Britain in Europe.
Renegotiating British membership: 1979-1986
Welcoming deregulation: the Single European Act.
Refusing the logic of political integration and of the Maastricht Treaty.
The Maastricht Treaty
From the ratification of Maastricht to the victory of New Labour.
European Policy under New Labour.
Renegotiating British membership.
The ideological ambiguities of Thatcherism
Thatcherism was a political practice which combined elements borrowed from different political traditions, namely liberalism and conservative traditionalism. This explained its success in the UK, since it covered a very wide spectrum, but also its lack of coherence, and ultimately, its inability to meet the challenge of European integration. Indeed, Margaret Thatcher’s inability to lead a rational European policy was one of the two reasons why she fell from power in 1990. In the case of Britain, and of the English speaking world in general, the philosophical opposition between liberalism and conservatism has structured political debates since the 18th century. This is not the case in many other European countries , and especially in France, where economic liberalism has usually been associated with right wing political forces , with a brief exception between 1830 and 1848.
In the name of Liberalism, Margaret Thatcher, who governed Britain between May 1979 and November 1990, welcomed the economic evolution undergone by the European Union in the 1980’s, in two fields: the abolition of tax barriers and of protective practices between member countries, on the one hand, and the deregulation of all European markets on the other hand. Besides, she accepted with enthusiasm the old argument in favour of joining, namely that the bracing winds of competition would force British industry to improve its productivity and the quality of its products if it wanted to remain in business: this would be important not just in order to export on the European continent, but also to remain competitive at world level.
In economic terms, Thatcher was therefore a keen pro European leader, in tune with the ideas prevailing among experts and most governments in the 1980’s, even though she seemed more extreme than most. During this decade, the theories and policies advocated by John Maynard Keynes were gradually abandoned by all European governments. Even socialist France abandoned the Keynesian priorities in 1982/1983. The restoration of full employment, and reflationary policies designed to boost production and employment were gradually discarded by François Mitterrand’s governments, under the influence of the French Minister for Finance and Economics , Jacques Delors. Delors, the father of the French austerity package known as “Rigueur” became President of the European Commission, and his views became extremely influential at European level in the late 1980’s.
The new economic priorities had been more or less defined by a group of economists called the “Chicago school”, or the “monetarists”. Their leading stars were Milton Friedman and Friedrich Hayek. According to the monetarists, the chief priority of governments should not be the restoration of full employment, but the control of inflation. Inflation, according to the monetarists, was the result of an excessive supply of money, relatively to the national output, i.e. the goods or services produced by the economy. It was therefore necessary to reduce the supply of money, which could be effected by keeping the creation of money by governments under control and by reducing public borrowing. Monetarists considered the market as natural phenomenon, and state intervention as inefficient and politically objectionable. They failed to see any difference in nature between the command economies of Eastern Europe, and the social market economies of Western Europe, where public sectors and private sectors coexisted.
The existing nationalized sectors were seen as the thin end of a wedge, which would lead ultimately Europe into “totalitarianism” and slavery (Milton Friedman’s first book, published just after the Second World War, was entitled “The Road to Serfdom”).
The laws of competition should be respected, since tampering with them would only result in inefficiency, a waste of public money, higher taxes, and inflation. Ailing firms, the “lame ducks”, as the press called them, should NOT receive public subsidies.
The scope of government intervention should be as limited as possible, for two reasons: borrowing was bad, since it bred inflation, and taxation was also objectionable, since it penalized the active, successful citizens, and reduced the incentive for work and initiative. Tax should NOT be used in order to reduce social inequalities, but just to provide the state with a (limited ) income.
Wages should only be determined by the market. There is such a thing as a natural level at which employers are prepared to pay workers. This is the natural level for wages. Interference with this, whether by powerful trade unions or governments imposing a minimum wage, can only have disastrous consequences. British workers, so Thatcher said, had “priced themselves out of a job”: they had imposed high wages, making their employment unprofitable. (This was challenged by many analysts, who pointed out that the problem in the UK was not the level of wages, but the relatively low productivity of industry.)
