Eurosceptics against the nation state

David Rennie uncovers the cruel paradox that to save the single market sceptics must support the European Commission

Brussels

For years, Eurosceptics in Britain have waited for the European Union to lose popular support. They watched the ancient nations of Europe shambling towards ever closer union, and thought: this cannot last. One day a compelling issue will arise, a cause will be found. Subject peoples will rise up and demand back their sovereign rights. Now, perhaps, that moment has come — and the lesson for the sceptics is: be careful what you wish for. It turns out that the cause uniting the Continent is hostility to the free market, even to capitalism itself.

The European Commission is under historic siege. Public support for Europe’s great unfinished project — the border-free single market — has collapsed. In Germany, Italy, Poland and Spain, even in little Luxembourg, workers want their frontiers back, if that means stopping foreign takeovers of cherished local firms. Political leaders are hearing the call, especially those with elections looming. Across Old Europe, ministers are meddling in the markets, whatever the Commission says. In France the right of Brussels to overrule national economic policy is being challenged by President Jacques Chirac and by the candidates of all parties who hope to succeed him.

A titanic struggle beckons. Since the days of Margaret Thatcher and the Single European Act of 20 years ago, the Commission has enjoyed extraordinary powers to quash national laws, ban state subsidies and break up monopolies, as guardian of the single market. Yet France is turning the clock back to the 1970s, proposing to spend billions to take an ineptly run water and energy firm, Suez, back into a form of state control to stop it being bought by Italians.

The Commission will doubtless become the target of heated abuse, in the rhetorical race to the bottom that is French politics. Commission sources are already preparing the ground for a possible climbdown. ‘Don’t make the Suez merger a test of our commitment to the single market,’ murmurs one Brussels official. ‘Not sure we can stop that one.’ The prospect of a slugging match between the European Commission and France might prompt some to echo Henry Kissinger, who reportedly said of the Iran–Iraq war, ‘A pity they can’t both lose.’ But all the current threats to the single market pose a real political dilemma for British Eurosceptics and the Conservative party — indeed anyone who claims to support free trade — and business. There is one mechanism for defending the single market, and it lies with the supranational powers of the European Commission, backed by the unelected judges of the European Court of Justice (ECJ). Just as a loss of sovereignty gave birth to the single market, it will take a fresh assault on national democracy to save it.

The internal market was always an overtly political project, which required leaders like Mrs Thatcher to swallow their doubts and sign away great slices of national sovereignty in the hope of prising open other nations’ closed markets. The paradox cannot be escaped easily. A single market is good, perhaps even vital, for Britain’s national interests. But if you want the single market to work, you need a strong Commission, and that means the Commission has to tell national governments what to do.

The dilemma cannot be shrugged off by arguing that the single market does not matter. That holds true even for hardline Eurosceptics who want Britain to leave the European Union and join, say, Norway in Efta. Their pitch usually notes the access to the single market enjoyed by Efta nations through the European Economic Area. The argument can be flipped on its head. Take the single market away from Efta, and anyone joining the bloc would gain unfettered access to the markets of Norway, Switzerland, Iceland and Liechtenstein.

The single-market crisis is not going away. The European Commission has signalled it is ready to take France to court over a recent decree listing 11 French business sectors as ‘strategic’ and thus shielded from takeover by foreign bidders. The Commission is also threatening court action against Poland, for blocking a bank merger, and against Spain, for proposing a shotgun marriage between two Spanish utility giants after one of them was eyed up by a German suitor.

The forces at work behind such mergers are hardly pretty — populism, electionyear panic and the defence of cosy local cartels. But that does not free the Commission from the charge of trampling on democracy. Free-market Tories might look with disdain on grubby French or Spanish politicians and despair at the protectionism demanded by their voters. But populism is a form of democratic mandate.

Nor is the Commission itself above populism. Earlier this month it unveiled a £350 million-a-year ‘European Globalisation Adjustment Fund’, explicitly described as a way to ‘show its solidarity towards workers affected by redundancies resulting from changes in world trade patterns’ — i.e., buy favourable headlines with your money and my money. The money will be channelled, officially, towards retraining those laid off in large numbers in areas of high unemployment, in cases where national governments can show ‘the unforeseeable nature of these redundancies’.

Oddly, the EU commissioner in charge of the fund, Vladimir Spidla, indicated that a ‘typical’ industry to support could be the Italian shoe-making sector, whose pain in the face of cheap Chinese imports just happens to be an issue in the present Italian elections. It is hard to see just how imports of Chinese shoes could be ‘unforeseeable’ unless Italian cobblers were unaware that China makes cheap things for export, and that Chinese people wear shoes.

Ultimately, whether the Conservative party under David Cameron can swallow this sort of nonsense, and still back the Commission as the guardian of the single market, is a fair litmus test of what sort of Euroscepticism it intends to pursue. If you are a theological Eurosceptic who believes Europe has never delivered on its promises, and that Britain could find better trading arrangements elsewhere, then the collapse of the single market can be viewed with relative calm. Let it go smash, is the logical conclusion.

David Heathcoat-Amory, Conservative MP for Wells, believes the European Commission bears the blame for the lack of support enjoyed by the single market, because it used the market as a mechanism to regulate, not to tear down, barriers. ‘An inefficient economic structure, once it starts to break down, does begin to exhibit signs of protectionism,’ he says. ‘I would like to preserve the single market, and I am willing to pay some costs for that, but the costs are beginning to outweigh the advantages. I’m not going to die in a ditch for the Commission. Until the Commission begins to face up to the failure of the European “social model”, I’m not terribly interested in them whining about member states breaking the rules. And I’m not quite sure what we’re defending anyway. There is no real single market. Just ask British firms trying to buy French or German companies.’ On the Conservative front benches, the talk remains of fixing the single market. This feels like a more utilitarian form of Euroscepticism that sees the present battle for Europe’s economic soul as one the Commission must win, for all its faults. It is a bit like stumbling across an alley fight in some Third World police state — you may not care for the local constabulary, but you are glad when they show up.

Graham Brady, the shadow Europe minister, says, ‘The single market is a good thing, though anyone in business will tell you that it’s greatly overregulated. The liberalisation promised hasn’t happened. The thing is to try to improve that.’ Fixing the single market might require the Commission to act as a ‘policeman’ against errant nations like France. ‘As a party, we bit the bullet with the Single European Act, in accepting that you can be prepared to allow supranational institutions to override national institutions, for the purpose of creating a single market.’ In this view of Europe, France escaping punishment would make a mockery of Britain’s decision to sacrifice some sovereignty, and its agreement to be bound by EU rules and laws. There is ‘emotional tussle’ in all this, says Mr Brady. Conservatives are uncomfortable with supranational authorities, and with judges having power over nations. But most have also grown used to the single market and the falling of European frontiers.

They like the fact that their newly graduated daughter can take a job in Paris or Pisa without fussing about work permits and visas. They like the fact that they can travel freely across the Continent, fly cheaply on European budget airlines and buy a retirement home in Spain.

Hardline Eurosceptics often talk of renego tiating for Britain an associate membership of Europe. It is a stirring-sounding thought, even if it presupposes that our European partners will be kind enough to grant us the advantages of EU membership, without most of the costs. Such hardliners are less vocal on the need to ensure there is still a free-trade Europe worth associating with — especially if Britain, the most important free trading nation in the EU, folds its flags and walks away. Not everything dreamed up by nation states is right. Sometimes, in the numbers game that is Europe, Brussels is Britain’s ally. It is a messy dilemma for Eurosceptics, and unsatisfying. But nobody said that defending national interests would always feel good.