Introduction
The UK and the European Union (EU) have reached a deal to redefine their relationship. After a series of hectic negotiations held at the European Council meeting on 18-19 February 2016, the EU leaders agreed on several of the UK’s proposal for reform in the EU. The agreement provided British Prime Minister David Cameron a political base for campaigning to stay with the reformed EU. For the EU, which faces external and internal challenges, the arrangement seems to avoid reversing decades of integration process, and creating an environment for its prominent defence power and the second largest economy of the region to not walk out of its fold. The deal offered to Britons, as British Prime Minister Cameron claimed, would grant a ‘special status’1 to the UK in the EU. Boosted by the agreement with the EU, the UK government called for referendum on 23 June to decide the fate of membership. The decision spurred a vibrant public debate, which seemed to shift to the issues of cost of EU membership, future of the EU reform and benefits – social and economic benefits from the EU.2
Theoretically, British ‘exceptionalism’3 is rooted in the structure of economy and political identity of the nation.4 With the reforms and renegotiation of the membership in the EU, the UK attempted to maintain its separate political identity as well as its own economic structure. In the light of developments in the EU – instability in the European neighbourhood, rise of Euroscepticism, economic crisis, to name only a few, UK’s attempt suggests a move towards finding a judicious balance between the regional approach and independent national approach in determining the course of its economy and external affairs.
British Demands for EU Reform
Historically, the UK has been sceptical of European integration process and believed in maintaining its own political identity. It refused to enter into negotiations for the foundation of European integration and evolving institutions in the 1950s. It joined the then EEC in early 1970s. Nevertheless, termed as “an awkward partner”5, it could not develop a smooth relationship with EEC,6 though the prospering economic community served the interest of the country. Britons voted in favour of staying with the EEC in the referendum held in 1975. The EEC membership provided Thatcher government the opportunity to extend the free market policies. As the EEC started moving towards deepening the integration, differences became obvious in the British approach towards Europe. Once considered as a ‘party of Europe’,7 conservatives had considerable influence on Euro-scepticism, which viewed Europe as ‘anti-thetical to British interest and identity’.8 In her Bruges speech (September 20, 1988), Margaret Thatcher noted the significance of common European efforts, but also emphasised on ‘relishing …national identity’ and over regulation of EU institutions.9 She argued for ‘wider horizons’ of Europe and said, ‘(Europe) never will prosper as a narrow-minded, inward-looking club’.10 The Labour Party government in Britain has been more pro-European. Euro-scepticism was not the fundamental ideological issue and the Labour Party government pursued a ‘more pragmatic and less politicized European policy agenda’.11 With the rise of United Kingdom Independence Party (UKIP) and Euro-scepticism in the conservative party, the conservative government came under the pressure of Euro-sceptics. Prime Minister Cameron sought to redefine the relationship with the EU.
In the efforts to renegotiate the membership, Prime Minister Cameron called for reform in the EU. In a letter dated 10 November 2015 to the European Council President, Donald Tusk, he presented the proposal for reform in four areas, namely, economic governance, competitiveness, sovereignty and social benefits and free movement.12 The Prime Minister asked for ‘legally binding principles’, which protect the operation of the Union and a mechanism for the implementation of these principles.13 Since Britain is the ‘permanent opt-out’ from the Eurozone, therefore, it demanded to ensure that there should be no ‘discrimination and no ‘disadvantage’14 in any business between Eurozone and non-Eurozone countries, and Eurozone decisions must not be binding on ‘non-Eurozone’ countries. The UK wants inclusive decision and policy making processes in the EU. Cameron’s letter stated that the UK also wishes that any issue, which concerns all Member States, must be decided by all Member States. Economic crisis has severe implications for growth and employment generation in Europe. Unemployment is record high in the continent. The UK seeks more role of the EU in facilitating economic growth and development. Increased competition can boost investment, innovation; hence, productivity will increase. The EU needs to be more democratic – transparent justice system, free pluralistic press and mechanism to tackle national vested interests.15 The European Commission should take measures towards ‘a single digital market’ and a ‘Capital Markets Union’.16 Prime Minister Cameron considers that a single digital market could add three percent to EU’s GDP and the Capital Markets’ Union might be helpful in providing more finance to entrepreneurship and business development.