Unemployment was a natural phenomenon. If it helped national economies adjust to the world economy, by persuading workers to accept lower wages, harsher working conditions, or more flexibility, then it would play a positive part.
During the 1970’s, the inflation rate had risen dramatically in Britain, which persuaded governments that their priorities should change. Besides, governments were at a loss, and could not make sense of the crisis, which had many different aspects. The crisis had political, cultural and psychological aspects as well as economic ones, and the decline of Britain to the status of a middle range, ordinary European country was hard to accept. Margaret Thatcher held a very synthetic discourse in which all different aspects intertwined, and the arguments reinforced each other. The Labour party, in the 1970’s, was divided. Part of it clung to the old Keynesian theories. The leading section implemented, in practice, the policies recommended by the monetarists even before Mrs Thatcher won the 1979 elections. In the rest of Europe, the ideas of the monetarists exerted a growing influence. France was the last country to abandon the social priorities of Keynesian economics, and was forced to do so by the growing trade deficit its reflationary policies had brought about in 1982. Germany was particularly attracted by the concern of the monetarists for inflation, for historical reasons. During the Weimar republic, in the 1920’s, Germany had experienced extremely high rates of inflation, which had brought about the general impoverishment of the population, and the rise of the Nazi party. Inflation was therefore treated as a very serious matter in Germany, whereas it was practically a permanent feature in other European countries, such as Italy.
The impact of monetarism, first within the English speaking world, and then in Europe, helped Britain exert a considerable influence over economic decision making in the European Union. This influence was long lasting, and is evident in the so called “Maastricht critieria” included in the Maastricht Treaty in 1990. The countries which wished to apply for membership of the European monetary system had to abide by strict economic criteria , among which a limited public deficit. Even though Britain did not adopt the Euro, thatcherite liberal, monetarist ideology pervaded decision making in the EU. Besides, economic liberalism, which was at the core of Thatcherism, also became integrated in European discourses and public policies, thus diluting the specificity of the European social model. After a decade of deregulation and privatizations, Europe became more similar to the United States, although, in the 1990’s, this became , and still is, extremely controversial and the subject of fierce social and political struggles.
British liberalism came to play a much more active part within the EU than ever. The indirect influence of British ideas and policies over the EU must not be underestimated, and far exceeds the direct influence of British governments.
However, Thatcherism included other elements than liberalism. It purported to restore British national influence and pride by the most traditional of policies, including the nurturing of the “special relationship” with the USA, and totally rejected the option adopted by other European countries, that of the “pooling of sovereignties”. Thatcherite conservatism bears little relationship with the European issue. Nevertheless, the promotion of a specific form of “britishness”, including opposition to the integration of immigrants, confrontation with Argentines over the futile, symbolic issue of the Falklands, opposition to any proposal emanating from continental European countries, and blindfolded kinship and solidarity with the United States of America had a very lasting impact on the nation, which can be still felt today.
In other words, Britain totally refused the logic of the Jean Monnet method. For Monnet, economics were a means to an end, and economic integration was just a tactical move, intended to lead to the strategic master plan of political integration. For Thatcher, economic deregulation was the one and only goal, and any move impinging upon British sovereignty would be, and was fiercely resisted. As long as Europe was happy with deregulating its markets, Britain was a keen supporter of this policy. When the political dimension appeared, with the discussion of the Maastricht Treaty, Thatcher fell foul with most European governments.
Haggling about the British contribution to the Community’s budget.
The first half of the Thatcher decade was dominated by a crisis, which not only affected the relationships between the UK and the European Community, but also paralysed the Community as a whole. The object of the conflict was the amount of the British contribution to the Community’s budget. The deep causes of the conflict lied in the fact Britain considered community policies as structurally imbalanced, since they had been designed long before Britain was allowed to join, and suited the interests of other member states. Germany, an industrial nation, could export its goods to the whole of Europe. France reaped most of the benefits of the Common Agricultural Policy (CAP). Britain, whose industry had been weakened by the crisis if the 1970’s, and whose small but efficient agriculture did not need European subsidies, did not benefit from the European integration process as much as its partners.
