Wednesday 11 July 2012

UK renegotiation and the European Social Contract: Free-rider Status?

Today Open Europe argues, on their blog and in The Telegraph, that the Norwegian model is a bad model for the UK to pursue, and that the British government should try to negotiate better terms within the EU rather than leaving to join the looser EEA. In arguing this, Open Europe take the argument of those who support either the status quo or further integration - that EEA membership or a Swiss model relationship with the EU would lead to a loss of political influence but require high levels of acceptance of rules decided in Brussels - and uses it to support the argument that the UK can get a special relationship within the EU. The UK, the argument goes, is such an important market, and Germany and other northern countries want the UK to remain inside the EU as part of a market-liberal alliance, that the UK can win a place as a member of the internal market, but opt-out of pretty much everything else.

This misses the point of what the internal market - and the EU - actually means to the rest of the Member States.

Back in the winter, when David Cameron wielded the British veto on treaty change, there was a political storm over whether Cameron negotiated well or not, but also a wide acceptance that what the UK asked for was reasonable. I argued that it wasn't, given that it was reversing integration in the internal market and that it would run counter to even the interests of the more traditionally UK-aligned Member States. In the UK the EU is portrayed as a free trading agreement that has run out of control, but the internal market itself is more than that, and the fact is that the rest of the EU needs to exist to politically support the internal market.

The internal market goes beyond a free trade agreement and a customs union because it's not just about getting rid of tariffs at the borders, but about creating an economic and legal space where businesses and people can move and work and provide goods and services without obstacles being thrown up by different regulatory systems. This means that there needs to be some harmonisation and some mutual recognition of rules and standards.

Which brings us to the "European Social Contract". Yes, despite all the fallout and arguments of the Eurozone crisis, I would argue that there is a basic social contract at the heart of the EU, which is also important to ensuring that the internal market has the political legitimacy to exist. The internal market covers a massive economic space and its regulation has social, economic and environmental consequences. Given the post-war social contract in Europe - essentially that the state has a place in ensuring the social welfare of the people both as a moral duty (it's seen as part of "what the government does", and in order to provide a bulwark against extremism and social instability - and a crude deregulation of markets within a European space would threaten national societies and their identities. The social and environmental legislation and the elements of redistribution that exist in the EU are an attempt to preserve this social settlement while unlocking the economic potential of such a large continental market (we'll ignore the history of integration being seen as a way of ensuring peace).

While the internal/single/common market has been elevated to an article of faith in the UK, really it relies on the social, regional developmental, redistribution-orientated and environmental faces for its political legitimacy. Would the other Member States not only be willing to give the UK full access to the internal market and let it leave the areas that sustain its political legitimacy, but also let it retain its political influence in votes in Brussels? It's a hard bargain to drive to say that you will have full benefits in the areas you like, but opt out of all other obligations. I don't think other Member States would be willing to open up their markets fully to a country that will not accept its part of the European Social Contract. It's up to Britain if it wants to reduce workers rights and social and environmental protection, but why should the other Member States provide the UK with unfettered access to the internal market if it does?

This is not asking for second or third tier membership, this is asking for Free-Rider Status.

The argument that the UK is too important to the more market liberal Member States to let Britain leave - as has been argued elsewhere too - also forgets to touch on the UK's political weight and influence as a Free-Rider Nation. The UK - and probably its MEPs - would not have a say in the areas that the UK opts out of. What use is the UK as an ally here if it doesn't have a vote? This is another aspect of the UK's negotiating position that is just not recognised in the British debate: the more the UK opts out or talks about opting out, the less valuable and reliable it is as an ally for the other Member States. After all, why should you put your political capital on the line for a country that's half out the door and in little position to help you in return?

There's no such thing as a free lunch, and in the EU there can be no such thing as a Free-Rider Nation.

UPDATE: The Centre for European Reform explores the Norwegian and Swiss options in more detail.


  1. Hi Conor,

    You make some really good points. However, your argument is also (to an extent) ignoring political reality on the ground. We are fast approaching the point in British politics where a referendum on EU membership becomes unavoidable. And such a referendum will, almost inevitably, be lost unless at least some of the powers put forward by the Fresh Start group of MPs (with plenty of input from Open Europe) are subsequently repatriated.

    I'm reading through the Fresh Start green paper now, and I'm perhaps a bit more optimistic than you about the prospects of a deal being worked out. They make it clear they don't expect to successfully repatriate ALL the powers they put forward (i.e. they are not attempting to tear up the "social contract" completely).

    I'm also not too concerned about the charge of "free-rider" status. There are plenty of polities in which some constituient states or regions have greater autonomy than others (take, for example, Südtirol/Alto-Adige in Italy, or Northern Ireland's devolved government within the UK). For me, renegotiation of powers can be couched as a way of testing the principle of subsidiarity, and it suggests a much more fluid transfer of powers between the European and national levels (disproving, for example, the "ratchet effect" so feared by British eurosceptics).


  2. An ever closer union has been part and parcel of European integration from the European Coal and Steel Community onwards, though with slightly different wording then, before the 1957 Rome Treaties (EEC and Euratom).

    A social market economy is the defined economic yardstick for the EU according to the current Treaties.

    The 'integrity of the internal market', clamoured by the UK government, does not only encompass its geographical application (decision making by all 27 member states), it is also - as you say - a question of the substantive scope.

    Those who campaign for renegotiation or secession reject the basic EU compact.