The EU should be more proactive in expanding economic engagement outside Europe. The UK argues that the EU has been unsuccessful in nurturing free trade partnership with major growth centres of the world. For instance, the EU has not signed free trade agreement (FTA) with China, but Norway, Iceland and Switzerland signed the FTA with China. In his letter, Prime Minister Cameron also seeks support in EU’s major trade initiatives with America, China, Japan and ASEAN. The UK wishes that the EU should do more for promoting competitiveness and reforms in order to facilitate growth.17
The external trade pattern of UK reflects that the EU remains its major trade partner, but its economic engagement with non-EU countries is expanding at a greater rate. The EU accounted for 44.6 per cent of UK exports of goods and services in 2014, and 53.2 per cent of UK imports of goods and services in the same year. Despite increase in the value of EU trade, the share in overall trade is decreasing. For instance, exports from the UK to EU and non-EU countries have grown on an average by 3.6 per cent and 6.5 per cent, respectively, annually, between 1999 and 2014.18
The ‘British exceptionalism’ in terms of political economy and national identity has been reflected in Prime Minister Cameron’s demand. The UK wishes to come out of commitment to ‘ever closer union’.19 The role of national parliaments has become crucial in the discourse on the EU matters, particularly over the legitimacy of EU decision making process. Parliament scrutiny and participation rights at the national and European levels are necessary steps for reducing the democratic deficit in the EU.20 Scholars also argue that ‘democratic deficit’ is the result of European economic structure.21 Prime Minister Cameron advocates that the National Parliament should be given more powers and its role must be enhanced. He also wants to properly implement the principles of subsidiarity. He suggested that the objective should be “Europe where necessary, national where possible.”22
Limiting immigration is a crucial demand of the UK. The UK says that current level of net migration is not sustainable for the UK. The immigrants have put extra pressure on welfare and social services. The UK has taken measures to control immigration from outside EU; however, the immigration within the EU also needs to be controlled. Prime Minister Cameron asked for reducing the welfare benefits or social housing. He argued that if a job seeker could not get a job in six months, s/he should be sent back. They would not be entitled to any welfare allowance. The UK also wanted to take measures to control sham marriage. Reducing welfare benefits of migrants was opposed by the Central and Eastern European countries.
Chart 1: British Prime Minister Cameron’s Demand, EU’s Draft and Final Deal
Issue |
Cameron’s Demand |
EU’s Draft Proposal |
Final Deal |
Assessment |
Economic Governance |
No-discrimination on the basis of currency; recognize that euro is not the only currency of the EU; non-euro zone countries’ taxpayers not to be financially liable for support the Euro zone. |
Measures for further deepening economic and monetary union would be voluntary for non-euro countries; mutual respect between euro and non-euro countries, no budgetary obligation in economic crisis. |
Measures for further deepening economic and monetary union would be voluntary for non-euro member states, but they would not create hurdle in the future integration process. The euro and non-euro member states would respect each other; single-rule is applicable to all credit institutions and financial institutions for level-playing field. No budgetary obligation in economic crisis. |
The EU has agreed to Prime Minister Cameron’s demands on economic governance. The deal also includes that non-eurozone members would not create hurdle for further integration; supervisory role of ECB and single- rule book provisions. |
Competitiveness |
Cut red tapism, reduce excessive regulations and extend single markets and move towards single digital union, etc.; pursue trade deal with America, Japan, China and ASEAN |
The EU must enhance competitiveness to generate growth and jobs; lower administrative burdens and compliance; repeal unnecessary legislations; pursue active trade policy. |
The EU must enhance competitiveness to generate growth and jobs; ower administrative burdens and compliance; repeal unnecessary legislations; pursue active trade policy. |
It is considered to be the least contentious demand. Prime Minister Cameron has achieved desired outcome. |
Sovereignty |
End the commitment of ‘ever closer union’; greater powers for national parliaments; fully implement subsidiarity – “Europe where necessary, national where possible.” |
Recognized the ‘specific situation’ of the UK in the treaties; the references to an ever closer union ‘... do not compel all Member States for a common destination.’ Non-compliance of principles of subsidiarity should be reported to the Council Presidency within 12 weeks with support of more than 55% of the votes of the national parliaments. |
Recognized the specific situation of the UK in the treaties; the references to an ever closer union ‘….do not compel all Member States for a common destination.’ Non-compliance of principles of subsidiarity should be reported to the Council Presidency within 12 weeks with support of more than 55% of votes of national parliaments. |
The EU has agreed to the UK to end the commitment for ever closer union. Prime Minister Cameron’s demand for the implementation of principles of subsidiarity has been accepted. More powers to national parliaments were also granted. Outcome is satisfactory for Prime Minister Cameron. |
Social Benefits and Free Movement |
Greater control on migrants from within EU; tougher and longer re-entry bans for fraudsters and sham marriages; migrants from EU contribute for four years before they qualify for welfare benefits or social housing. |
Member State may limit access of newly arrived workers with authorization of the Council for a period of four years. The implementing act would be for a limited period, and it would be extendable. Child benefits would be calculated according to the standard where it resides. |
Member State may limit access of newly arrived workers with authorization of the Council for a period of four years. The authorization would be limited to seven years. Child benefits would be calculated according to the standard where it resides. |
The EU has not fully accepted the UK’s demands. The UK will be able to limit the benefits of new EU migrants. Prime Minister Cameron asked for brake for a longer period. However, brake for a shorter period has been granted. |
Sources: British Prime Minister Cameron’s Letter to Donald Tusk dated 10 November 2015; Draft Decision of the Heads of State or Government, 2 February, 2016; European Council Meeting (18-19 February 2016),
Conclusions.
