Tuesday, January 04, 2005

A hugely risky step to take

Iranian-born Financial Times journalist, Scheherazade Daneshkhu, today offers us in the pages of this his august journal a piece headed: "Counting the costs and benefits of belonging to the European Union."

It is generally believed, he (she?) writes, that Britain's membership of the EU is "a good thing" although the debate over joining the euro and fears about the consequences of EU enlargement have led to this assumption being challenged and, as Britain takes over the EU presidency and the argument over the EU constitution heats up, the benefits of membership will come under greater scrutiny.

He reminds us that there have already been challenges, including from Civitas, and from Professor Patrick Minford of Cardiff Business School. Minford identifies "unacceptably high" ongoing costs of 3.2 to 3.7 per cent of gross domestic product in a book to be published this year. Assuming the EU would impose the same trade barriers it levies on non-members, he concludes "the UK would be considerably better off" leaving the EU.

Daneshkhu also cites the study by Brian Hindley and Martin Howe in "Better Off Out?" - for the Institute of Economic Affairs – which found a net economic cost to Britain of withdrawal, albeit a small one of less than 1 percent of GDP.

Sensibly, the man then opines that “estimating the costs and benefits of EU membership is fraught with difficulty because of the need to make the comparison with Britain's economic circumstances had it not been a member,” but then leaps into the dark by saying that “While the studies attempt to do this they inevitably involve making assumptions that may not be universally shared.”

True… but, amazingly (or conveniently, depending on your point of view) Deneshkhu does not cite the EU commission’s own current competitiveness report (see here and here) which concluded that EU could raise overall GDP by 12 percent through adopting an American-style "regulatory burden", putting the cost of EU red tape in the UK at £120,000,000,000 a year - £120 billion in real money.

With that omission, and only with that, is Deneshkhu able to come up with what, in the context is a truly amazing statement: “The consensus is that Britain has gained enormously from the EU.”

This is one Giscard d'Estaing consensuses: The main political parties are united in supporting membership as are business organisations, such as the Institute of Directors, the CBI and the British Chambers of Commerce.

To support that "consensus" Deneshkhu calls in aid an unnamed "commission report" which held that that the EU's GDP in 2002 was 1.8 percentage points, or €164.5bn, higher than it would have been thanks to the single market. Er… yes, maybe, but 12 percent lower than it could be otherwise.

Such is the magic of selective quoting – and selective amnesia – which can be reinforced by citing the National Institute of Economic and Social Research, which reckons that EU membership has raised UK GDP by 3 to 5 per cent, equivalent to about £35bn - £60bn.

And so he drivels on having, in my view, lost all credibility. "The difference of opinion about the costs and benefits of EU membership suggest that any thought of leaving the EU, in preference to stepping up the pace of internal reform, would be a hugely risky step to take," he concludes.

Yea… right. Anything you say guv.

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