Already emailed by Mr Dewey, but worth posting here in case any of you missed it; suggest you make flip cards for each subject - for & against - and try to memorise the main ones (i.e. trade, jobs, immigration). The information is presented in a very accessible manner, and it has context that you can use to demonstrate application - i.e. point out the IEA has debunked the job loss myth. I am also very sceptical of the size of a GDP drop if we leave; to me that is ludicrous - but that does not mean you cannot point out that the LSE has suggested this, and then go on to question the validity - excellent evaluation marks! The article is below, but the link is:
David Cameron has promised a referendum on whether Britain should remain in the European Union by the end of 2017. Here is a summary of the key arguments for and against British membership.
Are there any viable options for Britain leaving the EU?
If Britain votes to leave the EU, it will have to negotiate a new trading relationship with what would now be a 27 member organisation, to allow British firms to sell goods and services to EU countries without being hit by excessive tariffs and other restrictions. Better off out: Britain could negotiate an "amicable divorce", but retain strong trading links with EU nations, say those campaigning for Britain's exit.
There are several potential scenarios:
The Norwegian model: Britain leaves the EU and joins the European Economic Area, giving it access to the single market, with the exception of some financial services, but freeing it from EU rules on agriculture, fisheries, justice and home affairs
The Swiss model: Britain emulates Switzerland, which is not a member of the EU but negotiates trade treaties on a sector-by-sector basis
The Turkish model: The UK could enter into a customs union with the EU, allowing access to the free market in manufactured goods but not financial services
The UK could seek to negotiate a comprehensive Free Trade Agreement with the EU, similar to the Swiss model but with better access for financial services and more say over how rules and standards are implemented
The UK could make a clean break with the EU, relying on its membership of the World Trade Organisation as a basis for trade
Better off in: An "amicable divorce" is a pipe dream, pro-EU campaigners argue. France, Germany and other leading EU nations would never allow Britain a "pick and mix" approach to the bloc's rules. Norway and Switzerland have to abide by many EU rules without any influence over how they are formed and have to pay to access the single market. Negotiating a comprehensive free trade agreement could take years and have an uncertain outcome. And if Britain went for a completely clean break with the EU its exports would be subject to tariffs and would still have to meet EU production standards, harming the competitiveness of British business.
The run-up to the EU referendum is likely to be dominated by competing claims about how many millions of jobs will be lost or gained by Britain's exit. All such claims come with a health warning. Coming up with a precise figure is difficult as there is no way of knowing if threats by foreign companies to scale back their operations in the UK would come to pass or, indeed, how many jobs would be created by the reshaped economy that might emerge in the wake of an exit. Better off out: There would be a jobs boom as firms are freed from EU regulations and red tape, say those arguing for an exit, with small- and medium-sized companies who don't trade with the EU benefiting the most. In its recent paper, the EU Jobs Myth, the free market Institute for Economic Affairs seeks to debunk the claim that 3-4 million jobs would be lost if Britain left. "Jobs are associated with trade, not membership of a political union, and there is little evidence to suggest that trade would substantially fall between British businesses and European consumers in the event the UK was outside the EU," it argues. "The UK labour market is incredibly dynamic, and would adapt quickly to changed relationships with the EU." Better off in: Millions of jobs would be lost as global manufacturers moved to lower-cost EU countries. Britain's large, foreign-owned car industry would be particularly at risk. "The attractiveness of the UK as a place to invest and do automotive business is clearly underpinned by the UK's influential membership of the EU," said a KPMG report on the car industry last year. The financial services sector, which employs about 2.1 million people in the UK, also has concerns about a British exit. "The success of the UK financial services industry is to a large extent built on EU Internal Market legislation. To abandon this for some untried, unknown and unpredictable alternative would carry very significant risks," said global law firm Clifford Chance in a report by think tank TheCityUK last year.
What about the impact on the economy as a whole?
Much would depend on the trade deals Britain managed to negotiate with the EU and rest of the world after its exit.