What the New Settlement Deal Offers
Impact on the EU
The settlement deal has created a special arrangement for the UK in the EU. The deal may have multiple implications for the EU and internal political dynamics of its Member States. The EU faces challenges to reconcile the heterogeneity of member states’ objective and political willingness with the scope and content of the integration process.33 The EU has attempted to reconcile the demand of UK in the broader objective of the European integration. But analysts argue that the deal may open a‘Pandora’s box’34 and other member states may demand such special considerations at their convenience. Their fear is based on the changing political dynamics in the EU member states. Far-right parties in the recent elections have achieved electoral success in recent elections in the European countries. Their electoral agendas have the potential to create further frictions or strains in the European integration process. For instance, the National Front said that it would seek similar settlement for France if it comes to power. Economic crisis and current migrant/refugee crisis have already complicated the process of formulating the common responses among the member states to regional crises. An analysis of the negotiation process of the deal reflects that member states’ position is driven by several factors ranging from their national interests, changing political dynamics to broader European integration process.
The deal has assured the non discrimination of non-eurozone member states in the EU, but it maintains that eurozone countries can continue towards deepening the economic and monetary union. The deal also states that the European Central Bank would apply union law for functioning as the single supervisor. Both Germany and France supported Prime Minister Cameron’s demands and were willing to make special arrangement for the UK, but not at the cost of the EU. France maintains that Brexit would not be a positive scenario for both the UK as well as the EU. However, it was against granting power to any Member State, which may hamper the financial regulations of the EU.35 France insisted to the UK should not given any ‘exceptions to the rules of the EU’, particularly on the financial regulations.36 French President Hollande said, “No country must have a right of veto, no country must exempt itself from the common rules or common authorities. It's the European Union that's at stake, not simply one country of the European Union.”37 The rise of Front National may influence the French policy towards EU reforms. The Brexit may fuel such demands in France; consequently, the FN may get electoral benefits. German position also points out that it is in mutual interest of both EU and the UK to avoid Brexit. Chancellor Merkel was a ‘compromise-broker’ between the UK and other Member States. She along with European Commission President, Jean-Claude Juncker, and European Council President, Donald Tusk, played a crucial role in facilitating a deal.38
Competitiveness is desirable to almost every Member States. The EU needs to reform its institutions, cut red tapism, and delete the unnecessary regulations. Prime Minister Cameron’s demand for strengthening the single market and Custom Union won the support of several member states.