Conversely, Britain was expected to pay a very heavy contribution, which was calculated on the basis of:
the common external tariff. The more a country imported from the rest of the world, the higher its contribution. Naturally, since the British economy was more geared towards international , non European exchanges, than that of its neighbours, it was expected to pay a lot. In terms of agricultural imports, Britain imported, traditionally, a very large proportion of its needs from outside the Community.
a 1% levy on member countries’ Value Added Tax. The higher the domestic consumption , the higher the contribution.
The contribution seemed all the more unacceptable to Britain , since it did not benefit from the Community’s expenditure. The only expense which had been built in the Community’s structure, and which was compulsory and automatic, concerned agriculture. Whenever prices fell below an agreed level, farmers received European subsidies. This meant that they were encouraged to produce large amounts, irrespective of demand and of the reality of the market: their income was guaranteed even if there was an over production. The British press was full of horror stories about the beef mountain (surpluses of beef, stocked and deep frozen at great expense), the butter mountain and the wine lake. This was not only a waste of money, but an offence against the laws of the market, which are taken very seriously in the UK. British farmers only received 5% of CAP subsidies up to 1982, and 10% afterwards.
The other expenses of the Community were the European Social Fund and the European Regional Development Fund. In the early 1980’s, they were not very significant, since poor South European countries only joined the Community later (Greece in 1981, Spain and Portugal in 1986). Britain learned quickly how to tap those resources, but expenditure on the ESF and the ERDF was capped. Over a certain ceiling, the budget could no longer increase. This was not the case for agriculture, where expenditure was unlimited. Expenditure on the ESF and the ERDF did not exceed 10% of the Community’s expenditure.
When Britain had joined in 1973, it had been agreed that its contribution would increase very slowly, from zero in 1975, to £ 178 million in 1976, and £ 900 million in 1979, the year Margaret Thatcher became the tenant of 10 Downing Street. Had not Thatcher won the elections, the crisis would have broken out all the same, although her particularly abrasive style enlivened the negotiations.
During the Dublin European Summit of 1979 she exclaimed: “I want Britain’s own money back ! “
The forecasts for 1980 were ominous. Britain would have had to pay £ 1 200 million, which would have represented 60% of the Community’s expenditure. Thatcher was quite unrepentant about the size of American imports. Negotiations were held in May 1980, as a result of which both parties felt satisfied. Thatcher told the House of Commons she had won, and the French and German governments refused to accept the principle put forward by the UK, that of “Fair Return” ( “Juste retour” in French). This principle amounted to a negation of the Community’s very existence. It meant that a country should not contribute more to the European budget than it would get in return, through one programme or another. No solidarity would have remained between strong and rich countries on the one hand, and weaker ones on the other.
Continental Europeans were therefore firm on principles but very understanding in practice, since Britain was experiencing an economic downturn in the early 1980’s.
It was agreed the British contribution would only amount to £ 335 million in 1980 and £ 425 million in 1981. In fact, Britain only paid £ 200 in 1980 and nothing at all in 1981.
Encouraged by this success, Thatcher demanded new rebates in 1982. Britain should have paid £ 870 million for 1982, but an agreement was eventually reached, and the amount reduced to £ 480 million. This new crisis sums up in a nutshell the evolution of Community policies during the 1980’s. Irritated by Britain, who threatened to block an agreement on farm prices, continental Europeans decided to change the rules, and to deepen the process of European integration. They used majority voting in order to reach an agreement on agricultural prices, instead of the old rule of unanimity. A short term, financial victory for Britain, (who obtained a huge rebate) had to be paid for politically since , in practice, the UK lost its right of veto on the essential issue of agriculture
Both France and Germany felt enough concessions had been made. A lot of time was wasted over such negotiations, whereas efforts should have been geared towards the smooth integration of the new and future members (Greece Spain Portugal), whose per capita income was clearly lower than that of the UK. Britain was no longer the poor man of Europe, and did not deserve a special treatment.
