There is no doubt that UK manufacturing and wider business is best served by being in the EU, and by continuing to be influential in defining the future direction of the framework conditions for manufacturing companies in the bloc, writes Adrian Harris.
Adrian Harris is the director general of Orgalime, the European engineering industries association.
Three of Orgalime’s 42 members are UK associations, namely BEAMA, EAMA and GAMBICA, and we are closely following the Brexit debate. For the engineering industry, the EU’s largest manufacturing and trading sector, the outcome of this referendum is of course important for our members, whether they are indeed UK-based or from other EU countries.
We believe that the UK has gained considerably by having a seat at the EU table: the UK is the third most populous EU nation (with 12.7% of the EU’s population) and the second largest European economy. It has a strong and often moderating influence on the development of European policies, regulations and directives, which apply not only to EU companies but also to a considerable extent to companies trading with the EU: all products on the EU market are expected to respect the EU’s internal market and environmental legislation.
In Brussels, the UK is influential in all the major regulatory institutions: there are in excess of 1,000 British nationals who hold permanent European Commission positions, several of which are in the highest-profile jobs: of the 34 Director-Generals and Deputy Director-Generals, six are British citizens. Those posts include the department in charge of financial stability, financial services and Capital Markets Union, but more importantly for manufacturing it includes the key post in the Internal Market, Industry, Entrepreneurship and SMEs (GROW) department.
73 out of a total 751 members of the European Parliament are British. It is they, with national ministers, who hold the final power of adoption of legislation. The UK is one of the heavyweights in the parliament, with only Germany (96 MEPs) and France (74 MEPs) having more representatives. Many of the UK MEPs hold key positions, such as Committee Chair/Vice Chair of crucial Parliamentary committees.
The third final decision body is the Council where national ministers and prime ministers defend the interests of their country. The UK, as for other countries, has a blocking vote in areas which are important to the UK, such as taxation and common foreign and security policy.
What would the UK lose by no longer sitting at the EU table? First, as just mentioned, its right of veto in areas of interest.
Norway is often referred to by the ‘out’ campaign as a model country. But Norway has paid a substantial price. It has access to the EU’s internal market through its membership of the European Economic Area (EEA). Indeed, Norway invests billions of Norwegian krone in monitoring, applying and enforcing EU legislative developments so that they can remain compliant, including for all product and environmental legislation, the free movement of goods, the free movement of workers, etc. which are part of a ‘package deal’ with the EU.
In other areas, such as fisheries and agricultural products, Norwegian products pay tariffs on exports to the EU. In Norway, then, where most of their laws are structured around the EU legislation, the phrase ‘fax democracy’ has been coined to indicate the fact that much of their regulation derives not from the Norwegian Parliament, but rather via a fax machine from Brussels.
Switzerland, which is not part of the European Economic Area, is faced with similar issues: it has had to negotiate some 100 bilateral agreements so as to ensure it can access the EU’s markets and associated agencies like Europol. The first major trade negotiations took eight years to conclude, well above the two years that the UK would have to come to an agreement with the EU, if it left. And again this is a package deal which covers not only the internal market but also issues such as the free movement of workers.
Currently, following the adoption of a popular vote restricting this free movement of workers, Switzerland has already been sanctioned by being excluded from part of the EU’s research and development and innovation funding. It now faces the prospect of a tough negotiation with the EU so as not to lose its access to the internal market.
Therefore, the hard reality is that even if the UK, whose manufacturing economy is heavily dependent on trade with the EU (45% of exports and 53% of imports of goods is with the EU), were to choose to leave, it will have to comply with much of its standards and regulations, if it is to continue trading with the bloc.
Finally, the UK is the third largest recipient of foreign direct investment (FDI) in the world after the US and China: £1034 billion in 2014, of which 48% is from EU countries. For many companies, the core reasons for investing in the UK are language and access to the EU market.
In conclusion, the UK, which has generally seen its national interest as best served by being engaged with Europe and has been active driver for much of the EU’s core policy and regulatory agenda – the single market, enlargement, free trade and competition, can only lose out by not remaining in the EU. This is clearly true for the many engineering companies which have interests both in the UK and in continental Europe.