The settlement deal has accommodated British demand to maintain a separate political identity. Such provisions may fuel demands in other Member States. The settlement deal has reaffirmed the role of national parliaments in the institutional architecture of the EU. The Treaty on European Union (2009) stipulates that the institutions of the Union shall apply the principles of subsidiarity and proportionality. The settlement deal also emphasizes the implementation of the principle of subsidiarity. But it may create legal complexities in the decision making process at the EU and national level. It is argued that if Britons vote to stay with the EU, the legitimacy of decision making question would become more pertinent.39 The EU has agreed to different paths of integration being available to different Member States, which may end the common goal of integration of Europe.40
The free movement of people is a fundamental value of European integration, which is well recognized in the deal. The people of EU member states have the right to search employment across the EU. However, the deal has recognized that member states can limit the movement and welfare benefits in exceptional circumstances with the approval of the European Commission. Other states are also hoping to be benefit from the control on welfare and child benefits. The settlement deal states that the UK would no longer pay full child benefits for children who reside in their home country. Germany also has higher child benefit expenditure. It may follow British measures, where payments will be indexed to the cost of living or benefit rates where the children live. Austria, Denmark and the Netherlands have also expressed an interest in adopting such measures.41 Member states from Eastern Europe were against control on free movement of people. Although they agreed to the provisions of reducing and putting a brake on the welfare benefits, they are opposed to discrimination against the existing migrants. For instance, Poland argued that Poles, who are already living in the UK, were allowed to retain the access to work and child benefits.42 It is incorporated in the final deal.
Conclusion
The EU has attempted to accommodate the demands of the UK with the new settlement deal. It was reached after wide consultation and bargaining among the Member States. British political parties43 have given diverse reactions to the agreement; however, the proposed reform offer seems to be a balanced political deal for both - the EU and the UK. Prime Minister Cameron has not been able to achieve all his demands. The UK has achieved its objectives on competitiveness. In fact, the EU role in improving the job and growth prospects would be beneficial for all Member States. On economic governance issue, the EU has maintained a balance between euro and non euro Member States. The UK is also partially successful in terms of social benefits and free movement.
Reactions from the UK do not necessarily reflect view on the UK membership issue and relationship with the EU, but relate to the political discourse with in the country, including internal political dynamics and rise of euroscepticism. Divisions in the Conservative party are a critical challenge for the Prime Minister himself. Prime Minister Cameron is widely campaigning for staying with the EU. Some of cabinet colleagues and many of his party’s MPs have taken a political stand different from the government. The 23 June political exercise may lead to the rise of new political actors in Britain.
***
* The Author is Research Fellow at the Indian Council of World Affairs, Sapru House, New Delhi
The views expressed are that of the Researcher and not of the Council.
Endnotes:
1 “EU Deal Gives UK Special Status, Says David Cameron,” BBC, February 20, 2016, http://www.bbc.com/news/uk-politics-35616768 (Accessed March 3, 2016)
2 “Get Britain Out, Time to Leave the EU,” http://getbritainout.org/
3 Chris Gifford, The Making of Eurosceptic Britain: Identity and Economy in a Post-Imperial State, (Hampshire: Ashgate Publishing Limited, 2008), p. 83.
4 Chris Gifford, The Making of Eurosceptic Britain: Identity and Economy in a Post-Imperial State, (Hampshire: Ashgate Publishing Limited, 2008), p. 83.
5 Stephen George, An Awkward Partner: Britain in the European Community, Oxford University Press, Oxford, 1998.
6 Tim Oliver, “Europe’s British Question: The UK-EU Relationship in a Changing Europe and Multipolar World, Global Society, Vol 29,
No. 3, p. 409.
11Conservative Party stands divided, Labour Party called it largely irrelevant, but supports EU membership, UKIP opposed, SNP argues that the EU needs reform but it supports EU membership.
7 Oliver Daddow, “Strategising European Policy: David Cameron's Referendum Gamble,” The RUSI Journal, 160:5, November 2015.
8 Chris Gifford, The Making of Eurosceptic Britain: Identity and Economy in a Post-Imperial State, (Hampshire: Ashgate Publishing Limited, 2008), p. 83.
9 Oliver Daddow, “Strategising European Policy: David Cameron's Referendum Gamble,” The RUSI Journal, 160:5, November 2015.
10 Margaret Thatcher, Speech to the College of Europe (“The Bruges Speech”), September 20, 1988, http://www.margaretthatcher.org/document/107332 (Accessed February 2, 2016).
11 Chris Gifford, The Making of Eurosceptic Britain: Identity and Economy in a Post-Imperial State, (Hampshire: Ashgate Publishing Limited, 2008), p. 139.
12 Prime Minister Letter to the President of European Council Donald Tusk, 10 November 2015, 10 Downing Street London, https://www.gov.uk/government/uploads/system/uploads/attachmentdata/file/475679/DonaldTusk letter.pdf (Accessed January 10, 2016).
