THE EUROSCEPTICAL READER 2 Also by Martin Holmes BEYOND EUROPE THATCHERISM: Scope and Limits, 1983–7 THE EUROSCEPTICAL READER (editor) THE FAILURE OF THE HEATH GOVERNMENT THE FIRST THATCHER GOVERNMENT: Contemporary Conservatism and Economic Change THE LABOUR GOVERNMENT, 1974–9: Political Aims and Economic Reality EUROPEAN INTEGRATION: Scope and Limits The Eurosceptical Reader 2 Edited by Martin Holmes St Hugh’s College, Oxford Editorial matter and selection, Introduction © Martin Holmes 2001 For other chapters see Acknowledgements All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2001 by PALGRAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE is the new global academic imprint of St. Martin’s Press LLC Scholarly and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press Ltd). ISBN 978-0-333-97376-9 ISBN 978-0-230-51076-0 (eBooK) DOI 10.1057/9780230510760 This book is printed on paper suitable for recycling and made from fully managed and sustained forest source. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data p. cm. Includes bibliographical references and index. ISBN 0-333-1. 10987654321 10 09 08 07 06 05 04 03 02 01 Contents List of Tables, Figures and Illustrations vii List of Abbreviations and Acronyms ix Acknowledgements xi Notes on Contributors xii Introduction 1 Martin Holmes Part I: Economic Euroscepticism 1 British Influence and the Euro 7 John Coles 2 The Euro and Regional Divergence in Europe 25 Tony Thirlwall 3 British Trade and Europe since the 1960s 50 Martin Holmes 4 The UK and Euroland: Ships Passing in the Night 63 Graeme Leach 5 Towards ‘A Treaty of Commerce’: Euroland and NAFTA Compared 92 Keith Marsden 6 The Bank that Rules Europe: The ECB and Central Bank Independence 121 Mark Baimbridge, Brian Burkitt and Philip Whyman 7 Has the Euro Lived Up to Expectations? 142 Wilhelm Nölling Part II: Political Euroscepticism 8 The Myth of Europe 151 Russell Lewis 9 Britain, Europe and the United States: Reflections of an Anti-Maastricht Europhile 171 Oliver Wright v vi Contents 10 Can Self-Government Survive? Britain and the European Union 184 Nevil Johnson 11 Separate Ways 227 Peter Shore 12 Nice and Beyond: The Parting of the Ways 238 Christopher Booker 13 Aiming for the Heart of Europe: A Misguided Venture 269 John Bercow Index 286 List of Tables, Figures and Illustrations Tables 2.1 Unemployment rates and living standards in Europe, 1997 34 2.2 Expenditure on structural funds, 1994–9 41 4.1 The impact of monetary policy on output 72 4.2 Credit at adjustable interest rates in the EU 73 4.3 Differences in EU legal systems 75 4.4 Inflation divergence (HICP measure) 79 4.5 Interest rate differentials, UK versus Euroland 79 4.6 Direct investment in the UK 83 5.1 Market size, 1999 96 5.2 GDP per head, 1999 97 5.3 Growth in GDP (annual percentage change, 1993–9) 97 5.4 Merchandise imports 99 5.5 Links with the global economy, 1987 and 1997 100 5.6 Value and growth of merchandise imports 102 5.7 Imports of commercial services 102 5.8 Who subsidises most? (1997) 104 5.9 Agricultural subsidies 105 5.10 Growth in employment (annual percentage change, 1993–9) 105 5.11 Employment ratios and levels 106 5.12 Growth of labour productivity (annual percentage change, 1993–9) 107 5.13 Annual gross wages and net income after taxes in manufacturing, 1996 108 5.14 Human development indicators 109 5.15 Growth of real private consumption (annual percentage change, 1993–9) 110 5.16 General government receipts as % of GDP 111 5.17 Highest marginal tax rates 111 5.18 Capital mobilisation 112 5.19 FDI inflows (US$ billions) 113 5.20 Stock of foreign direct investment 114 vii viii List of Tables, Figures and Illustrations 5.21 Growth of real investment (annual percentage change, 1993-9) 115 5.22 Science and technology strengths 115 5.23 Openness to foreign immigrants 117 6.1 Correlation between central bank independence and macroeconomic variables for EU member states 132 8.1 Relative competitiveness and living standards 155 Figures 2.1 Absolute dispersion of regional unemployment in the EU, 1983–94 38 4.1 UK–Euroland output gap differential 64 4.2 Costs and benefits of a monetary union 66 4.3 Changes in structural unemployment (NAIRU) in the 1990s 68 4.4 Economic models and GDP growth 69 4.5 Alternative economic models 69 4.6 Economic growth and regulation 70 4.7 Outstanding residential mortgage debts as % of GDP 71 4.8 Household equity holdings as % of net wealth 72 4.9 Economic divergence or convergence? 