Why India should follow EU-UK debate

British Prime Minister David Cameron wants a new kind of European Union – or, at the very least, a new relationship between Britain and the EU, where there will be a “two-way flow,” powers flowing not just from nations states to Brussels but the reverse too. He is all set to unveil his plans at a speech in the Netherlands on Friday, and Indian diplomats would do well to grab a seat.

Having vetoed European Union treaty changes in 2011, which bolstered his position in the Conservative Party – particularly among the restive anti-European backbench – Cameron has now promised a referendum. But the Eurosceptic wing of this party is a tiger you ride at your own risk. This is not the 1980s and Cameron isn’t Mrs Thatcher. He leads a coalition government where his partners, the Lib Dems, are famously enthusiastic about Europe.

Equally, he will be aware that Thatcher’s downfall was hastened by party squabbles over Europe.

So when Britain’s allies criticised Cameron last week over his promise of a European referendum, they were doing so in the knowledge that the Prime Minister’s powers in a coalition government are limited. There has been furious speculation in the British media about the possibility of the UK leaving the EU, some of it stoked by Conservative MPs for purely political reasons (for instance, the rise of the Eurosceptic UK Independent Party at the expense of Conservative votes).

Britain’s international allies are unimpressed by Cameron’s tough talk. Philip Gordon, the American undersecretary of state responsible for Europe said last week, “We welcome an outward-looking European Union with Britain in it. We benefit when the EU is unified, speaking with a single voice, and focused on our shared interests around the world and in Europe. We want to see a strong British voice in that European Union. That is in the American interest. It would be fair to say that every hour at an EU summit spent debating the institutional makeup of the European Union is one less hour spent talking about how we can solve our common challenges of jobs, growth, and international peace around the world.”

That’s about as plain as you get in the world of diplomacy, and other allies such as Ireland and Germany weighed in with their own concerns.

On Monday, Cameron made it clear that he doesn’t want a referendum that will ask whether Britain should be in or out of Britain. Instead, he will seek to renegotiate the terms of Britain’s engagement with the EU after the next general election, which is due by May 2015. But to do so he must first defeat Labour at the elections – and things look touch-and-go on that front. Neither will he get the mandate to renegotiate if the election returns yet another Conservative-Liberal Democrat coalition government because the Lib Dems are likely to shoot the idea down.

So, only if Cameron wins an outright victory at the next general elections (there is some talk of him bringing the date forward to 2014), can he start to renegotiate the terms of the UK-EU relations. When negotiations are over, probably in 2018, he will put the results to the British public in a referendum, seeking its approval.

The big mystery of course is what exactly Cameron wants from Europe – what sort of changes does he have in mind? We can get an idea from the pro-reform Conservative group, Fresh Start. Their ambitious agenda appears to seek national powers in every conceivable area of the European Union, including social and employment law; structural funds; financial regulation; policing and crime; immigration; agriculture and fisheries; environment; and trade and customs union.

Of all of these areas, financial regulation is key in British considerations. Cameron wants to protect the City of London’s status as the main financial centre of Europe from meddling European regulators. The UK’s financial services sector employs 1.9 million people, accounts for 10% of the country’s GDP, generates 11% of its tax revenues and produces a £35.1 billion trade surplus. It makes up 35% of the EU’s financial services sector. With an emasculated manufacturing sector, the British economy is disproportionately dependent on the financial services sector. However, because the country is not a member of the Eurozone currency grouping it has little say in European financial regulations. “Due to the eurozone crisis, the new EU financial supervisory infrastructure and the EU voting system, the UK will find it harder and harder to block harmful regulation or when needed put in place her own higher standards,” says Fresh Start.

It is not entirely clear if there is a great deal of Eurosceptic sentiment in Britain, and this is where the expected launch of a pro-European group this month could become interesting. The group, to be called the Centre for British Influence Through Europe, is said to have the support of Thatcher-era minister Lord Michael Heseltine, sidelined Tory minister without portfolio Ken Clarke and former Labour minister and EU Commissioner Lord Peter Mandelson.

There are implications for India in this debate. According to some media commentators, a tightly-knit EU could compromise Britain’s position as the strongest American ally in Europe. Its voice would be lost in the crowd. Swallowed up by the European superstate, Britain would not be able to support American military missions in joint operations. And Britain could even lose its seat at the UN Security Council.

Another point of interest is how Cameron’s rival, the London Mayor Boris Johnson, plays this debate. He could take a more Eurosceptic position than Cameron at the next general elections, as long as he doesn’t spook the market with talk of a British exit.

What should be more important in this debate to countries outside the EU is whether Cameron will emerge the stronger leader from it and whether Britain, as a result, will consolidate its position in the EU.

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