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Reform is the word

18 May 2015 By Hugo Dixon

Reforming the European Union involves more than renegotiating the UK’s relationship with it. That may sound like a statement of the obvious. But in the British debate over staying in the EU the two have virtually become equivalent, largely because David Cameron, the newly re-elected prime minister, has promised to renegotiate Britain’s relationship with the EU before holding a referendum on continued membership.

In fact, reform offers much more than set-piece renegotiation – even from a purely British perspective. For a start, there are reforms that have already taken place. Then there are reforms which are in the pipeline and benefit the UK, but are not part of the renegotiation because they are to the advantage of the whole EU.

There are two dangers with simply equating reform with renegotiation.

First, the upcoming renegotiation may not achieve much. If Cameron comes back from Brussels with a paltry haul of concessions, anti-Europeans may use the perceived failure as a powerful campaign aid in the referendum.

Second, talk of renegotiation is unlikely to win allies in the rest of the EU. It sounds as if they are being asked to give Britain a special deal – and that is hard to sell to their own electorates. The more Cameron talks about renegotiation, the less he may end up with – which again may make it harder for him to win the membership plebiscite.

All this is doubly important now that the government seems to be coming round to the idea that it won’t be possible to reopen the EU treaties before the referendum. A quick new treaty is unlikely, since few other EU countries are keen on the idea, and without one there won’t be a chance for big changes in Britain’s relationship with the bloc.

By the same token, there is no need to follow Cameron’s original plan to wait until 2017 for the referendum. Momentum is now building to hold the vote next year. Even Mark Carney, the normally apolitical Bank of England governor, has implied that he backs an early poll to limit economic uncertainty.

Cameron has given a rough sketch of what he wants from his renegotiation: the ability to control migration from the EU by reforming welfare benefits; the return of unspecified powers from Brussels; the ability of national parliaments to work together to block EU legislation; and an end to Britain’s commitment to “ever closer union” in Europe.

Some of these changes can be achieved without a new treaty. With others, Cameron may have to settle for a “post-dated cheque” – a commitment by the other EU leaders that they will make the necessary changes when the treaties are next reopened.

Several of Cameron’s demands could and should be sold as beneficial to other EU nations too. Letting a quorum of national parliaments block unwanted legislation could be seen as addressing the Union’s notorious “democratic deficit”. Reforming welfare so that people have the freedom to move around the EU to work, study or retire but not to claim benefits appeals elsewhere. Getting Brussels to meddle less in matters best left to nation states could also win allies.

But even though such changes may be useful, they could look rather thin come the British referendum. So the pro-membership pre-campaign should also focus on what has already happened and what is in the pipeline.

One important recent reform is in the management of the European Commission under Jean-Claude Juncker. It has a slimmed-down agenda, focussing on high priorities rather than the previous scattergun approach. Its mission includes an onslaught on red tape, long a bugbear of British governments.

Other reforms include the first ever real-terms cut in the EU budget – something Cameron helped achieve. The British leader also secured a double-voting system which means the euro zone countries cannot caucus together to force through banking rules against the wishes of countries, most notably the UK, that aren’t part of its banking union.

Looking to the future, the biggest opportunity does not even figure on Cameron’s wish list. This is to complete the single market. Although it is integrated in manufacturing, it is patchy in services which account for 80 percent of the UK economy.

The Juncker Commission already has three helpful initiatives under way: creating a capital markets union to spur the use of non-bank finance; developing a digital single market to ease internet-based commerce; and building an energy union, to knit together the bloc’s fragmented energy markets – partly to boost efficiency and partly to help it stand up to Russia.

Then there is the prospect of EU-wide free trade deals with other parts of the world, which would again be beneficial to the UK. Top of the list is the one being negotiated with the United States.

Finally, there will be a mid-term review of the EU’s multi-year budget in 2016. While this is probably not the moment for further cuts, it can be an opportunity to ensure the money is spent better – for example by chipping away at farm subsidies and directing cash to research.

Put all this together with whatever Cameron manages to secure from his renegotiation and the package would look substantial and attractive. This is how he should sell reform in his referendum.



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