76 4.10 UK GDP correlation coefficients pre-Euroland, 1990–8 78 4.11 UK–Euroland cumulative output gap differential (sign) 81 4.12 UK-Euroland cumulative output gap differential (no sign) 82 4.13 Inward investment: number of projects 84 4.14 Pension assets as % of GDP, 1999 85 4.15 Bank representation 86 4.16 Foreign exchange turnover: global market share 88 4.17 No political convergence 88 4.18 Generational balances 89 Illustrations Map I GDP per head by region (PPS) 36 Map II Unemployment rate by region, 1997 37 List of Abbreviations and Acronyms APEC Asia Pacific Economic Community ASEAN Association of South East Asian Nations BoE Bank of England CAP Common Agricultural Policy CBI Confederation of British Industry CEPR Centre for Economic Policy Research CFP Common Fisheries Policy CFSP Common Foreign and Security Policy COMECON Council for Mutual Economic Assistance CRCE Centre for Research into Communist Economies EAGGF European Agricultural Guidance and Guarantee Fund EC European Community ECB European Central Bank ECE Economic Commission for Europe ECJ European Court of Justice EEA European Economic Area EEC European Economic Community EERU European Economies Research Unit EFTA European Free Trade Area/Association EMS European Monetary System EMU Economic and Monetary Union/European Monetary Union ERDF European Regional Development Fund ERM Exchange Rate Mechanism ESCB European System of Central Banks ESF European Social Fund EU European Union FCO Foreign and Commonwealth Office FDI foreign direct investment FEER fundamental equilibrium exchange rate FET five economic tests FO Foreign Office FSA Financial Services Authority GATT General Agreement on Tariffs and Trade GDP gross domestic product GNP gross national product ix x List of Abbreviations and Acronyms HICP harmonised index of consumer prices HDI Human Development Index HMG Her Majesty’s Government HMT Her Majesty’s Treasury IGC Inter-Governmental Conference IMF International Monetary Fund IoD Institute of Directors ILO International Labour Organisation IT information technology MEP Member of the European Parliament MP Member of Parliament MPC Monetary Policy Committee (Bank of England) NAFTA North American Free Trade Area NAIRU non-accelerating inflation rate of unemployment NATO North Atlantic Treaty Organisation NIC newly industrialised country NIESR National Institute for Economic and Social Research NUTS Nomenclature of Statistical Territorial Units (France) OECD Organisation for Economic Co-operation and Development PCY per capita income ppp purchasing power parity PPS purchasing power standard PSE producer subsidy equivalent QMV qualified majority voting R&D research and development TUC Trades Union Congress UKIP United Kingdom Independence Party UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme VAR variable VAT value added tax WTO World Trade Organisation Acknowledgements I wish to thank all the contributors to this book for permission to reprint articles or speeches which had already entered the public domain. I am particularly indebted to those contributors who reduced in length previously published longer articles which could not appear in full in this voulme because of necessary space constraints. I would also like to thank the Principal and Fellows of St Hugh’s College for providing an atmosphere conducive to scholarship and appreciative of research. Alison Howson at the publishers handled the manuscript with cus- tomary courtesy and efficiency and I am grateful to her. Needless to say, any errors in the following pages are my responsibil- ity alone. MARTIN HOLMES St Hugh’s College, Oxford June 2001 xi Notes on Contributors Dr Mark Baimbridge is Lecturer in Economics at the University of Bradford and European Economies Research Unit’s Director of Research. He co-authored What 1992 Really Means: Single Market or double cross? (1989), From Rome to Maastricht (1992), There is an Alternative (1996) and A Price Not Worth Paying: The economic cost of EMU (1997) for the Campaign for an Independent Britain. He has published over 100 art- icles, primarily concerning Britain’s relationship with the EU, in learned and current affairs journals in economics, politics and social policy. He is a frequent contributor and commentator on economic issues to radio and in newspapers, including the Sunday Times, the Sunday Telegraph, the Financial Times and the Guardian. John Bercow was elected MP for Buckingham on 1 May 1999 with a majority of 12,386. He was educated at Finchley Manorhill School and the University of Essex where he graduated in 1985 with First Class Honours in Government.