    The 'We were lied to' refrain is rubbish.

    Britain has a sovereign right to initiate negotiations or to withdraw, but I would be happier with fewer half-truths and outright lies.

  3. I still have to read the Fresh Start proposals first. However, it seems that the theatre of coming home from Brussels and saying that some powers have been brought back is more important than what those powers are, judging by the public debate. The only area really identified so far in the general public debate is that of social legislation, and even this area hasn't been discussed that much.

    On Free-Rider Status: for regions like Suedtirol or Northern Ireland, much of that status is to do with being subsidised by the rest of the country, which is based on national solidarity (correct me if I'm wrong on this being the case in Italy). This is different to opting out of large parts of environmental and social/employment protection, which is more linked to the social contract idea. Particularly in Northern Ireland, it should be noted that a lot of employment and environmental legislation comes from the UK and the EU, and in fact the duty of local government (below Stormont) to collect the rubbish is imposed by Westminster.

    While the UK might not be aiming for creating an off-shore free-riding libertarian paradise (it's really not clear there's an aim instead of just a mood), the social contract will be important to all the other Member States. Remember, I'm talking from the point of view of the rest of the EU negotiating with the UK. Though some concessions may be won, those that Open Europe are looking for aren't really possible. It is hard to believe that the rest of the Member States would permit such a level of opt-out of the social contract when there is a mood against tax competition in the Eurozone.

  4. SOME powers would have to come back, if only to prove (in the public mind) that such a thing is actually possible. In the British public perception, power is constantly being ratcheted in one direction only. Even a limited repatriation of powers would reassure people that power can flow both ways in the EU.

    I haven't had a chance to look at the Fresh Start green paper in detail (I'm reading it now), but my understanding (including from an interview I did with Andrea Leadsom, co-chair of the Fresh Start group) is that the priority within social and employment law is particularly over the EU Working Time Directive. This has been a long-standing bugbear for several reasons: firstly, it was seen as having been Social Chapter legislation (which the UK previously had an opt-out from) introduced disingenuously on the grounds of public health. Secondly, most Tories (and some from other parties) would probably argue that the social contract is not between citizens and the EU anyway, but between citizens and national governments. As such, national governments are breaking their side of the social contract by delegating responsibility to the EU.

    Other priorities for Fresh Start seems to be the European Arrest Warrant (seen as a "low-hanging fruit" because of the existing option of a blanket opt-out from EU police and justice laws in 2014) and securing "cast-iron" guarantees that British financial services will be protected from EU legislation.

    Lesser priorities (i.e. as far as I can tell, these are the ones Fresh Start are more willing to negotiate on) are an attempt to freeze (or at least slow the growth of) the EU budget, opt-out of some environment and immigration laws and secure meaningful CAP, CFP and cohesion policy reform.

    So, what we're actually talking about concretely are opt-outs from (at the very least) the Working Time Directive and the European Arrest Warrant, along with a guarantee that the Luxembourg compromise will still apply to decisions regarding financial services. There might be more, but I think that's possibly the minimum the British government could take back to the people and expect to win a referendum with.

    Finally, I've got one last rejoinder for you. Earlier this week, I had the opportunity to see Andrew Moravcsik speak. Social contract issues are "salient issues". Moravcsik's argument is that, as long as the EU deals with mainly technical, cross-border issues that are fairly low-salience in nature, there is no real problem of a democratic deficit in the EU. However, if the EU starts to intrude heavily into the sort of salient issues (such as social and employment law) that electorates prioritise, then there is a risk that it starts pushing its legitimacy (which already seems quite thin in places) to the limits.

  5. My focus for this post and the following one was the general public debate, rather than the proposals of groups/think tanks. Hopefully the actual desired opt-outs will be discussed more widely. Personally it would be interesting to see the UK opt out of the JHA area for good, since the UK is such a big player in that area, and is generally forcefully pushing a security agenda, at times to the detriment of civil liberities in my personal opinion.

    On Moravcsik and the social contract: I should make it clear that the "European Social Contract", as I've described it, is a relatively low-level one in terms of salience. However, I argue that one exists, and it is an extension of the national social contracts - i.e. in an internal market there are naturally going to be compromises and issues regarding employment law, etc. To some extent he is right regarding the social contract and legitimacy, in that the core of the welfare state must remain at the national and local level, but he takes a too narrow approach.

    The internal market can only be sustained by the projection of national social contracts on to the European stage, which through their compromises and innovations builds a European one. This does not threaten the legitimacy of the European Union because to *not* do this would be even more damaging. If the internal market introduced no standards or laws in this area, the damaging effects on the environment, and the difficulty in maintaining an effective social policy and welfare state in the race to the bottom such an internal market would promote would be very destructive to the national social contracts. The most destructive arguments to the EU's legitimacy is not that there is "too much red tape" - a rather abstract idea really - but if there is ( even perceived) unfair market competition. There must be a common social contract in order to safeguard the national ones.

    Essentially, a social contract based on common social and cultural norms is needed at most levels of policy making; even at the more technical EU one. The Member States do share enough of this through their shared political culture of left-right politics and basic approach to the welfare state and the idea of the public good. This projection of national social contracts - or European Social Contract - gives the EU and its internal market a legitimacy it would otherwise not have. Moravcsik tends to separate issues and policy areas out in a way that is too black-and-white in my opinion, without recognising how they blend together and can strengthen legitimacy in some cases. But then maybe my conception of social contract is too broad.