By Nick Wright
August 4, 2019
What is the European Union (EU)?
The European Union is a political and economic union of 28 member states with an estimated population of about 513 million. Its origins lie in post-war reconstruction and the Cold War, when the first attempts were made to construct a political, military and economic power bloc in Western Europe.
Although the plans to establish a pro-NATO, anti-Soviet European Defence Community and European Political Community were defeated in 1954, the European Iron and Steel Community survived to form the basis of the European Economic Community in 1957 alongside the new European Atomic Energy Community (Euratom).
The UK joined the European Communities in 1973, despite widespread opposition on the left and in the labour movement. Since then, the EU—as it became—has taken big steps towards that original goal of a political, military and economic union.
The EU has since developed an internal Single Market and a Customs Union through a standardised system of Rules, Directives and Regulations which apply in all member states to major areas of the economy (notably competition, trade, investment, agriculture, fisheries, public finances, VAT and trading standards), employment and social policy (including hours of work, leave, health and safety, gender equality and consumer rights), and the environment (including pollution and waste management).
How is the EU structured?
The heads of state or government of the EU member states meet as a European Council at least four times a year. They and their subsidiary councils of ministers in specific matters give political direction to the development and operation of EU policies. In reality, though, the EU Commission nominated between the member states and the Council uses its treaty-based powers to initiate, draft and police EU legislation and control the operations of the EU. The President of the Commission is currently Jean-Claude Juncker (who when Prime Minister turned Luxembourg into a major corporate tax haven). There is a European Parliament with 751 MEPs elected every five years in national or regional constituencies.
What are the basic EU Treaties?
The Treaty on the Functioning of the European Union (TFEU, based on the 1957 Treaty of Rome) and the Treaty on European Union (TEU, based on the 1992 Maastricht Treaty amended by the 1998 Amsterdam Treaty) were revised and consolidated as such by the 2009 Treaty of Lisbon (the ‘Constitutional Treaty’).
The peoples of France and the Netherlands had rejected a European Constitution in referendums in 2005. Referendums planned for the UK and five other EU member states were then cancelled.
The Constitution was repackaged as the Treaty of Lisbon and rejected in the only referendum allowed, in the Irish Republic in 2008. The result was reversed by another referendum in 2009 and the Treaty adopted. It introduced Qualified Majority Voting in the Council of Ministers (the UK has about 8% of the votes), an unelected President of the Commission, an unelected High Representative for Foreign and Security Policy and a substantial military dimension for the EU.
What are the ‘four freedoms’?
EU Treaties and Directives aim to ensure the free movement of goods, services, capital and labour within the internal market (and the free movement of capital between member states and the outside world). The EU ‘right of establishment’ empowers companies in one EU country to set up and conduct operations in any other EU member state.
These ‘freedoms’ implement the principle of an ‘open market economy’ proclaimed five times in the TEU and TFEU.
These are the main reasons why most of the big capitalist monopolies and big business organisations across Europe—including the CBI and Institute of Directors—support EU membership.
What about the free movement of people?
The free movement of labour and workers is also presented in EU treaties as the ‘free movement of persons’, in the attempt to humanise the main aim of maximising profit through the exploitation of mobile labour power.
For travel, work and residency within the EU ‘Schengen Area’ of 22 member states (due to become 26), passport and most other controls have been abolished (although some were partially reintroduced during the 2015 migrant crisis). The UK and the Republic of Ireland are not part of the Schengen Area and so still have the power to operate passport controls within the EU.
The EU’s ‘free movement of labour’ principle and its Posted Workers Directive empower companies to employ and transfer workers across national borders, sometimes undermining local pay, conditions and trade union agreements.
How is the EU Budget distributed?
There are usually nine EU member states that contribute a net amount to the EU Budget and around 12 countries that usually receive over one million Euros from the Budget. The largest net contributor is Germany followed by France and Italy contributing about the same amount with the UK close behind. Poland is by far the largest net recipient of EU funding followed by Greece, Hungary, Spain, Belgium and Portugal. More than one-third of the EU Budget is spent on the Common Agricultural Policy, less than one-quarter on regional development and 7% on aid to developing countries.
How much does the UK pay into the EU?