13 Ibid.
14 Ibid.
15 Christian Odendahl, “European Competitiveness, Revisited,” Center for European Reforms, January 19, 2016.
16 Prime Minister Letter to the President of European Council Donald Tusk, 10 November 2015, 10 Downing Street London, https://www.gov.uk/government/uploads/system/uploads/attachmentdata/file/475679/DonaldTusk letter.pdf (Accessed January 10, 2016).
17 Ibid
18 Office for National Statistics, “How Important is the European Union to UK Trade and Investment?” http://www.ons.gov.uk/ons/rel/international-transactions/outward-foreign-affiliates-statistics/how-important-is-the-european-union-to-uk-trade-and-investment-/sty-eu.html (Accessed February 5, 2016).
19 Prime Minister Letter to the President of European Council Donald Tusk, 10 November 2015, 10 Downing Street London.
20 Katrin Auel & Thomas Christiansen, “After Lisbon: National Parliaments in the European Union,” West European Politics, 38:2, 2015, 261-281.
21 Jakub J. Grygiel, “The Faulty Logic of the European Union & Its Consequences for the United States,” Orbis, Fall 2012, p. 521.
22 Prime Minister Letter to the President of European Council Donald Tusk, 10 November 2015, 10 Downing Street London.
23 European Council, European Council meeting (18 and 19 February 2016) – Conclusions, Brussels, 19 February 2016, p. 12.
24 Ibid
25 Ibid, p-13.
26 Ibid, p. 14.
27 Ibid, p. 15.
28 Ibid, p.16
29 Ibid
30 Ibid, p. 23.
31 Ibid, p.23
32 Ibid, p. 22
33 Funda Tekin, Brexit or No Brexit? Political and Institutional Implications of an EU without the UK. IAI, March 2016.
34 Sylvie Goulard, Brexit Deal ‘Is Legally Dubious and Politically Dangerous’, Financial Times, February 22, 2016, http://www.ft.com/intl/cms/s/0/bb4326aa-d749-11e5-829b-8564e7528e54.html#axzz48EMZ3Vsh (Accessed May 5, 2016).
35 Benjamin Dodman, “Brexit Saga, Britain Is Fast Running Out Of Friends,” France 24, February 5, 2016, http://www.france24.com/en/20160205-brexit-uk-europe-cameron-france-hollande-referendum-eurosceptic (Accessed February 7, 2016).
36 Alex Barker, George Parker and Jim Brunsden, “Brexit: Talks Drag on as France and Poland Dig In,” Financial Times, February 19, 2016, https://next.ft.com/content/19fe32bc-d6db-11e5-8887-98e7feb46f27 (Accessed May 3, 2016); BBC, “EU reform Deal: What Cameron Wanted and What He Got,” February 20, 2016, http://www.bbc.com/news/uk-politics-eu-referendum-35622105 (Accessed May 3, 2016).
37 Oliver Wright, EU deal: David Cameron Urged to Sign 'Take It or Leave It' Clause as Donald Tusk Says Talks May Be Extended Until Sunday, The Independent, February 19, 2016, http://www.independent.co.uk/news/world/europe/eu-deal-france-and-belgium-demand-take-it-or-leave-clause-to-avoid-second-renegotiation-in-event-of-a6882261.html (Accessed May 4, 2016).
38 Tara Palmeri, “Germany Wants To Be a Brexit Broker,” Politico, November 24, 2015, http://www.politico.eu/article/germany-merkel-wants-to-be-a-brexit-cameron-broker/ (Accessed January 25, 2016).
39 Funda Tekin, Brexit or No Brexit? Political and Institutional Implications of an EU Without the UK. IAI, March 2016.
40 Charles Grant, Cameron’s Deal is More Than It Seems,” Center for European Reform, March 23, 2016.
41 Philip Oltermann, Germany Among EU Countries Keen to Copy UK Child Benefit Peg, The Guardian, February 18, 2016, http://www.theguardian.com/world/2016/feb/23/germany-angela-merkel-eu-countries-keen-copy-uk-child-benefit-peg (Accessed May 7, 2016).
42 Patrick Wintour, “Poland Will Not Accept Cut in Benefits for Those Already in UK, Says Aide,” The Guardian, 18 February 2016, http://www.theguardian.com/politics/2016/feb/18/poland-will-not-accept-cut-in-benefits-for-those-already-in-uk-says-aide (Accessed May 7, 2016 ).