Understanding the European Union
Professor Eiko Thielemann
October 14th, 2012
Should the UK remain a member of the European Union?
The issue of whether or not the United Kingdom should remain a member of the European Union has been debated heavily over the past decade, with the debate heating up even more from the current European Sovereign Debt Crisis. Recent polls of the UK population showed that around half of the UK’s citizens would vote to pull out of the EU if it went to referendum. However, after all of the economic, political, and social advantages of being a member of the EU are considered, it remains clear that leaving the EU is not in the UK’s best interest. Economically, it does not make sense for the UK to leave the world’s largest trade block considering the EU buys fifty percent of the UK’s exports, at a time when the UK’s current account deficit is at one of its all-time highs. Additionally, the UK would lose its allure as being a hotspot for Foreign Direct Investment, as they would no longer give companies access to the single market, further contributing to the UK’s growing imbalance of payments. Ultimately this could be detrimental to the value of the British pound, and even worse, cause the UK to lose its position as the financial center of Europe. The UK giving up its decision-making influence in the EU would not likely result in the UK seeing trade polices pass that make this debated exit any easier. From a social perspective the citizens of the UK would lose the highly valued privilege to seamlessly travel, attend school, live, and retire anywhere throughout the EU. After all of these factors are made clear, especially the negative financial factors, the economic impact of a UK exit would triumph over any negative sentiment associated with staying a member of the EU. The most powerful factor marrying the UK to the EU is the undeniable economic dependence the UK has on the world’s largest trading block. The fifty percent of UK exports that goes to the countries of the EU would become much less competitive with trade barriers, which would then raise the necessity for many UK exporters to either lower their prices, or decrease their output to meet the fallen demand of their goods. Additionally, due to the nature of the goods the UK trades with its EU partners, it would not easily substitute this trade with non-EU countries (Oxford 24). According to simple economic theory, this would ultimately decrease the amount of money the UK receives for its exports, as the amount the tariff increases the price of UK goods will ultimately have to be born by the UK company exporting it, and any price increase not born by the UK company will lead to a decrease in exports demanded by the EU. Therefore, a major piece of the British economy would face severe hardship on the basis of the UK not being a member of the free trade block. Another area of the UK’s economy that would be adversely affected by the removal of the EU free trade block is Foreign Direct Investments (FDI) in the UK. The UK is seen as many non-EU countries as the gateway to European market penetration, and this view would ultimately change if the UK left the EU. FDI has an important role in the UK economy, as it has been a consistent source of job growth of 50,000-60,000 jobs a year, while providing protection to another 40,000 jobs each year (Oxford 43). In addition to creating jobs, FDI is known to fuel innovation and competition, as it incorporates the advances in technologies that have been proved successful in other countries. By leaving the EU, the FDI of non-EU countries would relocate their base of operations to European markets to a country within the EU, and out of the UK, and all further FDI intended to reap the gains of the largest trading block would more than likely invest in an EU country. This not only inhibits job growth directly, but also widens the gap of the UK’s balance of payments, which would have to either...