Fortunately for Britain, the European Union does not prohibit member countries from seceding. No Abraham Lincoln sits in Brussels, willing or able to wage a war of continental aggression, should Britain decide to leave an organization that imposes net economic costs upon it.
The economic case for exit is now dominating debate across the Pelagic Isle. The large single market of the EU has brought benefits to Europe’s many small economies,especially those with a relatively large industrial base. It is bringing transfer benefits to the profligate PIIGS who are exploiting the charity of German savers. The UK, however, is a large economy with a small industrial base. It is fully capable of correcting its own fiscal excesses, especially under Conservative Party governance. For the United Kingdom, the regulatory burden of the single market massively outweighs the benefits.
The key assumption that underpins this judgment is that Britain – in the absence of becoming a member of the European Economic Area – Norway, Iceland and Liechtenstein – would still enjoy access to free trade with the European Union. This assumption is highly probable, since Germany and the Netherlands – the two best functioning EU economies – would welcome open access to the large British market. A negative trade shock imposed on the UK is in the economic interest of no EU economy, however perfidious, Albion may be regarded by some of its former allies and enemies.
Article 50 of the Treaty on European Union, one of the two treaties known together as the Lisbon Treaty, provides the option for an exit. Negotiations would be required between the British government and the various European institutions. Most likely, Britain would secure an exit placing it into a comparable situation with Switzerland i.e. a bilateral free trade deal. This would be a sweet deal for a country that desires to retain the City of London as Europe’s major financial center, and to evade the strangulation of the financial transactions tax and European-style banking regulations that the EU bureaucracy is panting to impose.
So, contrary to the advice given today by President Obama to Prime Minister David Cameron in the Oval Office, my advice is that Britain should exit now, without attempting to reform the EU from within. A country operating outside the euro-zone has precious little leverage to secure a deal that will weaken the social market philosophy that now dominates euro-land. Remember that Britons are still predominantly Anglo-Saxons, Prime Minster Cameron, and that their ties remain closer to North America and other former colonies than to Old Europe.
Hat Tip: Wolfgang Munchau, ‘Lawson is right – Britain does not need Europe’, Financial Times, May 13, 2013