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The UK and the EU: A Dwindling Partnership

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President Obama stressed to British Prime Minister David Cameron earlier this month at the G7 summit in Brussels that "it's always encouraging for us (US) to know that Great Britain has a seat at the table in the larger European project." Obama added, "It's hard for me to imagine that project going well in the absence of Great Britain." However, he also emphasized that it was difficult for him "to imagine that it would be advantageous for Great Britain to be excluded from political decisions that have an enormous impact on its economic and political life."

Last year, on a visit to Washington, both Obama and Cameron met to discuss the Transatlantic Trade and Investment Partnership (T-TIP), which is believed could bring the UK £10 billion a year. The T-TIP agreement intends to grow the “$458 billion in goods and private services” that the US, in 2012, had exported to the EU. It also aims to reinforce the almost “$3.7 trillion in investment” that the US and the EU have in one another’s economies, while removing “all tariffs on trade.”

According to coverage by The Guardian, the Obama administration cautioned British representatives that the UK leaving Europe could eliminate itself as a participant in the agreement. Such a move would cause the US to question whether the UK can still be seen as an optimal trading and investment partner. Several US industries and companies may think twice before exporting goods to or importing from the UK because they may find it more costly. The automotive, pharmaceuticals, technology and energy industries would be largely affected by a UK that is no longer part of the EU single market.

In February, at a Vice-President of the European Commission, Viviane Reding, warned the UK at Cambridge University's Centre for European Legal Studies Mackenzie-Stuart Lecture stressed that "If the UK were to leave the EU, it would no longer be able to influence EU regulation." She added that the UK " would have to live with the rules decided on by the other EU countries." Reding further emphasized that she believes it would be "difficult to see why the other Member States would grant the UK unfettered access to their markets without requiring it to apply the EU's rules."

The May 25th EU election resulted in a number of countries voting for right wing, anti-immigrant and largely pro-isolationist parties. The UK, in particular, has seen a surge in its citizens voting for the highly anti-EU party, UKIP. At the heart of this dispute are the British parties, which mainly include the Tories, Labour and the highly anti-Europe United Kingdom Independence Party (UKIP). The election demonstrated that a large portion of the British population, excluding those in the main English cities such as London, Birmingham and Manchester and Liverpool, believe that leaving the EU will solve the nation's unemployment and immigration issues. However, the discussion concerning the financial ramifications of the UK leaving the EU has not been sufficiently brought to the British public's attention.

The BBC put together a list of arguments for and against the UK leaving the EU. Both sides are persuasive as to why their side is correct. The main argument used by those in favor of leaving the EU involves countries such as Norway and Switzerland. These two nations are put forward as examples of success stories of countries that work with the EU "have access to the single market but are not bound by EU laws on agriculture, fisheries, justice and home affairs." However, those opposed to this move say that countries such as Germany and other major European nations would not allow the UK to have a "pick and mix" approach to the bloc's rules." They also add that Norway and Switzerland have to follow "many EU rules" and "its exports would be subject to EU export tariffs and would still have to meet EU production standards." Furthermore, according to the website nationmaster.com, the UK economy is vastly larger, specifically 15 times bigger than Norway's. It is ranked 2nd behind Germany, while Norway is ranked 19th and Switzerland is ranked 11th. Such a difference in the GDP's among the UK, Norway and Switzerland undercuts the argument of why the UK should leave the EU.

Viviane Reding further emphasized in her speech that the UK economy has benefitted a great deal from its financial services sector, which has resulted from its membership status in the EU. This industry, she reveals employs, over "1 million people" and enables the government to receive more than 10% in "tax receipts." Reding stresses that this is primarily because the UK is not competing with any EU members, but rather with economies outside of Europe such as New York or Hong Kong.

If the UK were to leave the EU, London's Wall Street, known as the City, Reding explains, would most likely "lose its unhindered access to the single market." On top of that, EU member states would decrease their dealings with "an offshore financial centre competing with their own financial firms." Furthermore, countries outside the EU would also see London as a "much less attractive location to do business, since it would no longer be a gateway to the EU's single market."

There are valid reasons why the UK, like most developed countries, should be concerned about heavy immigration, especially from the EU. Many immigrants from poorer EU countries do tend to take advantage of the free healthcare system and benefits that the UK provides. However, for the UK to completely separate itself from the EU based on this concern alone does not certify that it will be better off without Europe's "single market." In the end, such a drastic move could prove to be more damaging than beneficial to the UK's economy.

Viviane Reding further emphasized in her speech that the UK economy has benefitted a great deal from its financial services sector, which has resulted from its membership status in the EU. This industry, she reveals employs, over "1 million people" and enables the government to receive more than 10% in "tax receipts." Reding stresses that this is primarily because the UK is not competing with any EU members, but rather with economies outside of Europe such as New York or Hong Kong.

If the UK were to leave the EU, London's Wall Street, known as the City, Reding explains, would most likely "lose its unhindered access to the single market." On top of that, EU member states would decrease their dealings with "an offshore financial centre competing with their own financial firms." Furthermore, countries outside the EU would also see London as a "much less attractive location to do business, since it would no longer be a gateway to the EU's single market."

There are valid reasons why the UK, like most developed countries, should be concerned about heavy immigration, especially from the EU. Many immigrants from poorer EU countries do tend to take advantage of the free healthcare system and benefits that the UK provides. However, for the UK to completely separate itself from the EU based on this concern alone does not certify that it will be better off without Europe's "single market." In the end, such a drastic move could prove to be more damaging than beneficial to the UK's economy and its citizens.

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