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The EU Referendum Paradox

One paradox of this referendum is that the Leave campaign is mobilizing grassroots activists to send the elite back to the drawing board, not to give power to the people, while the Remain campaign is driven by an elite but could trigger a shift of power to the people. Just as the ‘no’ vote in the Scottish referendum was followed by greater devolution of power to the Scottish Parliament, so a ‘yes’ vote on the EU could give citizens more power in Europe.

Here’s how. If we vote to Leave, British officials will be dispatched on marathon trade negotiations with the EU and the rest of the world. They will be run under the executive authority of the prime minister and presented to Parliament as a package. Parliament is unlikely to have much more influence than within the EU, because trade deals involve numerous bargains between officials and bigger trade blocs have more leverage. The EU is likely to give the UK less generous market access to deter other countries from leaving, while President Obama has said it will not prioritize UK trade negotiations above the EU. In practice a deal with the US is likely to be modelled on that with the EU or NAFTA. Australia’s deal with the US, AUSFTA, was modelled on NAFTA. The Australian Senate made a few amendments to protect its healthcare system, which the Americans accepted. Like NAFTA, it also gave up sovereignty over public procurement, subsidies and treatment of a wide range of goods and service to give American and Australian producers equality.

The North American Free Trade Association (NAFTA) was over 1,700 pages, with numerous rules that Canada, Mexico and the US agreed to adopt, regardless of whether voters and their elected representatives had previously rejected them. Critics of AUSFTA, NAFTA and the WTO, make similar points about the lack of democratic accountability and loss of sovereignty as critics of the EU, because the underlying issues are similar, but the EU has stronger democratic oversight through the Council of Ministers and European Parliament.

All markets pool sovereignty

Every time people widen the market, they need to create political institutions to manage it, unless they are willing to accept any goods regardless of safety standards, subsidies and conditions of animal welfare, the environment or workers in other countries. “Buyer beware” is the only rule in a completely free market and countries can’t stop others from dumping surplus goods, using forced labour, producing meat in inhumane conditions or using chemicals they don’t like unless they agree to some minimum standards across the whole market. Widening markets always means sovereignty is shared, to agree basic standards and prevent abuse. In the US this happened first between states, which involved a civil war from 1861 and has seen a steady increase in powers of the federal government, then in NAFTA and the World Trade Organisation (WTO).

Like the EU, these trade bodies have a secretariat, working groups and tribunals which can rule against states. NAFTA has a Commission for Labor Cooperation and Commission for Environmental Cooperation with Councils of Ministers from each country and a Secretariat to promote cooperation  and ensure effective enforcement of domestic law in these areas. Under NAFTA companies can sue member states for loss of trade arising from decisions of elected parliaments. The WTO has overruled US legislatures on meat labelling laws, measures to protect dolphins and protect specific industries, and “buy local” laws.

Leave campaigners are wrong to say the US would not cede sovereignty, because it has done under NAFTA and other trade agreements. Markets need to be managed across borders. The political institutions of the EU are more extensive than NAFTA or the WTO because it covers more goods and services and has a larger vision of equality and solidarity between people across the continent. The USA also pools sovereignty in NATO, the World Bank, IMF, WHO and other international institutions, but it is so powerful that most of the time it can get its way over other countries. However, the growing economies of China, India and other countries are changing the balance of power.

The key questions about cross-border political institutions governing markets are

  • How can citizens influence the rules which govern markets beyond their borders?
  • Do they take account of the environment, labour laws, social protection, health, animal welfare, creative industries or other issues that concern people?
  • How open, accountable and effective are they?
  • And, do the benefits of a wider market outweigh the constraints of pooling sovereignty?

Many economists argue that bilateral trade deals between two countries simply displace trade with other countries so that the net benefits are less than more comprehensive agreements, as across the US, EU or WTO.

How will power shift after the referendum?

My guess is that Leave supporters will soon be disappointed if they win, because international trade deals may be less favourable and access to the EU market means accepting most of its rules, free movement of people and payment into the EU budget (like Norway or Switzerland), without having any say over those rules (see Full Fact).

On the other hand, the prospect of Brexit and fear that other countries might follow Britain out of the EU could make its leaders focus on improving people’s lives and engaging better with citizens. Jean Claude Junker, president of the EU Commission, conceded “We were wrong in overregulating and interfering too much in the daily lives of our fellow citizen,” but added “we would also be wrong if we insufficiently respected the principle of solidarity.” Since he became president in 2014, more than 80 proposals have been dropped by the Commission.

The political mechanisms of the EU may be cumbersome and remote, but at least British people can elect Nigel Farage to harangue the EU President in open parliament. No one elects delegates to the World Trade Organisation, UN Climate Convention, IMF, the NAFTA Council and over a thousand other international bodies which decide global rules. Elected ministers from every EU member state meet frequently to solve problems politically within a framework of law, and have to account for their decisions. One reason the EU is so frustrating that agreement between 28 member governments is difficult, because each one is accountable to their own electorates.

Europe’s elite need to address underlying issues

Leave campaigners are voicing widespread dissatisfaction with political elites in Britain and the EU, as well as people’s sense of powerlessness. The rise of new political movements on the left and right across Europe are also raging against elites. The causes of dissatisfaction are complex. In the UK some are due to decisions by British governments, such as pushing for a single market which meant fewer veto powers for member states and stricter controls over state aid to industry; accepting migration from Eastern Europe when they didn’t have to, and financial deregulation which contributed to the crash. Many of the causes are due to rapid changes in technology, financial deregulation and powerful corporations in a rapidly globalising economy.

Leaving the EU may give Britain greater ability to adapt and respond to these changes, but it is just as likely to reduce British influence, because big trading blocs like the EU, USA and China are able to dictate terms of trade in their interests, and big corporations have more influence in trade negotiations as most citizens.

But the outcome is not fixed, whichever way the referendum goes. What happens depends on how much citizens scrutinize the issues and say what they want our politicians, officials and trade negotiators to do on our behalf.

As members of the EU, British citizens do have mechanisms for influencing decisions by the EU and exercising political power to deal with rapid changes in technology, financial markets and corporations. These mechanisms are not as accessible, visible or effective as they should be, but the British press and political parties have not used these mechanisms to make EU decision-making more open. It has suited them to behave as if the EU was a foreign body in which we had no say. It is true that joining late meant that Britain did not create the ground rules, but British governments have had a huge influence on the accession of Eastern Europe, the creation of a single market, financial deregulation, privatisation, animal welfare and many other policy areas. We have not been bystanders.

But the referendum should be a wake-up call to political elites running the EU – including British politicians and officials – to make these mechanisms more accessible, accountable and effective. Leaders of the Remain campaign need to show people that the EU can hear them, it is making the political process more responsive, and can address the challenges of a rapidly changing world.

The paradox is that a Leave victory could put Britain at the mercy of officials who find they have little choice but to accept whatever deals the EU, USA, China, Japan and others offer us, while the Remain campaign could be compelled to create a more responsive and accountable EU.

The bigger question is what kind of future people want for Europe and the world. To do this, people need to understand how the world is changing and debate what they want, as many did in the Scottish referendum. Every university, school, community organisation and other group needs to discuss the issues in the referendum and help people make up their own mind. And then continue after 23 June, because whatever Britain decides then, the political battles over trade, migration, working conditions and global integration will continue.

For a summary of resources for the EU debate, see my blog: Help – I haven’t a clue about the EU!

Titus Alexander is convenor of Democracy Matters. This is a personal view.

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