In 1984, a new crisis was opened by Britain, who refused to vote the European budget, on ideological grounds. The Conservative House of Commons felt the Community, where many countries were dominated by socialists, was over spending. The Community was paralysed for over a year, including the Erasmus exchange programmes for university students. The matter went to the European Court of Justice, and a compromise was, again, struck in 1986.
Britain succeeded in reducing significantly its contribution to the budget, thus avoiding to pay the price of its heavy reliance on foreign trade with the USA and other non European countries. British foreign trade with the Community was changing. Exports to the EU only represented 15% of the total in 1955, 32% in 1974 and 42 % in 1980. The trend was unmistakeable, but British integration in world markets was a reality. In the I980’s, most American and Japanese investments in Europe went to Britain. In the long run, this preserved the special status of Britain, as a European country exerting influence in the EU, but at the same time a peculiar offshore outfit, at ease with globalization, and closely linked to the USA. Continental Europeans felt differently. To some extent, the considerable leap forward which the Single European Act of 1986 and the Maastricht Treaty of 1990 represent for European integration was due to a reaction, on the part of Continental Europeans, against British obstruction in the early 1980’s.
A world view dominated by the cold war and by solidarity with the USA.
The first half of the 1980’s was the last years of the cold war, which nobody at the time could imagine would end so quickly, after Perestroika and the fall of the Berlin wall in 1989. Military strategists in the West seriously considered the possibility of an armed conflict in Europe. Evidence appeared that the USA were even seriously contemplating a limited nuclear war on the “European theatre”. They required the support of their allies for the deployment of tactical nuclear missiles , i.e. short and medium range ones which could hit Soviet troops in Eastern Europe – and, incidentally, Eastern Europe itself- without affecting the Soviet Union . The Soviets, it was believed, would refrain from using strategic, long range missiles against the USA if their own territory was not hit. The two superpowers could therefore escape relatively unscathed from a limited nuclear conflict, which would weaken, or eliminate, their European clients. This was a nightmare scenario for many European governments and public opinions. Margaret Thatcher remained, throughout this period, one of the most faithful allies of the USA. Britain accepted the deployment on its soil of large numbers of American tactical nuclear missiles, the “Cruise Missiles” equipped with nuclear warheads. The British Peace Movement , called the Campaign for Nuclear Disarmament, was presented as unpatriotic, but mobilized hundred of thousands of demonstrators.
In return, Mrs Thatcher obtained American support during the war it led against Argentina, when a British expeditionary force was sent to the South Atlantic in order to recapture the Falkland Islands (“Malvinas” for the Argentines), which had been seized by Argentina. This American support was not only effective in terms or electronic intelligence, gathered thanks to spy satellites and eavesdropping. It was also very significant politically, and could not be taken for granted . This was the first time the USA supported a former colonial power, the UK, against an American nation, in clear breach of the old Monroe Doctrine. Besides, the Argentine dictatorship largely drew its origin from an operation mounted by the CIA in Latin America, called Operation Condor, designed to eliminate physically left wing leaders and militants. The military alliance between the US and the UK was strengthened by the support provided by the USA, and helped promote the Echellon network. This is an international network of electronic “intelligence” (i.e. spying), integrating the intelligence agencies all English speaking countries. It enables the USA and its clients to eavesdrop on all telephone conversations in the world, and on all Internet communications. Britain currently operates one the most powerful listening posts of Echellon, and GCHQ (“Government Communication Headquarters”), employs literally thousands of technicians, translators and agents at its Cheltenham base. Clearly, Echellon represents a breach of European solidarity, since it is used against other European countries, including France.
