Sovereign State The great conspiracy

C. Gordon Tether

"My judgment is," said the Prime Minister explaining to the House of Commons why he had decided to urge the British people to give a 'Yes' vote in the forthcoming EEC referendum, "that, on an assessment of what has been achieved, remaining in the Community is best for Britain, Europe and the Commonwealth, the Third World and the wider world."

There is plenty of room for argument as to whether continued British membership of the Common Market is really in the best interests of any of the overseas groupings Mr Wilson listed — with the possible exception of the Community itself. What is certainly far from evident is that it would be to Britain's own advantage to remain in the Community on revised terms which are not materially different from those negotiated by the Heath administration — terms which Mr Wilson roundly condemned at the time as meaning that the country had "sold its constitutional heritage for a mess of problematical economic pottage."

As everyone knows, Britain's experience during the first two years of membership of the EEC demonstrated beyond all question that the serious doubts that had been expressed beforehand about the economic value of such an involvement had been more than justified. The question that now has to be asked is whether renegotiation has so changed the prospective relationship between costs and benefits that we can confidently count on membership henceforth to our advantage rather than to our serious disadvantage. And the answer is quite simply 'No.'

The reality is that — in the economic field — renegotiation has produced precious little. Under one of the two main headings it has confined itself to — the Common Agricultural Policy — it has produced a good deal of tinkering and superficial reform. But, as Mr Wilson has himself admitted; it did not get anywhere near achieving the fundamental overhaul the British authorities were supposed to be aiming for. The outcome of thp renegotiation under the second of the main headings it concerned itself with — contributions to the Budget — proved to be similarly unimpressive. So the position is little better than it was beforehand in this important respect too. And it would be quite wrong to suppose that the CAP and Budget contributions are the only additional burdens imposed on Britain by membership of the Common Market There are a number of other major ones that cannot be left out of account. One concerns the flow of investment between Britain and the rest of the Community. Although this was a field wherein Britain was supposed to derive great benefit from membership of the EEC, the traffic has so far developed in a manner that is very much to Britain's disadvantage. In the first year after the UK crossed the threshold, some £500 million odd of British money went to finance development on the other side of the Channel. All that we got in return was a bare £100 million.

Then there is the need to cover the additional gap in our external payments opened up by contributions to the CAP and net investment flows to other EEC countries by diverting to exports resources that would otherwise be available for supporting living standards at home. And to the extent that our inability to cope with this requirement precipitates a fall in the value of the £ in the currency markets, the foreign exchange we earn trom export traffic as a whole is reduced, while the prices for imports to the home consumer are increased.

A detailed analysis of the true costs of being in the EEC recently prepared by a working party headed by Dr Brian Burkitt of Bradford University reached the conclusion that, all told, the economic costs of membership were already running in the region of £1,000 million per annum and could top the £2,000 million mark by the end of the 1970s. It must be remembered, too, that the potential threat to the UK's future economic well-being — as well as to its sovereignty — posed by the Community's economic and monetary union ambitions has not been eliminated.

Economic and monetary unification is the real McCoy of European economic togetherness — all that the EEC represents at the moment is a glorified free trade area. Its arrival would leave us much more exposed to the disadvantages which regions on the periphery of a common economic area invariably incur. Furthermore, the loss of the right to vary the external value of the currency — which monetary unification ultimately entails — would make it extremely difficult to protect British industries against "peripheral" pressures of this kind or against the backwash of an inability on Britain's part to match the economic advancement performances of other member countries.

It would be logical to suppose that membership of the EEC would have to be shown to be capable of conferring some very substantial benefits indeed on Britain to justify incurring the existing heavy costs of membership as well as running the risk of having to accept the very much larger burdens that involvement in economic and monetary union would entail. Yet the sombre reality is that it is next to impossible to find evidence that we are profiting from it to a significant extent in any way now or are likely to do so in the foreseeable future.

According to the prospectus on which Britain was taken into the Market at the beginning of 1973, the operation was going to be made worthwhile by the "dynamic effects" of entry into a market of 300 million. This transmutation, so the British public was assured, would lead to the much sought-after economic take-off in Britain, thus making a "positive contribution" to the equally much sought-after strengthening of the balance of payments.

Neither thing has happened. There are no indications that entering the market of 300 million has acted as a spur to economic growth in Britain in any discernible way. As for the balance of payments, the post-entry period has been characterised by a spectacular deteriora

tion in the relationship -between Britain's exports to and imports from other EEC countries, the figures for the early months of this year showing an adverse balance well beyond the £2,000 millions per annum mark.

Pro-Market advocacy has tacitly recognised this simple truth up to a point by shifting its ground. Its new proposition is that back-pedalling on the Market now would only make our position even worse — the probability being that we would be unable to make good in alternative markets the deprivation experienced as a result of breaking away from Europe.

There are two things that must be said about that. The first is that, if we are not deriving any positive advantage from being in the Community in the trade sense, there can be no justification for paying the high price that membership imposes. The other is that, in spite of all the talk about the isolation that will be Britain's lot if she leaves the Community, there is no reason why it should involve any curtailment of trade with the Community — unless, that is, vie ourselves want it to.

One reason for this is that Britain's withdrawal does not necessarily have to exclude her from the free trade area system that the Community has been developing in collaboration with the European Free Trade Area countries that chose to stay out. Indeed, without putting the whole of this operation in reverse — which would be very difficult to justify—the other EEC countries would find it virtually impossible to prevent continuing British participation in this operation.