In 2017, the UK’s gross contribution to the EU Budget amounted to £18.6bn (or £358m a week). Receipts from EU funds and Britain’s rebate added up to £4.1bn and £5.6bn, respectively. That leaves a net contribution from the UK to the EU of £8.1bn. In short, all the spending by EU funds in Britain is more than affordable in future from the savings of non-membership. In addition, up to £8bn a year would be available for extra spending on, say, housing, the NHS, education, social benefits, pensions and overseas aid or for National Debt repayment or tax reductions.
What is the European Court of Justice?
The ECJ is the highest court of the European Union in matters of EU law, but not national law unless this is in conflict with EU Treaties and Directives. Its judges are nominated and approved by the member states.
In a series of rulings (the Viking, Laval, Ruffert, Luxembourg, Alemo-Herron and Woolworths cases) the ECJ has upheld the right of companies to defy collective agreements and national and provincial legislation in their treatment of ‘posted’ (imported), outsourced and redundant workers. These judgements uphold EU business freedoms at the expense of local wages, conditions and the right of trade unions to strike in their defence.
The ECJ is not to be confused with the European Court of Human Rights (see QX)
What is the Eurozone?
Monetary union began in 1990 and 19 EU member states have adopted the Euro since 1999. In preparation, Britain entered the European Monetary System in 1990 before crashing out with soaring interest rates, prices and unemployment on ‘Black Wednesday’, September 1992.
Prime Minister Tony Blair recommenced preparations by granting ‘independence’ to the Bank of England in 1997, but Chancellor Gordon Brown vetoed adopting the Euro in place of the pound.
Operated by the European Central Bank and policed by the European Commission, Eurozone policy prioritises fiscal conservatism and low inflation above public investment, economic expansion and full employment.
What is the European Central Bank?
The ECB was established by the Treaty of Amsterdam in 1998 with the objective of ensuring ‘price stability’ in line with a very low, calculated rate of inflation.
The President of the ECB is Mario Draghi, formerly governor of the Bank of Italy, member of the World Bank and managing director of the Goldman Sachs international division.
The Governing Council is made up of the governors of the national central banks of the 19 Eurozone countries. The TFEU makes clear that the ECB must operate its monetarist policies independent of any elected or appointed EU or national Member State body.
Is the EU to blame for austerity?
Right-wing governments are usually happy to cut social and welfare spending, privatise public assets and cut taxes for the rich and big business.
The EU presses all Member State governments to do likewise. The TFEU’s Stability and Growth Pact subjects all member states (not just the 19 members of the Eurozone) to annual monitoring by the European Commission and the Council of Ministers. Every country is obliged to limit public sector borrowing to 3% of GDP and debt to 60%.
Breaches are subject to an Excess Deficit Procedure (EDP) to achieve this ‘convergence’. The UK was removed from the EDP recently as the Tory government’s austerity policies were on course to meet EU targets.
From 2010, the EU Commission-ECB-IMF ‘Troika’ granted loans and ‘bond swaps’ to eight EU member states to assist the bail-outs of banks and financial systems. In return, national governments had to impose sweeping public spending cuts, tax rises and labour ‘flexibility’ reforms. Those that resisted were removed in 2011 and replaced by unelected technocrats acceptable to the ‘Troika’ (see QX).
In December 2018, the EU Commission, ECB and bond markets forced the Italian government to cut spending on pensions and unemployment benefit, even though its budget obeyed the 3% deficit rule.
Is the EU democratic?
Although the European Parliament is directly elected, this is on a scale (one MEP per half a million electors—almost ten times the Westminster ratio) that breaks any organic link between the people and their representatives.
The EU parliament does not have the powers normally associated with parliaments in a democracy: to initiate legislation, appoint and control the executive (the government or in this case the Council of Ministers), determine the Budget or effectively call the civil service—the Commission—to account. It merely shares decision-making with the Council of Ministers to amend and approve any legislation brought to it by the EU Commission.
Pressure from the EU and its supporters has forced countries to re-run referendums that do not produce a pro-EU result (e.g., Denmark 1993, Ireland 2002 and 2009).
When elected governments in Greece and Italy refused to carry out stricter austerity policies in line with the EU Stability and Growth Pact, they were forced from office in 2011 by the ‘Troika’ (the Commission, ECB and IMF) and replaced by unelected regimes headed by former top EU officials. In December 2018, the Commission and financial markets compelled the Italian government to abandon plans to boost unemployment benefits and pensions.
