To B-EU or Not to B-EU

The British people
will decide whether they wish to be part of the European Union on June 23rd by
voting in the EU Referendum. Voters, including myself (a naturalized Briton),
will be able to respond to the question with only a “Yes” or a
“No.” But while the vote comes with suspense and worry, the fact that the
voting is happening at all should be enough to spur change in how Europe sees
and structures itself. 

A Brexit referendum
could only take place in the UK. Out of all Northern European Countries, the UK
is the only with enough bargaining power to question the current EU integration
strategy. For some British people, the less than ideal EU management of the economic
downturn and the recent migration crises exemplifies the deficiencies of
European-wide governance.

This is not to say
that the UK would be right to leave the EU. On the contrary: although the UK, a
relatively wealthy state, is a net contributor to the European budget (even
though British representatives have managed to reduce its contribution over
time, mainly by benefiting from the so-called UK rebate),
the EU is the UK’s main customer and UK trade deals
with the world are not going to hold if the UK is outside Europe.

British economic
dynamism attracts a more than its proportional intake of EU migrants, but such
migrants contribute more to the welfare state than what they take out on
benefits (hence help its funding). Part of the highly skilled migrants Britain
receives from EU countries result from the UK’s record as being the main
exporter of education services in Europe, and a hub for research and innovation
that would not be sustainable without free movement of people. Besides, some
would argue that the UK has little to complain about EU migration given the
size of the British community of expats in other European countries (in Spain alone
more than 300,000 UK expats enjoy the social rights to health and social care).

That said, the
referendum call will have succeeded in one of its main objectives: to signal
that the current strategy of European integration is not without its
discontents, and that the model of federalism that has worked in Germany might
not be applicable to Europe as a whole. If the European Union aspires to be the
first polity truly created out of a “democratic process,” then it will have to
redefine its governance process.

The “European
core,” comprised of the founding countries (perhaps including Spain and
Portugal and a few others), should be allowed to proceed with further
integration without waiting for the rest. This implicitly means accepting that
the EU club will have to be more functionally asymmetrical as some suggest—some
gold member states are likely to agree to integrate most typically “federal”
governance functions, whilst others will choose a modest ‘standard membership’
(without an automatic guarantee of future acceptance as gold members). European
detractors in that case, will not be able to appeal to Europe’s “democratic
deficit,” as it is a public choice to be in the “club.” The EU core in turn,
will be able to learn from the experience of those who opt-out.

What would a “Brexit” entail?

The referendum will
not focus on how to more effectively exist within Europe. Instead, it will
decide on whether the UK should leave the EU—whether the people want a
“Brexit.” Yet serious analysts would agree that the exact meaning of “Brexit’”
is still up in the proverbial air. Loosely speaking, it means that the UK would
come to opt out of some, but probably not all, of EU legislation. Not least
because, if it wishes to have favorable trade deals with the EU it will have to
keep most legislation anyway, but as Gordon Brown
recently reminded us: the EU is rooted on the same principles as the core
values of British society.

This isn’t to say
that the decision won’t have ramifications. If the UK does indeed decide to
leave the EU, nothing, not even free trade with the EU, is guaranteed to
continue. Similarly, the substitution of EU legislation for an alternative
national one could take a number of years to materialize. During that time, UK
bureaucracy would have to inefficiently expand the provision of public goods
that today are more efficiently allocated at the EU level (such as the European
Environmental Agency). Not being part of the EU, would mean having to negotiate
(and renegotiate) every single bilateral agreement now signed by the EU on
behalf of 28 countries. Further, some argue that Brexit would be followed by
Scottish independence, meaning that a post-Brexit UK would be an altogether
‘different animal’.

Certainly, the UK
is not the only party that faces uncertainty. The Brexit would weaken, at least
for some time, the credibility of the process of European Integration as
defined today. It would also produce a political crisis and possibly, an economic downturn in the whole EU, from which
two extreme scenarios could follow:

One is an EU
meltdown. Up until now, joining in the EU meant remaining in the EU forever,
but a Brexit opens up an exit legislation that today does not exist. One can
see how this might question the credibility of the process, and bring about a
collapse of the European project as we know it, the rise of nationalism and
conflict in the area.