It has also to be recognised that being excluded from the EEC does not automatically condemn a European country to being economically isolated. Norway, Sweden and Switzerland already occupy the "wilderness" into which, according to pro-Market propaganda, Britain would move in the event of her withdrawal from the Market and they are thriving on it.

Above all, it is already abundantly clear that the effect of the oil explosion must be to produce changes in international economic patterns of a kind that will materially reduce the attractiveness of the European market for British exports in relation to that provided by the rest of the world. Thus since EEC countries will almost certainly be restricted to a much slower growth rate from now on, opportunities to do more business there will be growing much more slowly than in the past. On the other hand, the oil-producing countries are obviously going to constitute a rapidly expanding market. And this will also be true of the less-developed countries to which the oil-producing countries are making available a sizeable part of their unspendable surpluses.

For lack of other arguments that are capable of standing up to close examination, pro-Marketeers continue to talk of the intangible advantages Britain can derive from being a member of a large regional grouping like the EEC. In reality, the kind of international co-operation that is most valuable today is that which operates on a world-wide scale rather than on a regional basis.

The case for British involvement in the Common Market on terms that involved imposing considerable burdens on her economy and accepting inhibiting restrictions on her sovereignty was not impressive when it was first put forward in the early 1970s. Any honest cost-benefit analysis will show that it is non-existent now. How is it, then that it has the backing of almost the whole of the Conservative and Liberal parties, of nearly half the Labour Party, of the greater part of industry and the City, as well as of the press? And there is an even more pertinent question that arises from this one. Why is it that, notwithstanding their ability to call on this support, pro-Marketeem are showing themselves ready to go to almost any lengths to make absolutely sure that the vote in the forthcoming referendum goes their way? Look, to begin with, at the behaviour of the politicians.

The main political parties have pursued courses of action that are obviously intended to turn the "appeal for the people" referendum into a travesty of the real thing, while in its approach to the mechanics of the referendum, the Government has displayed an unmistakeable pro-Market bias.

Another deplorable feature of the pro-Market scenario has been a major effort to divert the public's attention from the real issues involved in the referendum by organising side-shows designed to put a spoke in the anti-Market wheel. Thus, the idea of holding a referendum at all on the Market issue has been bitterly attacked on the grounds that it is "a reckless political gamble." Again, pro-Marketeers have mounted a massive campaign of distortion and exaggeration aimed at demonstrating that, while nothing but good can come from staying in the EEC, the most terrible fate will befall the British people if they should be "misguided" enough to elect to withdraw. Here are some examples of these fictions, along with the related facts.

(1) That the official figures show that in the first year after Britain's entry into Europe, EEC investment in this country soared to some £2,000 million. The reality was that the flow of Continental capital into capital development in Britain was only a fraction of the movement of similar finance in the opposite direction. (2) That virtually the whole of the rest of the world — including all the Commonwealth countries — is wholly opposed to Britain's Withdrawal from the Community. The reality is that only a relatively small number of countries can be said to have intervened in our EEC controversy in a meaningful way and they have usually gone no further than to say that they • have lost their earlier enthusiasm for seeing Britain outside. (3) That the withdrawal from the EEC would precipitate the collapse of the E. The reality is that, as sterling is not dependent on EEC support and withdrawal would not produce any significant immediate changes in external payments patterns, there is absolutely no need to fear such an outcome. It is quite conceivable that, if it were made clear that advantage was to be taken of the country's escape from EEC entanglements to make a direct attack on the Payments deficit through the use of import controls, the Vs fortunes would take a decisive turn for the better. (4) That, as there is no 'alternative' to the EEC, Britain's withdrawal would mean that a great curtain would descend round these islands, condemning them to gradual extinction. The reality, as already noted, is that nothing of the kind would happen because the "alternative" is already in existence and because the big opportunities for trade expansion will in future be outside Europe in any case.

(5) That investment would languish, with unhappy consequences for the jobs of many workers. The reality is that, once the encouragement to concentrate capital development on the Continent which British membership of the EEC has been found to generate is eliminated, the level of investment in this country could well start going ahead again. • (6) That Britain is in such a bad shape in the economic sense that she cannot afford to leave the Common Market — however impressive the other arguments for doing so may be. The reality is that belonging to the Market is one of the main reasons why Britain is finding the economic going so hard. It is essential, therefore, for her to escape at the earliest Possible moment.

What makes the widespread use of such Misrepresentations, exaggerations and sheer untruths so significant is that most of the People who are perpetrating them are well aware that this is what they are. How is this extraordinary situation to be explained? Part of the answer no doubt lies in the fact that the belief that elitism — and Parliamentary elitism in particular — should always have the last say dies hard. But other very powerful factors are clearly also at work. And while one hesitates to use the word conspiracy, it is inescapable that those who see themselves as having a vested interest in Britain's continuing involvement in the Common Market are bending all their efforts in concert to seeing that their wish is satisfied without much regard to moral and ethical considerations. In short, if this is not a conspiracy it is a very good imitation of one.

What the British public has to recognise is that, while there is little to be afraid of in coming out of the Market, there is every reason to fear the consequences of staying in. A fair weighing of the pros and cons of staying in the Market can only lead to the conclusion that, whatever may be true for the politicians, the big business interests and other manipulators, from the viewpoint of the public as a whole the case for coming out is irresistible. All the indications, indeed, are that the longer we stay in the EEC the more enfeebled will Britain become and the more exposed its people will be to the modern form of enslavement — that which arises from becoming heavily dependent on foreign financial support.

Gordon Tether is the writer of the 'Lombard' column in the Financial Times