The best-case scenario, according to think tank Open Europe, is that the UK would be better off by 1.6% of GDP a year by 2030. That is assuming the UK carried out widespread deregulation after its exit and managed to strike favourable trade deals. The think tank adds: "A far more realistic range is between a 0.8% permanent loss to GDP in 2030 and a 0.6% permanent gain in GDP in 2030, in scenarios where Britain mixes policy approaches".
The Centre for Economic Performance, at the London School of Economics, says the worst-case scenario is a 6.3% to 9.5% reduction in GDP, "a loss of a similar size to that resulting from the global financial crisis of 2008/09". The best case, according to their analysis, is a loss of 2.2% of GDP, although it does not take into account as wide a range of factors as the Open Europe study.
What about immigration?
Better off out: Britain would regain full control of its borders, say anti-EU campaigners. UKIP wants to see a work permit system introduced, so that EU nationals would face the same visa restrictions as those from outside the EU, which it says would reduce population growth from current levels of 298,000 a year to about 50,000. This would create job opportunities for British workers and boost wages, as well as easing pressure on schools, hospitals and other public services. Better off in: Britain might have to agree to allow free movement of EU migrants as the price of being allowed access to the free market. In any case, pro-EU campaigners argue, immigration from the rest of the EU has been good for Britain's economy. The UK's growth forecasts are based, in part, on continued high levels of net migration. The independent Office for Budget Responsibility says the economy relies on migrant labour and taxes paid by immigrants to keep funding public services.
Would Britain save money in membership fees?
The UK's net contribution to the EU, taking into account the rebate, was £11.3bn in 2013. That is more than four times what it was in 2008. It is about the same amount as the UK government spends on transport every year. Better off out: The UK would save billions in membership fees, and end the "hidden tariff" paid by UK taxpayers when goods are exported to the EU, caused by red tape, waste, fraud and other factors. Better off in: The UK's contribution to the EU budget is a drop in the ocean compared with the benefits to business of being in the single market.
What would be the effect on trade?
Better off out: The EU is not as important to British trade as it used to be, and continuing turmoil in the eurozone will make it even less so. Even if Britain did not manage to negotiate a free trade deal with the EU it would not be as disastrous as EU-enthusiasts claim, argues economist Roger Bootle in his book The Trouble with Europe: "It would place the UK in the same position as the US is currently in, along with India, China and Japan, all of which manage to export to the EU relatively easily." The UK would be free to establish bilateral trade agreements with fast-growing export markets such as China, Singapore, Brazil, Russia and India through the World Trade Organisation. Better off in: The EU is the UK's main trading partner, worth more than £400bn a year, or 52% of the total trade in goods and services. Complete withdrawal from the EU would see trade barriers erected, with car exports to the EU, for example, facing a 15% tariff and imports a tariff of 10%. "The idea that the UK would be freer outside the EU is based on a series of misconceptions, that a medium-sized, open economy could hold sway in an increasingly fractured trading system dominated by the US, the EU and China; that the EU makes it harder for Britain to penetrate emerging markets; and that foreign capital would be more attracted to Britain's economy if it were no longer part of the single market," the pro-EU Centre for European Reform said in a recent report.
Would the UK's influence in the world change?
Better off out: The UK would remain a key part of Nato and the UN Security Council and a nuclear power, with a powerful global voice in its own right. The Eurosceptic Bruges Group wants an end to the "discredited" principle that Britain acts as a transatlantic bridge between the US and Europe, saying the country should make self-reliance its guiding principle. Better off in: Stripped of influence in Brussels, Berlin and Paris, Britain would find itself increasingly ignored by Washington and sidelined on big transnational issues such as the environment, security and trade. America and other allies want Britain to remain in the EU. The UK risks becoming a maverick, isolated state if it leaves.
What would happen to Britons working in Europe, and EU citizens working in the UK?
Better off out: Britain would gain full control of its own borders, with migration in and out of the country regulated solely by British law. It would be more difficult for EU citizens to move to the UK, although those already living here are unlikely to be removed. Better off in: A lot would depend on what kind of deal was reached with the other EU nations. Britons may have to apply for visas to enter EU countries and those already living there may face integration rules, such as proving they can speak the language before gaining long-term residency rights. There would also be uncertainty for many EU workers now paying taxes in the UK - what benefits, if any, would they be entitled to?
