to write us off. If European consumers stop buying Chinese exports, the consequences will be felt in Australia’s coal and iron-ore mines and beyond. Certainly we need to improve our competiveness, and get past our current financial ills, but Europe will remain a major player in the world economy. And Australian companies will continue to find the UK, the easiest place in Europe to do business, their natural gateway into the world’s largest trading bloc.

(The text of this blog was also carried as an article I wrote for The Canberra Times today.)