Isn’t the EU a force for peace and stability in Europe and the world?
The EU has expanded alongside NATO across eastern Europe, the Baltic states and other former Soviet republics to the borders of Russia. The Treaty on European Union commits EU member states to rearmament and to a Common Security and Defence Policy that will ‘contribute to the vitality of a renewed Atlantic Alliance’.
Since the 1997 Amsterdam Treaty, the EU has developed a military-political apparatus including the European Defence Agency, the EU Institute for Security Studies, the EU Satellite Centre and the European Operational Rapid Force (the nucleus of EU armed forces).
EU membership has not prevented members states from military intervention—mostly unlawful—in Djibouti, Chad, Mauritania, Afghanistan, Zaire, Iraq, Kuwait, Serbia, Bosnia, Kosovo, Somalia, Libya, Syria and elsewhere.
How important is Britain’s trade with the EU?
Since joining the European Economic Community in 1973, the UK’s trade deficit in goods with the EU has grown to £95bn (2017). Although there is a trade surplus in services (£28bn), the UK’s overall trade balance with the EU is in deficit by £67bn.
Beyond the EU, the UK has a trade surplus with the rest of the world of £41bn (the £83bn surplus on services outweighing the £42bn goods deficit). The UK sells 44% of its exports to the EU (down from 53% in 1998) and is jointly the biggest market for EU exports along with the USA (16% each). The EU 28’s share of world economic output has declined from 30% in 1980 to 17% today.
Britain and the EU have a mutual interest in maintaining close trade relations—but economic relations with the rest of the world are becoming increasingly important.
Would Brexit mean a loss of rights?
EU legislation has expanded some employment, environmental and consumer rights and standards. These were all transferred into British law by the EU (Withdrawal) Act 2018.
However, most of our rights and standards derive from domestic legislation—much of it won only after determined campaigning by trade unions, pressure groups and other popular movements. This is true in terms of statutory pay, pensions, health and social care, trade union recognition, the right to strike, most equalities legislation, planning and the environment.
UK rights and standards are often far superior to the minimum levels required by EU legislation (eg. working time regulations, maternity pay, traffic pollution and animal welfare).
The Treaty on the Functioning of the European Union (TFEU) forbids any EU measures to enforce the right to strike, minimum pay or protection against employer lock-outs. The EU has never defended rights and freedoms in Britain against anti-trade union and other repressive legislation.
Instead, civil liberties in Britain have received some protection from the Council of Europe (established in 1949) to which all 47 European states are affiliated. Neither this nor its European Convention and Court of Human Rights (ECHR) are related to the EU.
In December 2014, in defence of its own powers, the EU Court of Justice ruled against European Union accession to the ECHR. In Britain, we will only lose our rights if we fail to defend them, whether outside or inside the EU.
Is Brexit racist?
The free movement of people within the EU has been accompanied by restrictions on people coming in from elsewhere. EU member states such as Britain, Denmark, Sweden and the Netherlands have been pressured to raise their barriers to non-EU immigration.
This ‘Fortress Europe’ policy has helped create the conditions in which violent racist attacks have increased in many EU member states.
The trade and investment agreements imposed upon countries in Africa by the EU have opened up their economies to privatisation (eg, water) and over-dependence on a narrow range of exports, contributing to debt, destitution and mass migration.
While many Leave voters in 2016 were concerned about immigration, opinion surveys (Ashcroft Polling, the TUC) show that their biggest issue was democratic control and national sovereignty.
Misplaced fears about the impact of immigration on jobs and public services should be countered with information and rational argument, not by falsely branding 17.4 million people as racists.
What’s in Theresa May’s EU deal?
The Withdrawal Agreement sets the terms of divorce:
- The UK formally leaves the EU and its institutions on March 29, 2019, but remains part of the EU Single Market in goods and most services and the Customs Union during the ‘transition period’ until December 31, 2020 (which can be extended for up to two years), bound by its rules and Directives (including any new ones). Thereafter, the UK will remain in a single market with the EU for trade in goods and many financial and other services, bound by current and future rules and Directives and ECJ rulings, but outside the EU Common Agricultural Policy.