Solidarity with the USA went even beyond the realm of defence in this period. The USA had elected a very conservative Republican President, Ronald Reagan, who was ideologically very close to Margaret Thatcher. The USA preached the doctrine of monetarism, even though they did not necessarily apply it to their own public deficit. With British support, they imposed monetarist policies to the rest of the world, thanks to the International Monetary Fund and even the World Bank. The so called “structural adjustment policies” imposed on third world countries, consisting in reducing public spending and avoiding deficits, contributed to the rise of world poverty in this period, and became very controversial. The roots of the anti globalization movement, and of anti American and anti British feelings in many countries can be found partly at least in those policies. In international terms, Europe remained a virtual reality, with a lot of potential, but no achievements.
Britain imported a lot of American policies in many areas. Privatizations, the deregulation of services, aggressive, confrontational strategies against trade unions, indifference towards industrial firms which faced bankruptcy, the encouragement of private wealth accumulation, all gradually changed the nature of British society. Britain, since the war, had been an industrial welfare state, in which public services enabled ordinary people to share , to some extent, the benefits of economic prosperity. Under Margaret Thatcher, Britain became a service society, where industry became marginal, and where the collective culture one associated with industry also collapsed. Public services could then be described by using the phase the American economist JK Galbraith had used in the 1960’s to describe the USA: “ Private affluence and public squalor”. There was a lot of wealth about in the UK, but it was concentrated in private hands. Public services declined in the fields of health, education, public housing and transport. British Rail, which , in the 1960s, was an efficient and modern national network, was divided into rival private companies. The British train service, slow, expensive, unreliable and accident prone, became one of the worst ones in Europe, comparable only to that of the USA, where it is largely marginal. Until 2003, when the service was modernized, Eurostar travellers from Paris to London shot through the North of France, only to grind their way through the Home Counties of the South of England . As President Mitterrand said diplomatically “On a le temps d’admirer la belle campagne anglaise”. By the mid 1980’s, 12 million citizens were said to live below the poverty line. British society was nevertheless rich, and richer than it had ever been in history. Will Hutton, a popular sociologist, said Britain had now become a 40/30/30 society. 40 % of the population were doing quite well, thanks to the rise of new technologies, the communication industry, banking, the rise in real estate prices. Their taxes were cut by Mrs Thatcher, to whom a lot remained faithful. The next 30 % were in employment , but did not make a lot , and were in danger of losing their jobs. The bottom 30 % were either unemployed, in poverty, or had very precarious, flexible jobs which did not provide a sufficient income for them to live without social security benefits. This is very close to the American pattern and very far from the traditional British one, in which the poor were less numerous, and were considered as part of the working class, and politically and socially integrated. The americanization of British society was largely completed by the mid 1980’s. The conservatives remained in power until 1997, which would imply that a significant section of the population accepted this situation. In terms of mentalities, the philosophy of the market came to pervade the whole of the nation, and even modified the ideology of the Labour party.
2. Welcoming Deregulation: the Single European Act, 1986.
The Milan summit, on June 28th 1985, adopted the conclusions of a White Paper on the achievement of a domestic single European market, commandeered by the European Commission to a team of experts, and validated by the Commission. The paper, called “The costs of Non Europe”, (also called after the name of the expert in charge of the team, “The Cecchini Report”), proposed:
The elimination of physical borders
The elimination of technical borders
The opening of public markets
The free movement of workers and professionals
The free movement of services
The liberalization of capital flows
The elimination of all physical barriers.
By 1986, the Single European Act had been signed by all members of the European Community. Clearly, the method was economic, but the goal was political. The next step would obviously be the Maastricht and Amsterdam treaties. The European Commission was then led by a very dynamic and committed president, Jacques Delors. The strange thing is not that the Act was signed, but that it should have been necessary at all, since all the proposals were already included in the 1957 Rome Treaty. Why was the Single European Act necessary ?