Would taxes change?
Better off out: The EU has limited power over tax, which is largely a matter for national governments. The exception is VAT, which has bands agreed at the EU level. Outside the EU, the UK would potentially have more flexibility. Better off in: "Tax avoidance and evasion will reach crippling levels as our economy becomes increasingly wholly owned by foreign multinationals that make tax avoidance in Britain central to their business strategy," argued the pro-European The Observer newspaper in an editorial.
Would Britain's legal system, democratic institutions and law-making process change?
Better off out: It would be a major shot in the arm for British democracy as the Westminster parliament regained its sovereignty and reconnected with voters. The country would be free from the European Arrest Warrant and other law and order measures. Better off in: Britons benefit from EU employment laws and social protections, which would be stripped away. Withdrawal from the European Arrest Warrant could mean delays for the UK in extraditing suspects from other European countries; and the UK already has some opt-outs from EU labour law, including the Working Time Directive.
It's over; that's it, it is no more, it is a "dead parrot". As Mark Carney said, "enjoy it while it lasts"...
In fact, there is a serious point to carry into your exam, that will help you demonstrate good knowledge beyond the syllabus: Despite the putative 0.1% fall last month ("-0.1%! First time since 1960!"), several things meant the BoE Governor was hardly likely to break into a sweat. 1) AD is not falling 2) House prices are rising (9.6% in March Y/Y) 3) Any number of other things showing prices rising.
In short, don't go into the exam with the -0.1% figure thinking it will have a major impact on policy - it won't. For sure, inflationary and deflationary pressures exist, and will continue to duke it out (until inflation wins - anyone want to take me on with a bet [Brad, you owe me £10...] - but the key point about this deflationary "episode" is that serious economists do not see it as an issue at all. It is not a "sustained bout of falling prices over a period of time". Please make that distinction if you get an opportunity in the exam.
from the Daily Telegraph - some relaxing post-exam reading!
What is TTIP and why is it so controversial?
An obscure free trade agreement has attracted a huge wave of protest across the EU - so much so that the European Parliament has put it on hold. What's the big deal?
An new acronym has being plastered all over headlines, online petitions and protesters' signs – TTIP.
ADVERTISING
Eyes can glaze over and brains can switch off at the mere mention of this EU treaty. But, in political and economic terms, it is hugely important.
Opponents argue that it could jeopardise the NHS and leave the UK open to being sued by foreign companies.
After being put on hold in the European Parliament, TTIP is the focus of more scrutiny.
Here's what you need to know to get up to speed on this increasingly contentious topic.
What is TTIP?
It stands for the Transatlantic Trade and Investment Partnership, sometimes called TAFTA – the Transatlantic Free Trade Area.
It is a free trade deal between the US and Europe, currently under negotiation, which would cut tariffs and lower regulatory barriers to make trade easier between the two markets.
It would be the biggest trade agreement of its kind, affecting one quarter of global trade.
That sounds simple enough.
I'm afraid it's not. MEPs in the European Parliament have just postponed a vote on it and left-wingers have stuck on a raft of amendments to hold it up.
They only have so much power, though – MEPs only have the power to veto any agreement they don’t like. The European Commission is doing the negotiating behind closed doors.
The Conservatives, Labour and the Liberal Democrats all broadly support the TTIP, although Labour has called for the NHS to be better protected.
Members of the European Parliament protest TTIP (Reuters)
So how does it affect me?
Supporters of TTIP say that lower European tariffs will benefit shoppers by making goods cheaper and creating more choice.
The Government claims the average household could benefit by up to £400 a year, and that TTIP could boost the UK economy by as much as £10bn. The deal could provide a £100bn boost to the whole EU.
Opponents argue that it could lead to the privatisation of the NHS because the treaty includes 'market access' which bans state monopolies – including public services run by the state.