- The UK and EU agree there should be a ‘frictionless’ border between the UK and Northern Ireland, on the one side, and the EU and Irish Republic on the other. Failure to reach an agreement on trade relations after December 2020 would mean that a ‘backstop’ would operate, whereby Northern Ireland stays aligned with EU Single Market and Customs Union rules and—for as long as the union exists—so, too, by extension would Britain. That arrangement can only be changed legally with EU consent.
- EU citizens and UK nationals and their family members will have guaranteed rights of continued residency and travel.
- The UK will pay an estimated £39bn to the EU in order to meet commitments to future EU expenditure. The EU claim is contested—a House of Lords report claimed that the UK owes nothing—and most of that money will not come to Britain or British citizens.
- Any disputes over interpretation of the Withdrawal Agreement will be decided according to ECJ rulings in matters of EU law, while British authorities will take ECJ rulings into account when deciding other matters.
Both sides will continue to cooperate and coordinate their policies in areas such as taxation, professional qualifications, policing, judicial affairs, intellectual property rights and environmental protection.
The deal also comprises a much shorter Political Declaration about a framework for future UK-EU relations after the transition period.
What about Scotland and Wales?
Brexit would transfer decision-making powers in 64 areas of policy from the EU and its Commission to both the Scottish Parliament and the National Assembly of Wales. These areas include state aid to industry, public sector procurement, rail franchises, equalities legislation, agriculture, forestry, land use, carbon capture and storage, offshore oil and gas installations, environmental impact assessments and quality controls, planning consent, onshore hydrocarbon licences, radioactive shipments, animal welfare, food standards and public health and safety protection.
In 43 additional areas, Scotland’s greater degree of devolution would mean new powers over renewable energy, rail markets and operating licences, social security and criminal justice including child sexual exploitation and human trafficking.
There is every prospect that Scotland and Wales would develop policies that can only improve on the low standards set in Brussels and Westminster.
‘Independence’ for Scotland and Wales inside the EU would mean (1) those powers remaining or going back to Brussels and (2) possible dislocation of trade relations with their biggest trading partner by far, namely, a post-Brexit England.
What are the ‘Norway +’ and ‘Canada +’ options?
As a member of EFTA, Norway participates alongside the EU in the European Economic Area, which is based on EU Single Market principles of the free movement of capital, labour, goods and services. EFTA also has its own less substantial free trade agreements with non-EU countries (mostly aligned with EU principles and standards).
Norway therefore accepts almost all EU legislation and ECJ and EU Commission rulings on economic matters (except agriculture and fisheries) and contributes to relevant EU budgets.
The EFTA countries are subject to EFTA Court rulings on market ‘freedoms’ and labour ‘flexibility’ and are part of the EU Schengen Area.
A ‘Norway +’ arrangement signifies adding affiliation to the EU Customs Union, Euratom, the European Defence Agency or the EU VAT Area to EEA membership.
EFTA member Switzerland participates in Euratom and—through its own non-EEA sectoral agreements—in the EU Single Market.
Under the EU-Canada Comprehensive Economic and Trade Agreement (CETA), trade tariffs on all industrial and most agricultural goods are being removed or capped. So are many barriers to investment, public procurement contracts and—with restrictions—the provision of services. EU Single Market rules do not apply, border checks on people and goods still operate and Canada will not contribute to EU funds.
State aid will be restricted and strict compensation rules apply in cases of nationalisation. Companies in the EU will be empowered to take the Canadian government to a disputes resolution tribunal.
Either side can withdraw from CETA with notice. For Britain, ‘Canada +’ could mean adding full access to each others’ financial markets.
What would happen if there’s a ‘no deal’ Brexit?
Since triggering Article 50 in March 2017 giving belated notice to leave the EU, the British government and the EU have refused to negotiate a mutually beneficial agreement on withdrawal and future relations.
Instead, the EU Commission has colluded with the pro-EU faction in the Tory Cabinet led by Theresa May and Chancellor Hammond to produce a ‘bogus Brexit’ deal, as the fall-back position if the Brexit decision could not be reversed altogether. Now we are told that we must back this ‘bogus Brexit’ or else the UK will ‘crash out’ of the EU on March 29 in a ‘No Deal’ Brexit, with ‘catastrophic’ results.
It’s true that leaving the EU with no agreed replacement for current arrangements, or a transition period towards one, could cause significant upheaval and dislocation. for that, the Tory government and the EU would be jointly responsible. But forecasts of a catastrophe are wide of the mark.
