City Perspectives: How could the UK renegotiate its relationship with the EU?
By Dr Daniel Wilsher, Senior Lecturer in Law
The Prime Minister has said he wants the UK to remain in the 27-member union playing a "committed and active" role but argues that the basis of its relationship must change. To negotiate a new relationship between the UK and the EU will require changes in EU law. If such changes are fundamental, Mr Cameron's objectives will not be easy to achieve. There are essentially three routes open to him:
(a) Changes in existing EU legislation which the UK no longer wishes to be bound by;
(b) Treaty change to repatriate certain powers from Brussels;
(c) UK exit and renegotiation of a new treaty relationship with the EU.
Option 'A' is the simplest to achieve but even here there are challenges. The core of EU legislation relates to the single market in goods, workers, capital and services. Linked to these are binding rules on some aspects of workers' rights, consumer safety and environmental protection. By joining the EU, all Members agree to accept this core of rules which are considered to create a level playing field for fair competition to occur. When the treaty was amended again in 1986 Margaret Thatcher accepted majority voting on these issues because she saw the benefits of opening up trade.
To reject individual laws, like the Working Time Directive, is legally impossible for a single Member State and would disturb the premise of the single market. Instead, the UK would have to persuade a sufficient number of other Member States and the European Parliament to repeal such laws. This would invite every country to propose such measures and could lead to legislative chaos.
In fact, the UK's fundamental economic interests lie in working more closely with EU partners to complete the single market, particularly in services where we are strong but integration remains weak.
Option 'B' is more dubious because Treaty changes are very difficult and complex. However, due to the financial crisis, the other EU Members wish to integrate further and some of this requires Treaty amendments. The UK would, in principle, be able to veto this process. In return for its consent it could demand that some powers (perhaps over criminal justice) be returned to the UK, or even less plausibly, that particular legislation should not apply in the UK (such as the Working Time Directive). The other Member States might agree to the some return of powers but not in respect of the single market which has always been an 'all-or-nothing' package.
On the other hand, the UK's 'veto' might be illusory; the other EU members could sign a separate agreement amongst themselves and by-pass the UK as they did when the Fiscal Compact was agreed in December 2011. This happened because the UK vetoed treaty change unless it secured new powers to block EU financial regulation affecting the City. However, such a 'break-away' agreement is only lawful if it does not conflict with existing the EU law and treaties. This might present some bargaining options for the UK, as indeed was seen during the recent discussion about creating a single banking regulator for the Eurozone. There the UK was able to secure blocking votes on banking measures because the other Member States needed UK consent to amend the powers of the European Central Bank.
Ultimately, if the UK cannot secure its wishes through changing legislation or Treaty amendments there is Option 'C'. The UK is entitled to withdraw from the EU by giving notice and waiting two years. During this time however it would have to negotiate a new relationship outside the EU whilst retaining access to EU markets. This is the position of the EFTA countries Norway, Iceland and Switzerland. There is however no guarantee that the UK could negotiate a similar arrangement or would, in fact, wish to do so.
At present, the UK has a seat at the table in Brussels and MEPs who can put forward British interests and perspectives on EU legislation. UK bargaining power remains strong as a large Member State. Outside the EU, the UK would simply have to accept whatever laws are passed in Brussels. Particularly as the Eurozone integrates further in services, including banking, this presents real dangers for improving or retaining UK access to the single market. Similarly, the EU is not happy with present arrangements with the EFTA countries because of their complexity and it is not obvious that the UK would be given a similar status.
Note: The views expressed in this post are those of the author and not of City University London.