Among the reasons for this decision was the fact that the economic crisis, since the 1970’s, had led many governments to adopt protectionist moves, such as public subsidies for ailing sectors (e.g. steel manufacturing in France and Germany), or even market protection. All attempts by the European Commission at encouraging the mobility of workers, a feature which already featured prominently in the Rome Treaty, had failed.
The Rome Treaty itself was largely ignored, and seemed increasingly at variance with the actual practice of governments. As years went by, it could become totally irrelevant if nothing was done.
The difficulties created by Britain during the negotiations on the British contribution and the CAP paralysed the Community, and deprived it of any element of idealism and political ambition.
The European market was still largely divided because of
Different rates of VAT. For example, VAT on cars amounted to 28% in France, 14% in Germany, 15% in the UK and … 173% in Denmark.
Different sanitary regulations, used largely to protect national markets. The British regulations on the import of pet dogs and cats, motivated by protection from rabbies, also conveniently protect British breeders from European competition.
Different policies as regards imports from third countries (i.e. non European) . France limited the import of new Japanese cars to a maximum of 3% of all new cars.
Different norms and technical regulations, which were used systematically as a protectionist device. German brewers used a law on the “purity of beer” to stop French beer from crossing the Rhine. French cassis de Dijon could not be exported to Germany either, because it was too potent (32°) to be considered as wine, but not strong enough to qualify as spirits. A famous case was fought in court over this.
The economic, political and psychological impact of the Single European Act, adopted in 1986 and enforced in 1992, was considerable.
Eliminating physical borders.
This was naturally a very liberal move, in the political as well as the economic sense of the word. Individuals would be able to circulate without any kind of control, and no quotas would be imposed for individual imports, provided they were used for individual consumption. Goods imported from the rest of the world would only be controlled once, at the port of entry, which raised a number of problems for the automobile sector, since Britain imported Japanese cars and car parts very freely. This definitely increased competition, and exposed all European industries . Sanitation regulations were supposed to be unified as well.
Britain welcomed the economic aspects. A thriving individual import industry now exists between Britain and supermarkets in the North of France, where many goods, including alcoholic beverages, are cheaper. However, Britain insisted on the need to retain passport controls , in the name of the fight against illegal immigration, terrorism and crime. In fact, the decision seems to be more political and symbolical than practical. There are no identity cards in the UK, and citizens are not expected to carry proof of their identity when are stopped by the police. This is considered as an essential feature for a free country, and attempts at introducing an ID card have always been fiercely resisted. However, serious criminals or highly motivated illegal immigrants are not likely to be deterred by passport controls at the border. The massive increase in travel makes border controls problematic, unless electronic or biometric data are included in passports. Such data became necessary in order to obtain the right of entry in the USA in 2003 .
The British European Commissioner Sir Leon Brittan said that border controls were irrelevant in the struggle against transnational crime. Nevertheles, they were maintained, either as a symbolical gesture, or a transitional measure, until more efficient controls are invented.
One can say that, to some extent, political liberalism remains an essential British feature, but that it does not apply to foreigners.
Eliminating technical frontiers.
Norms had been fixed independently, without any kind of cooperation, and this was used as a protectionist device. The solution which had been theoretically adopted by the European Community in the past consisted in adopting the highest standard for consumer protection. This was unrealistic, and extremely slow. Countries were ecological consciousness appeared at an early stage, and was higher, such as Germany and the Netherlands, had very high standards , for example concerning automobile pollution, and the fumes coming out of exhaust pipes. They had taken stringent measures which, in effect, would have meant the scrapping of a large proportion of the road vehicles circulating in France, and most South European countries. Besides, the new clean catalytic exhaust pipes were all manufactured in Germany. Consumer protection and ecological concerns could easily become a new form of protectionism.
The new approach was more flexible. It consisted in saying that all technical norms were deemed equivalent within Europe . If a product was acceptable in country A, country B could not use its own norms to exclude it. Contrary to what was feared in some quarters, German roads were not swamped with unsafe, rattling French or Spanish vehicles leaving a trail of stinking black smoke behind them.
