THE POLITICS of SOVEREIGNTY: BRITAIN and EUROPEAN MONETARY UNION ABSTRACT Raymond Keitch
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THE POLITICS OF SOVEREIGNTY: BRITAIN AND EUROPEAN MONETARY UNION Raymond John Keitch PhD International Relations London School of Economics September 2002 Word Count: 99,987 (with footnotes) 90,965 (without footnotes) 1 UMI Number: U61334B All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U613343 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 OF POLITICAL TutseS F & o $ < %6^-L+O THE POLITICS OF SOVEREIGNTY: BRITAIN AND EUROPEAN MONETARY UNION ABSTRACT Raymond Keitch. PhD International Relations, London School of Economics The thesis examines the interrelationship between conceptions of British sovereignty and European Economic and Monetary Union (EMU). The central argument advanced is that the multiple discourses of sovereignty generated in the political debate have been a key influence in understanding British government policy on EMU. Before 1997 both Conservative government policy and Labour opposition policy on EMU was marked by an overall “wait and see” approach and a referendum commitment. After 1997 there was a divergence between the “Yes subject to economic tests” policy of the Labour government and the “No for two Parliaments” policy of the Conservative opposition. The multiple discourses of sovereignty focused on the locus of sovereignty (executive, parliamentary or popular) and the divisibility of sovereignty (pooling, differentiated or absolutist). These discourses taken together influenced policy in a number of identifiable ways. Initial chapters outline the epistemological approach of discourse analysis, the interpretation of sovereignty as a social construct and the serious challenges of EMU to British conceptions of sovereignty. The relationships between the discourses of sovereignty and government policy on EMU are examined in the political debate from the Maastricht ratification process in 1992/3 to the aftermath of the European election of 1999. Five arguments are advanced. Firstly, the discourses of sovereignty reinforced the cautious “wait and see” policy. Secondly, sovereignty was a key component of Conservative divisions, which influenced Conservative government policy (1992-1997). Thirdly, Conservative divisions, arguments on popular sovereignty, and reaction by the Labour opposition fostered the referendum commitment by both major parties. Fourthly, the referendum commitment itself strongly influenced Labour government policy (1997-2001). Finally, the alternative discourses of pooling and absolutist sovereignty between the two major parties prefigured the 1997 policy divergence. Other factors influencing government policy on EMU are considered. The conclusion stresses the key influence of the multiple discourses of sovereignty. 2 TABLE OF CONTENTS Page Number INTRODUCTION 5 CHAPTER 1 EPISTEMOLOGIC AL APPROACH: 15 DISCOURSE ANALYSIS Explaining and Understanding 15 Language and Meaning 18 Discourse Analysis 20 Discourse, Structure and Agency 24 Discourse and Policy 27 The Utility of Discourse 3 0 Politics of Sovereignty: Application of 32 Discourse Analysis CHAPTER 2 SOVEREIGNTY IN THE CONTEXT OF 38 BRITAIN AND THE EU Sovereignty: Conceptual Bases 39 Sovereignty: Key Perspectives 43 The European Union and Sovereignty 49 Subsidiarity and the “Democratic Deficit” 60 Britain and Europe: A Troubled Relationship? 65 Structural Explanations of Semi-Detachment 69 Agency Explanations of Semi-Detachment 73 Sovereignty: Parliamentary or Other? 75 Central Thesis: The Politics of Sovereignty and 81 EMU CHAPTER 3 SOVEREIGNTY: THE CHALLENGES OF 88 EMU Money and Monetary Unions: Challenges to 89 Sovereignty International Monetary Union: The Gold 92 Standard (1867-1914) Particular Monetary Unions 95 Britain and the Historical Development of EMU 103 Monetary Sovereignty 109 Institutional Sovereignty: The European Central 121 Bank Fiscal Sovereignty 128 European Political Union? 136 CHAPTER 4 MAASTRICHT TREATY RATIFICATION: 145 SOVEREIGNTY SETS THE AGENDA EMU Policies Post-Maastricht 146 The Ratification Debates 157 Eurosceptic Discourses 168 The Ratification Debates: Appraisal 177 3 CHAPTER 5 INTO THE PUBLIC SPHERE: THE 1996 188 REFERENDUM AND 1997 GENERAL ELECTION DEBATES The 1975 EC Referendum 189 The 1996 Referendum Commitment: The 196 Conservative Discourse The 1996 Referendum Commitment: The 205 Labour Discourse 1975... 1996 Continuity or Change? 