Britain is the world’s fifth biggest economic power. Most economic activity in Britain—around 80-85%—takes place independently of relations with the EU. Temporary and emergency arrangements could be negotiated, some in areas already covered by the Withdrawal Agreement, and economic relations can always be conducted in line with World Trade Organisation rules. These insist upon extensive market access between member countries and, except in very limited circumstances, forbid discrimination against any particular country.
Tariffs on each other’s products would be inconvenient—but Britain’s trade deficit with the EU means that the Treasury could reimburse exporters in full from the tariffs on EU imports and still make a profit.
In the absence of the Withdrawal Agreement or an agreed alternative, UK-EU trade relations would be conducted under general WTO rules which (1) guarantee market access between WTO member states in most circumstances; (2) disallow discrimination by one member state against another, unless a preferential trade agreement exists between them; (3) set universal limits on tariff or quota levels that can be imposed on imports; and (4) outlaw ‘dumping’ of under-priced exports on foreign markets.
Trading with the EU on WTO rules would free British governments to reduce tariffs with other countries and trading blocs which account for 55% (and rising) of Britain’s trade.
Outside the EU, Britain would nevertheless remain a full participant in more than 70 international organisations including the UN and its affiliated bodies, the World Trade Organisation, the G8, the IMF, the International Labour Organisation, the International Panel on Climate Change, the Council of Europe, the European Court of Human Rights, Interpol and NATO.
Would a no-deal Brexit mean a ‘hard border’ in Ireland?
There has been a Common Travel Area across all of Britain and Ireland since 1952 (and 1923-39 before then). Customs posts between the UK/ Northern Ireland and the Irish Republic were dismantled in 1993, despite continuing different rates of VAT, excise duty and corporation tax and the need to maintain separate national economic accounts.
As confirmed by the all-party Home Affairs Committee of the European Parliament report Hard Border 2.0(September 2014), notification procedures, non-border spot checks and new technology make a structural ‘hard border’ across Ireland unnecessary, whether or not Britain and Ireland are in a European single market or customs union.
The EU Commission and its supporters in Ireland and Britain have raised the ‘hard border’ spectre to obstruct and discredit Brexit. Their ‘backstop’ clause in the Theresa May’s UK-EU Withdrawal Agreement would lock Northern Ireland and Britain into the EU Single Market and Customs Union indefinitely, with no legal right of withdrawal, unless the EU agrees to a ‘frictionless’ free trade agreement during the transition period to December 2020.
Isn’t a second referendum the democratic way forward?
The people were told that the June 2016 EU referendum would enable them to decide whether the UK—as a whole—would remain in or leave the EU. That exercise in popular sovereignty saw the biggest vote in Britain’s history.
Nobody proposed beforehand that the result could or should be ignored as merely ‘advisory’.
The official campaigns on both sides put forward reactionary and dishonest arguments and the Remain side (which included the Tory government, most big City banks, the CBI and the Institute of Directors) outspent the Leave side by £Xbn to £Ybn.
Normal democratic practice is that the results of a mass vote should be implemented before a similar vote occurs again. No conditions were attached to the size of the turnout or the majority needed for this to happen.
According to the detailed Ashcroft analysis, the majority of—by any definition—working class, unemployed, anti-capitalist, English, Welsh, Jewish and Sikh voters favoured Leave.
The ‘People’s Vote’ campaign is promoted by the same big business forces and politicians that bankrolled and organised the official Remain campaign in the 2016 referendum.
Where does the Labour Party stand?
Labour’s official policy is now to leave the EU and negotiate a trade and customs agreement that would retain all the alleged benefits of EU membership.
A majority of Labour MPs and many Shadow Cabinet members would prefer to remain in the EU or, failing that, to stay aligned with its Single Market and Customs Union—which could be done via membership of EFTA (the European Free Trade Association) and its European Economic Area with the EU. They argue that the EU could be reformed from within—but who by?
Most social-democratic parties in Europe have lost much of their support, having backed the EU and austerity policies for a decade and more. Labour currently opposes May’s EU deal, claiming it jeopardises jobs, economic growth, future cooperation, etc.