Part of the agreement would allow big companies to take the government to court – in secret. Many argue that it represents a threat to democracy.
This refers to the Investor-State Dispute Settlement (ISDS) mechanism, which allows companies to take legal action against countries they perceive to be hindering potential profits.
A protest against TTIP in Germany (Photo: Reuters)
These kinds of cases are increasing in number. Opponents argue that the ISDS can deter governments from enacting policies to benefit the environment, for example, in case they trigger an ISDS action from a foreign company.
The German government, for example, shut down its nuclear power industry after the Fukushima disaster in Japan in 2011. Due to an ISDS clause in a treaty covering energy investments, Vattenfall, a Swedish utility that operates two nuclear plants in Germany, was able to demand compensation of €3.7bn from the government.
The ISDS mechanism was originally conceived as a means of encouraging companies to invest in countries where they might not expect to get a fair hearing in court if should there be a legal dispute. The hearings are not held in court but judged by three arbitrators.
That sounds potentially worrying. What else is in the treaty?
Environmental campaigners have raised concerns: TTIP would bring the EU's food and environmental safety regulations in line with the US's less strict laws.
The Labour party and other EU officials want wording within the treaty that means governments will remain free to run public services like the NHS.
The EU has said that it always negotiates these kinds of exemptions within treaties. But some don't trust the EU to make them.
The treaty most likely has to be ratified by all national parliaments, as well as by the EU. At this rate, it will take some time before it is legally binding.
From the Economist (all sitting in my room...); if nothing else, carry the paragraphs in italics into your Unit4 exam next week - cracking piece of evaluation (good luck with the paper & questions this afternoon):
THE Trans-Pacific Partnership (TPP), a putative trade agreement, would ease commerce between America, Japan and ten other countries that between them account for two-fifths of global GDP. But how beneficial would it be to these economies? Advocates claim it would boost their output by nearly $300 billion in a decade. Critics say it would make little or no difference.
The disagreement reflects the difficulty of gauging the impact of free-trade agreements. Almost all economists accept the benefits of free trade as laid out in the early 1800s by David Ricardo. Countries do well when they focus on what they are relatively good at producing. But Ricardo looked at only two countries making two products, at a time when few non-tariff barriers such as safety standards existed. This renders his elegant model about as useful for analysing contemporary free-trade deals as a horse and carriage are for predicting the trajectory of an aircraft.
Instead, most economists use what is known as computable general equilibrium (CGE) analysis. CGE models are built on top of a database that seeks to describe economies in full, factoring in incomes, profits and more. Researchers line things up so that the model yields the same output as a real benchmark year. Once that is achieved, they “shock” the model, adjusting trade barriers to see how outcomes shift, both immediately and over time.
There is much to recommend CGE. It is the only trade model broad enough to encompass services, investment and regulations, all of which lie at heart of the TPP debate. It also generates predictions that policymakers want: which sectors will do well and how incomes will change. But CGE has big drawbacks. First, it is dependent on data, which can be very patchy in some areas. Second, faulty assumptions can quickly lead forecasts astray.
Studies of TPP illustrate these strengths and weaknesses. The most influential, by Peter Petri, Michael Plummer and Fan Zhai, for the East-West Centre, a research institute, forecasts that the deal would raise the GDP of the 12 signatories by $285 billion, or 0.9%, by 2025. It is their numbers that America’s government cites when it says TPP will make the country $77 billion richer. Their model tries to avoid some of the common failings of CGE. Their assumptions are transparent, include a range of scenarios and are often conservative — for example, they expect only slow and partial implementation. That makes the results more credible.
Yet subjective elements of the model have a huge impact. The authors use a new approach to predict that more firms will become exporters as the costs of trade decrease. That may be an improvement over previous theories, which assumed a constant number of exporters, but this one tweak greatly changes results: it makes the benefits some 70% bigger, according to a study for Canada’s C.D. Howe Institute by Dan Ciuriak and Jingliang Xiao.