However, this solution was not entirely satisfactory. Norms remained different for lamps, or plugs, as anybody trying to use an electric appliance in a different European country will have discovered. Britain remained particularly isolated in this respect. It had specific norms, and its safety standards, such as those for electrical appliances, were very high indeed. They still are much higher than French ones. Besides, although Britain slowly turned metric in many fields in the 1970’s, the old habits died very slowly, and workers were used to specific lengths, weights, volumes and gauges, unknown on the continent. Such details created a certain amount of aggravation and fed anti European feelings in the UK.
Opening public markets.
Britain was particularly happy about this, since this quintessentially liberal decision was in tune not only with the new, rather shrill discourses of monetarist pundits and thatcherite politicians, but also with traditional British culture. Britain is very different from France in this respect. In France, the involvement of the State in industry is traditional, and has a long history, starting under Louis XIV and his minister Colbert. The history of French capitalism is very different from that of Britain’s. In France, the State will often identify the areas in which it feels industrial expansion should be encouraged, invest heavily, use its scientific and managerial expertise in order to develop the industry, use State authority to exclude foreign or private competitors if necessary, and even create a market by purchasing the goods itself, or by forcing French consumers to buy them. The French telecom, aircraft, space, nuclear, railways and even construction industries are a case in point. French supporters of Colbertisme will point out that it is in fact very efficient, and that , whenever the country did not resort to this practice, indigenous private capitalism failed dismally. This connects to the debate on the anthropological roots of capitalism, and Weber’s thesis. On the other hand, this argument would imply that the new European economic model is closer to the North European, Protestant, competitive and capitalist cultures than to those of Southern, egalitarian nations, where the role of the State was different.
Britain is perfectly at ease with the new European philosophy . The British government never had an industrial policy. British capital will be readily exported, provided the opportunities are good. Investing in European public services seems a natural avenue for British financial institutions. Opening Britain to foreign investment is not problematic either. Traditionally, 50% of American investments in Europe went to the UK. The argument of “national sovereignty” or “national interest” is not presented in the same ways as in France. The litmus test, for capital, is profitability. The only point of a business is to make a profit, not to produce goods or create employment. Britain needs a profit making financial sector, efficient firms, whoever owns them. Jobs are a by product of profits. When the British company manufacturing military helicopters, called Westland, went bankrupt, several options were at hand. The company could be taken over by a European consortium including British Aerospace, but also German and French companies, or it could be bought by an American company called Sikorsky. Margaret Thatcher exerted pressure in favour of the American option, which, a few months later, led to the resignation of her defence minister, Michael Heseltine. The American option was adopted.
The free circulation of workers and professionals.
The circulation of workers was already a provision of the Rome Treaty, but, in practice, the Common Market led to little mobility for ordinary workers. Highly skilled, and well paid professionals are more mobile. British doctors, who, as public employees, are less highly paid in the UK than in liberal (USA) or quasi liberal systems (eg France), have a tradition of mobility. Many emigrated to the US, and Britain compensated for this loss by welcoming doctors from poor countries (eg Egypt). Emigration was therefore not a new idea, contrary to the situation in France. British law and accountancy firms were well placed to make the most of the increase in the free circulation of professionals. They had a lot of expertise both technically and in the export of their services.
Besides, all state employment in Europe was now open to European nationals, except police forces, which created opportunities in fields such as teaching.
A Common market for services.
Fields such as financial services and transport are areas where Britain excels. Small, low cost airline companies are a case in point , and benefited a lot from the changes.
Freedom for capital flows.
In a situation where all financial operations become possible between two European countries, competition will naturally favour those countries that have the most liberal (i.e. cheapest) taxation system, and the highest interest rates. This was the case for Britain, which also had the best and the oldest financial institutions in Europe, and very competitive insurance companies. The change suited perfectly the interests of the City. New technologies meant that the existence of a separate currency, the Pound, would not seriously hinder exchanges. There is a lot of evidence that this was indeed the case.