Alternatively, it
might accelerate ‘an ever closer union’ as its main contender would be out of
the way. Many argue that precisely what Europe needs is a crisis of this magnitude
to press the speed button towards ‘more integration’. In the latter case, the
UK would be marginalized and would become more peripheral to Europe than ever. This would
signal to more euro-sceptic Northern European countries the consequences of any
exit.

Which scenario
prevails will depend on the leadership of the countries that today make
Europe’s core.

What is really under
discussion?

It should not come
as a surprise that many in Britain advocate against an ever closer Europe. In
their minds, a European parliament, or a European-wide government, is not
perceived as legitimate as national parliaments. Hence, following that logic,
staying out of the EU club is to defend ‘“democracy” (in a twist, the argument
is essentially the British version of “no taxation without representation”).
Implicit in the point is the assumption that there can’t be any democracy
outside the contours of the “old nation-state.”

Brexit supporters
appeal to the fact that European authorities are unaccountable, and hence
democratically deficient. Paradoxically, very few of those question that
England (not the UK as a whole), is one of the most centralized countries in
Europe, or that the electoral system (‘first past the post’) poorly represents
its people and, that its members of its second legislative chamber, the House
of Lords, are still unelected.

But the finger
points both ways. The root of the Brexit supporters’ concerns lies in the
glitches of EU governance design. Unlike in established federal states, EU
decision making faces a “hampered demos”—Europeans don’t see themselves as European citizens yet, and indeed it is fair to say that there is no comparable
EU political cycle. The European public often ignores what the EU does for
them, and certainly it’s hard to imagine, tangibly, what life would look like
without belonging to the EU club. European elections are still “third order
elections” in almost any country, and UK turnout in such elections has always
been well under 40 percent despite a favorable electoral system (proportional
representation) that makes every vote count (hence, there is, of course, an
argument to be made that Britons would be more represented in the EU if they
actually went to vote in EU elections, but that is another article entirely).
 

Certainly, progress
has been made to increase the weight of the European Parliament and today a
majority of EU legislation is made by co-decision procedures. But still, such
legislation is inevitably implemented by national governments as the EU has a
minimal government size (two percent of GDP compared to 20 percent of US
federal government) and no tax to be transparently accountable for. This means
that national governments (guided by electoral rewards) tend to take the credit
if the outcome of EU policy is favorable but blame the EU if it not.

In other words,
this EU referendum is not just the result of British Euroscepticism. It is
also, at least in part, the natural consequence of the imposition of a
restrictive model of EU governance on too heterogeneous communities.

How are British people expected
to vote?

Most electoral
polls reveal that as many as one third of voters are still undecided and will make up their
minds only in the last few days before the vote. Those who believe the UK
should remain in the EU are betting on individual’s loss aversion, and have
spent most of their time reminding us of the costs of leaving the EU rather
than the benefits of staying in it. Conversely, those who believe the UK should
leave the Union have done just the opposite, appealing to emotions and
exaggerating the facts and figures behind.

As mentioned
before, whatever outcome of the vote, it is unlikely to settle the matter. Many
in the remain camp argue that the leave campaign has been spreading falsehoods
(e.g., wrong figures on the UK contribution to the EU) and relying too much on
emotions and little on the practical inconvenience that a life outside the EU would
entail. Similarly, the leave campaign will always be able to accuse the ‘remain
side’ of fear mongering, and if participation is below that of national
elections, or very close, both sides are likely to even question the results’
legitimacy.

So what could the EU do?

The mere fact that
one EU member state is putting its membership into question is a clear signal
that the institutional structure of the EU has growing detractors, both in and
out of the Brexit camp. Europe faces a unique challenge, for which we have no
experience in confronting: deciding on a model of federalism that solves the
problems of the present, and not one that solved that of the past.  

Regardless of the
outcome, perhaps it’s time for the EU to reconsider its strategy of integration.
The decision to start the new chapter of a European federation should not be perceived as an imposition (of being “in” or ‘out), but a choice between being
a gold, or a standard member of the club.