Some assumptions are also debatable. The researchers calculate that increased protection of intellectual property (IP) is beneficial for all countries. A review of studies of TPP funded by the British government, by Badri Narayanan, Mr Ciuriak and Harsha Vardhana Singh, questions that. Stronger protection for IP should spur more investment by producers. But it can also raise costs for consumers beyond what is necessary to encourage innovation and slow the spread of technology to developing nations.
That also points to one of the many blind spots in CGE models. Most use figures from Purdue University’s Global Trade Analysis Project, the best database available. But since it was initially developed for agriculture, it is skewed. It has separate categories for raw milk and dairy products, but lumps pharmaceuticals into one overarching category for chemicals—a problem for models since TPP deals extensively with drugmakers’ IP. Given the uncertainty, Messrs Ciuriak and Xiao exclude any impact from enhanced protection of IP. They also use a more conventional model for exports. They calculate that TPP will raise the GDP of the 12 countries by just $74 billion by 2035, a mere 0.21% higher than baseline forecasts. Others see an even smaller impact. In a paper for the Asian Development Bank Institute, Inkyo Cheong forecasts that America’s GDP will be entirely unchanged by TPP.
Why bother?
That raises the question of whether TPP is worth pursuing at all. As complex as the CGE studies are, they are just models, peering into the future through a haze of assumptions. It is thus important to buttress them with studies of completed deals. The Asia-Pacific region is an ideal laboratory because it went from five free-trade agreements in 1990 to more than 200 in 2015. A new Asia-Pacific Economic Cooperation study finds that, in the five years after an agreement, participants’ exports increased on average by nearly 50% relative to the five prior years. The researchers then control for factors such as GDP and distance, isolating free-trade deals as a variable. Those with the biggest impact share certain features: they have more members, bring together developed and developing economies, and aim at non-tariff barriers as well as tariffs.
This suggests that the gains to be had from freeing trade, even if diminishing, are far from exhausted. But that does not necessarily make TPP the right way forward. Almost all studies agree that its principal limitation is size: it is not big enough. Specifically, the exclusion of China is costly. The Petri study concludes that a more inclusive Pacific free-trade deal with weaker rules on state-owned firms and intellectual property would lift income gains for the original 12 TPP members, including America, to $760 billion—more than double the boost from TPP. Such precise CGE forecasts ought to be taken with a pinch of salt. But the moral is clear enough. The objective should be to bring more countries into the tent, not to push for overly strict rules.
At A2, as you know, evaluation is everything (well, half of everything); therefore, you have to know how to question its value. It is important to understand that questioning the value (efficacy) of something does NOT mean it is not worthwhile; it merely says YOU understand there may be limits, which is what the examiners want to know. For education and training policies one way of achieving evaluation marks is by pointing out that even PhD students (let alone school leavers) are "raw material" where firms are concerned, and will need to be trained in specific skills by their employers. Their education (hopefully) means they will be quicker learners, and with better outcomes (i.e. profits) for their employers. This article points out that countries that just increase education do not see the big uplifts in growth achieved by the developed nations, and so therefore there must be more to growth than just education:
"And there is more bad news for the “education, education, education” crowd: Most of the skills that a labor force possesses were acquired on the job. What a society knows how to do is known mainly in its firms, not in its schools. At most modern firms, fewer than 15% of the positions are open for entry-level workers, meaning that employers demand something that the education system cannot – and is not expected – to provide."
You do not have to read the whole article; you can encapsulate this evaluation point in one sentence. If you use supply-side policies, I hope human capital/education & training will feature prominently; you now have your evaluation in a nutshell.
This excellent 24-minute video gives a colour-coded explanation how to structure an answer to meet the examiner requirements for knowledge, application, analysis and evaluation. Everybody should watch this. The exam question is not AQA, and therefore differs from what you will get; however, the method applies across the boards, and you can ALL benefit from this information-rich video; it may help you add enough marks to lift you up a grade:
Please note the author is a Conservative MEP, who (it is alleged) is considering defecting to UKIP; this is definitely a "best case" scenario for a post-EU Britain, but sift through it for reasons to consider the EU as being a millstone - but be prepared to argue the other side.
