Leaving the EU will not set Britain’s economy free by Philip Whyte
EU membership, British eurosceptics are fond of asserting, has become the principal obstacle to the country’s prosperity. The regulatory and other costs of membership have ratcheted relentlessly upwards, just as the economic benefits of trading with an ageing and sclerotic region have fallen. Britain, to use a term now very much in vogue, has “shackled itself to a corpse”. If the UK loosened its relations with the EU – or perhaps left the club altogether – it would free itself of the irksome regulatory burden that cripples British business and could focus on developing trading relations with faster-growing economies outside the EU. It is not hard to see why such a narrative appeals to many British minds. At a sentimental level, it harks back to a bygone age when the country was a globe-trotting, island nation largely unencumbered by European entanglements. And at a rational level, it rests on claims that are at least partly valid. It is true that the EU is, to an important degree, in the business of regulation, and that most EU countries have a greater appetite for regulating markets than Britain. It is also true that in certain areas of policy, common minimum EU standards are set at higher levels than the UK might have chosen, had it been left to its own devices. Nevertheless, the overall thrust of the story is deeply misleading. Contrary to popular belief, the EU is not an iron cage that imposes rigid uniformity on its members. Despite the alleged
shackles of EU membership, the UK’s product and labour markets are among the freest and least regulated in the developed world. Most of Britain’s supply-side deficiencies originate at home, not in Brussels. And while there is little evidence to suggest that EU membership hampers the development of trading links outside Europe, the flow of goods, services and people across British borders would probably be less free if the country left the EU. Start with regulation. If EU membership really entailed everything that the eurosceptics like to imply, one would expect two things. First, the EU would have a strong levelling effect on its member-states: because of ‘harmonisation’ at EU level, markets for goods, services and labour would look much the same in Italy and Greece as they do in Ireland and Britain. That