The elimination of tax barriers.
Britain was in the European average, with a VAT set at 15%, whereas France had a standard rate at 18.6 % and a high rate at 33,5% . It would no lose much.
In terms of “sin taxes”, i.e. the excise duties levied on alcohol, tobacco, and petrol the situation varied widely. Britain had very heavy taxes on alcohol, and, at the time, low ones on tobacco and oil. This was due to a mixture of economic considerations (the UK was an oil producing country, did not produce wine etc ) and complex ethical ones. Duties on petrol increased a lot in the 1990’s, but the issue of taxes on alcohol is so entangled with cultural, ethical or even religious factors that differences remained enormous within Europe. Duties on alcohol remain very high in the UK compared to French ones. This explains the success of supermarkets in the North of France, which do a brisk trade with British customers.
The economic impetus and the advantages of the greater European market were enormous, and it became impossible to imagine that Britain could remain aloof from the process or withdraw from economic integration. However, the political side of integration was another matter. Besides, technical difficulties in the way of economic integration remained. Such problems had a political dimension, as well as a practical one.
The difficulties concerned the fields of transport, higher education and public procurement.
All quotas for national carriers in the area of road haulage were theoretically abolished in 1988. However, this led to a crisis, since Germany , fearing foreign competition, insisted on specific controls. The hours of work of lorry drivers, - a very controversial issue, on which wide variations still exist in practice within the EU- and the reliability of monitoring devices, recording driving hours and speed, remained under the control of national governments. In 1990 a special tax was created in Germany, levied on foreign lorries entering the country. This is compounded by the fact that private carriers from Southern and Eastern Europe are believed by public opinion in Northern countries to flout the regulations concerning working hours and pollution norms.
The mutual recognition of diplomas remained a virtual reality. In 1988, the principle of mutual recognition was adopted by the 12 member states. However, this is only a very general principle, which remains largely meaningless. It only affects degrees delivered at year 3; i.e. the French licence of British Ba. It leaves aside all diplomas delivered at year 2, whose value on the European job market is low. Outside France, few universities award diplomas after 2 years of training. It does not affect either post graduate diplomas, such as French Maîtrises, DESS and DEAs, British Masters etc. In the case of post graduate diplomas, the UK functions on the basis of absolute competition between institutions, on the basis of their prestige. The basic fee for postgraduate British students is at least £ 3000 (4500 Euros) . For students from outside the EU, the fee is often over £ 10 000. Even in the case of BAs, British universities operate as a market, even though the fee is a standard one and has so far remained low. The difference between the market value of a BA from a prestigious university (e.g. Oxford or Cambridge) and from a less prestigious one is considerable. This is both due to real differences in standards, and to social factors. This is unequalled on the continent, and especially in France, where the market values of all licence diplomas is strictly similar, and bears no relation to the university which delivered them. It would therefore be rather unrealistic to expect British institutions and British society to award the same kind of value to a foreign diploma as to a British one, since their own system functions like a domestic market. To some extent, European academia is drawing closer to the British model, based on all out competition. This is already the case for masters professionnels in France (the old DESS). The original philosophy of European integration, implying the respect of national approaches to public services, and their gradual replacement by European standards, was gradually replaced, in the course of the I990’s, by the neo liberal approach, based on competition, and modelled on the USA. This is a highly controversial issue, since what is at stake is the existence of a specific European model, distinct from the American one.
Finally the directive on public procurement, stipulating that all public authorities, including local authorities, must open their supply contracts to tenders from any EU country, was resisted. French public industries (EDF) or private firms (e.g. water supply companies) were quick to export their services, but did not necessarily welcome European competition . This was the case all over Europe. Water works in the UK were privatised under the conservative governments, and the fact that French companies , which have a lot of expertise in this field, invested heavily in the sector was the subject of much criticism in the British press. This issue remained a difficult one well into the XXIst century.