A vision of Britain outside the EU - confident, successful and free
It’s 2020, and the UK is flourishing outside of the EU. The rump Union, now a united bloc, continues its genteel decline, but Britain has become the most successful and competitive knowledge-based economy in the region. Our universities attract the world’s brightest students. We lead the way in software, biotech, law, finance and the audio-visual sector. We have forged a distinctive foreign policy, allied to Europe, but giving due weight to the US, India and other common-law, Anglophone democracies.
Part of our success rests on bilateral free-trade agreements with the rest of the world. The EU has to weigh the interests of Italian textile manufacturers, French filmmakers, Polish farmers. Even Germany likes to defend its analogue-era giants against American internet challengers such as Google, Amazon, Facebook and Uber.
Once outside the Common External Tariff, the UK swiftly signed a slew of free-trade agreements, including with the US, India and Australia. Our policy is like Switzerland’s: we match EU trade negotiators when convenient, but go further when Brussels is reluctant to liberalise, as with China. Following Switzerland, we forged overseas relationships while remaining full members of the EU’s common market – covered by free movement of goods, services and capital.
Non-EU trade matters more than ever. Since 2010, every region in the world has experienced significant economic growth – except Europe. The prosperity of distant continents has spilled over into Britain. Our Atlantic ports, above all Glasgow and Liverpool, which were on the wrong side of the country when the EU’s customs duties were imposed in the Seventies, are entering a second golden age.
London, too, is booming. Eurocrats never had much sympathy for financial services. As their regulations took effect – a financial transactions tax, a ban on short-selling, restrictions on clearing, a bonus cap, windfall levies, micro-regulation of funds – waves of young financiers brought their talents from Frankfurt, Paris and Milan to the City.
Other EU regulations, often little known, had caused enormous damage. The Reach Directive, limiting chemical products, imposed huge costs on manufacturers. The bans on vitamin supplements and herbal remedies had closed down many health shops. London’s art market had been brutalised by EU rules on VAT and retrospective taxation. All these sectors have revived. So have older industries. Our farmers, freed from the CAP, are world-beating. Our fisheries are once again a great renewable resource. Dis-applying the EU’s rules on data management made Hoxton the global capital for software design. Scrapping EU rules on clinical trials allowed Britain to recover its place as a world leader in medical research.
Universities no longer waste their time on Kafkaesque EU grant applications. Now, they compete on quality, attracting talent from every continent and charging accordingly.
Immigration is keenly debated. Every year, Parliament votes on how many permits to make available for students, medical workers and refugees. Every would-be migrant can compete on an equal basis: the rules that privileged Europeans over Commonwealth citizens, often with family links to Britain, were dropped immediately after independence.
A shale gas exploration well at Barton Moss, near Manchester, in 2013.
Britain has been able to tap into its huge reserves of shale gas and oil, which came on tap, almost providentially, just as North Sea gas was running out. At the same time, the free-trade deal with China has led to the import of cheap solar panels, which the EU had banned. They are now so integrated into buildings and vehicles that we barely notice them. Cheaper energy means lower production costs, more competitive exports and a boom all round.
Unsurprisingly, several other European states opted for a similar deal. Some (Norway, Switzerland) came from the old European Free Trade Association; others (Sweden, Denmark) from the EU; yet others (Turkey, Georgia) from further afield. The United Kingdom leads a 21-state bloc that forms a common market with the EU 25, but remains outside their political structures. The EU 25, meanwhile, have pushed ahead with full integration, including a European army and police force and harmonised taxes, prompting Ireland and the Netherlands to announce referendums on whether to follow Britain.
Best of all, we have cast off the pessimism that infected us during our EU years, the sense that we were too small to make a difference. As we left, we shook our heads, looked about, and realised that we were the fifth largest economy on Earth, the fourth military power, a leading member of the G8, a permanent seat-holder on the UN Security Council, and home to the world’s greatest city and most widely spoken language. We knew that we had plenty more to give.
Daniel Hannan is Conservative MEP for South-East England
4 Comments