While the Shadow Cabinet’s official policy is to force the Tory government’s resignation through Commons votes, leading to a General Election, many Labour MPs prefer one of the secondary options agreed at the 2018 party conference—a second referendum (‘People’s Vote’)—in the hope that it will prevent or reverse Brexit.
What would be best for a future Labour government?
While taking full account of realities and a range of possible outcomes, the left cannot base its strategy on a perspective of permanent defeat and right-wing rule in Britain. In its 2017 General Election manifesto, Labour put forward a raft of policies that would conflict with the Treaty on the Functioning of the European Union, EU Directives and ECJ rulings as follows:
- A National Transformation Fund to boost infrastructure investment with extra government borrowing (v. the EU Stability & Growth Pact borrowing and debt limits and TFEU Article 123).
- A National Investment Bank and regional development banks to support small business, cooperatives, R&D and innovation (v. TFEU 107).
- Direction of corporate investment to distressed regions and nations (v TFEU 49, 50 and 63).
- Public ownership of rail services, energy, water and the Royal Mail, supporting public and social sector companies in competition with private ones (v. TFEU 18, 50, 56, 59, 106, 107 and Directives on the railways, public procurement and postal services and Fourth Railway Package).
- Maintenance of public and private sector banking facilities in local communities (v. TFEU 49, 50, 63, 106 and 107 and Directive protecting shareholders and creditors).
- Trade deals and duties which safeguard regulatory rights and public services, prevent dumping, subsidise exports and guarantee new jobs (v. TFEU 28-30, 32, 110, 113).
- Public procurement requirements for tax compliance, trade union recognition, equal opportunities and training provision (v. TFEU 37, 101 and Directives on public sector procurement).
- Make employees the ‘buyer of first refusal’ when their company is put up for sale (v. TFEU 49, 50, 56, 63 and Directives to protect shareholders and creditors).
- Amend company law so directors have a legal duty to workers, customers, the environment and the public interest as well as to shareholders (v. Directives to protect shareholders and creditors).
- End the exploitation of migrant labour and stop ‘overseas-only recruitment practices’ (v. 45, 46, Posted Workers Directives and ECJ rulings).
- Develop new, fair immigration rules once freedom of movement ends when Britain leaves the EU (otherwise v. TFEU 20, 21, 45, 46, 49).
- Restrict VAT to its current range of goods and services (v. VAT Directive and proposed VAT Action Plan)
These policies would almost certainly breach TFEU Articles 18 (against national discrimination), 20 and 21 (migration and residency rights), 28-30 (EU Customs Union, no internal but common external tariffs), 32 (EU Commission trade negotiating monopoly), 37 (regulating state monopoly procurement), 45 and 46 (free movement of workers), 49 and 50 (right of establishment), 56 (freedom to provide services), 59 (liberalisation of services), 63 (free movement of capital), 101 (banning supplementary public sector contract conditions), 106 (protecting competition against state monopolies), 107 (restricting state aid), 110 (banning tax discrimination against EU products), 113 (harmonisation of excise duties and turnover taxes) and 123 (banning central bank credit and bond purchases).
A left-led Labour government would face enough political and big business opposition from within and internationally, without becoming embroiled in an endless series of political and legal conflicts with EU treaties, rules and institutions.
Why a ‘People’s Brexit’?
A ‘People’s Brexit’ would mean:
(1) Implementing the referendum result, not May’s bogus Brexit or a second referendum.
(2) A General Election as soon as possible so a left-led Labour government can complete the withdrawal and negotiate new relations with the EU which protect jobs, public services and the welfare state.
(3) Britain no longer bound by EU treaties, rules, institutions and Directives so that British, Scottish, Welsh and local government would be free to implement left and progressive policies without EU obstruction.
(4) EU and British citizens retaining extensive rights of residency, work and travel across Europe, subject only to national policies required for just, balanced and sustainable development.
(5) Britain, the EU and its member states continuing to cooperate closely across a wide range of economic, social, environmental and security matters, but with no British participation in the EU’s military structures and programmes.
(6) Renegotiation of a financial settlement that substantially reduces the proposed divorce bill of approximately £39bn.
(7) A commitment from the British government to maintain all progressive spending programmes, employment rights and environmental and consumer standards carried over from EU membership.
This briefing note, which appeared in 21st Century Manifesto, was prepared earlier this year by the Communist Party of Britain for distribution among trade union and Labour Party activists.