212 The 1997 General Election Debate 214 The Election Campaign: The Conservatives 218 The Election Campaign: The Labour Party 223 The Conservative Discourse: The Conflation of 227 EMU and Political Sovereignty Campaign: Evaluation of EMU Themes 232 CHAPTER 6 EMU AND SOVEREIGNTY: POST- 239 ELECTION POLICY DIVERGENCE Labour’s October 1997 Statement: Prepare and 240 Decide Conservatives in Opposition: No EMU 246 Membership for Two Parliaments Policy Consolidation: The Labour Government 247 Policy Consolidation: The Conservatives 257 “Phoney War”: Divergence Confirmed? 261 External Dynamics: Euro-X, Tax Harmonisation, 268 EMU a Reality Internal Dynamics: The 1999 European 274 Elections The Aftermath: Political Sovereignty 278 Centrestage CHAPTER 7 BRITISH BUSINESS PERSPECTIVES ON 288 EMU The Business Debate: 1992-1997 288 Post-1997 General Election Polarisation? 299 Business Debate: Widespread Uncertainty 304 Business Cases 312 CHAPTER 8 CONCLUSIONS: THE POLITICS OF 322 SOVEREIGNTY POSTSCRIPT 2001 GENERAL ELECTION 335 REFERENCES 339 4 INTRODUCTION: THE POLITICS OF SOVEREIGNTY Primary Thesis This thesis examines the interrelationship between European Economic and Monetary Union (EMU) and conceptions of British sovereignty.1 The focus is on the British political debate during the period between the formalisation of EMU in the 1991 Maastricht Treaty of European Union and the aftermath of the British European election in 1999. EMU has raised a series of issues related to British sovereignty which have led to heated political debate. These issues include monetary sovereignty over interest and exchange rates, fiscal sovereignty over taxation and public expenditure, institutional sovereignty in terms of the new European Central Bank (ECB) and ultimately Britain's status as an independent nation-state. The sovereignty debate itself influenced government policy on EMU. The central thesis advanced is that the multiple discourses of sovereignty engendered by the political debate were a key influence on British government policy on EMU. Many conceptions of sovereignty were utilised during the debate. On the dimension of the divisibility of sovereignty the discourses ranged from an absolutist discourse of sovereignty surrendered to the idea of sovereignty being functionally differentiated (between say monetary and defence issues) through to the idea of pooling or sharing sovereignty. On the other dimension of the locus of sovereignty, the discourse ranged from executive sovereignty through Parliamentary sovereignty to the wider idea of popular sovereignty. Far from weakening the impact of sovereignty, the multiple discourses have strengthened its impact like the many strands that constitute a rope. 1 An initial note on terminology. EMU is used throughout this book for Economic and Monetary Union and is used synonymously for the more popular term "single currency" unless indicated otherwise. EU is used for European Union and is used except where historical or other circumstances require an alternative term. Britain is used throughout the thesis as a synonym for die United Kingdom. 5 British government policy on EMU displayed a number of characteristics. The strand of continuity throughout is the general caution displayed by both the Conservative government under John Major (1991-1997) and the Labour government (1997-2001) under Tony Blair. This caution was marked from the beginning by the British "opt-out" in the Maastricht Treaty, the general espousal of a "wait and see" approach and the decision not to join the first wave of EMU members in 1999. Another strand of similarity between the policies of the two main parties was the 1996 decision to grant a popular referendum on the specific issue of ultimate British membership of EMU. Underneath this apparently similar policy surface were marked differences in the detailed policies of the two main parties. The Conservative government stuck, with increasing difficulty, to the "wait and see" policy until their defeat in the 1997 General Election. The Labour opposition supported EMU membership in principle but stressed economic obstacles to British membership. After the 1997 General Election a clearer policy divergence emerged between the two main parties. The Labour government explicitly rejected a constitutional barrier to EMU (whilst rejecting early membership) and the Conservative opposition rejected EMU membership for two Parliaments. How did the multiple discourses of sovereignty relate to British government policy on EMU? The relationship is both a complex and a dynamic one. Five particular arguments are made in this thesis. Firstly, the general policy characteristic of caution reflected