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Labour and the EU. Corbyn and the Customs Union

After the Transition Agreement
Written by Richard Tuck

Corbyn’s leadership of the Labour Party reverts to an older Labour opposition to an EU which enforces privatisation and prevents subsidies to industry. In opposing full support for joining the EU customs union, Corbyn has offered Labour the chance of breaking out of the strait-jacket into which the EU has strapped all the political parties of Europe… in country after country on the Continent, it is the old left-wing parties which have been the chief victims of this strait-jacket.

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All major political speeches work by including the most important material in an apparently reasonable, almost throw-away fashion.  This was certainly true of Teresa May’s speech in London on March 2nd.  The most significant passage was the following:

If we want good access to each other’s markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments – for example, we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU’s. The UK drove much of the policy in this area and we have much to gain from maintaining proper disciplines on the use of subsidies and on anti-competitive practices. Furthermore, as I said in Florence, we share the same set of fundamental beliefs; a belief in free trade, rigorous and fair competition, strong consumer rights, and that trying to beat other countries’ industries by unfairly subsidising one’s own is a serious mistake.

As far as I can tell, not many commentators nor prominent Brexiteers have leaped onto these remarks.  Indeed, the most high-profile figure to do so was Jeremy Corbyn, in his response to May in Parliament on March 5th, when he said that:

The Prime Minister’s only clear priority seems to be to tie the UK permanently to EU rules that have been used to enforce privatisation and block support for industry.

The reasons for this relative neglect tell us a lot about the strange history of Britain’s relationship with the EU.  As we all know, the EU and its predecessor the EEC were founded on the famous “four freedoms”, the free movement of goods, services, capital and people, to which we should really add a fifth, the freedom to establish a business in any member state (a “freedom” recently used to break the old Norwegian dock labour scheme).  From the beginning it was clear that a jurisprudence based on these innocuous-sounding principles was in fact going to entrench a certain kind of competitive capitalism in each member state, since large-scale political intervention in the economy would almost certainly be ruled illegal.  This was already obvious to the members of Harold Wilson’s cabinet when they met at Chequers in 1967 to discuss whether they should keep Macmillan’s failed application to join the EEC on the table or withdraw it and seek other options; Tommy Balogh urged instead a North Atlantic Free Trade Area, and he was broadly supported in his opposition to the EEC by the other leading economic advisors to the Treasury, Nicky Kaldor and Robert Neild.  As Richard Crossman, the most eloquent opponent of the EEC in the cabinet, put it in his diary, the question was:

whether the Commission in Brussels would really deprive us not only of some of our sovereignty but of some of our power to plan the economy?  Would investment grants be allowable or not?  Would we still be able to see that new factories are put in Scotland rather than in South-East England?[1]

And though the Wilson cabinet decided to keep the application alive, largely, as Crossman also recorded, as a means of underpinning Britain’s post-imperial ambitions, including the sterling area and its role “east of Suez” (how antiquated these terms now seem!), the unhappiness of Labour with the European project had been made quite clear.

The unhappiness continued down to the mid-1980s.  Labour whipped against the final vote on the European Communities Act in 1972, which passed, certain current Remainers agitating for a second referendum should be reminded, by a majority of only seventeen – and the second reading had earlier passed by a still smaller majority, of eight.  Our entire history of membership of the EU would have been different had five members of the Commons voted differently on the second reading on 17 February 1972; Hansard recorded that the members voting for the second and third readings included Norman Tebbit, Nicholas Ridley, and “the Rt. Hon. Mrs Margaret Thatcher”.

In government, as we know, Wilson solved the dilemma of whether to pull out by instituting the first referendum in British history and allowing a free vote on it to his cabinet; but even after Leave lost the 1975 vote, Labour remained largely hostile to the EEC.  A party conference the same year had voted two-to-one to leave, and it became official policy to do so in 1981, precipitating the split in the party and the formation of the SDP by prominent pro-Europeans – a split which arguably undermined Labour’s authority and permitted Thatcher’s landslide victory in 1983.  In that election Labour polled 8.5m and the Lib/SDP Alliance 7.7m, as against Thatcher’s 13m. Another road not taken: suppose the SDP leaders had remained loyal to their party, Thatcher might well have lost in 1983.  Her regime would not then have seemed the inevitable turning-point in history which to many people it subsequently appeared to be – including to Tony Blair.  We could say without much exaggeration that Thatcher was the principal – and ungrateful – beneficiary of Britain’s membership of the EEC.

The positions the two parties took up prior to the mid-1980s were thus entirely in line with the logic of the EEC.  Tories correctly saw it as a way of locking Britain into structures which essentially precluded the kind of socialism which was still the aim of the Labour Party in the 1960s and 1970s, while the Labour Party (though not all its politicians) correctly saw it in exactly the same light.  Those of us who support Brexit today, from the perspective of either the Right or the Left, do so (I think it would be fair to say) very much because we do not believe in any structures which lock people into particular political policies in near-perpetuity.  But we should remember that it was the Tories who originally chose to use this weapon against their opponents, and Labour who were willing to have a fair fight, and to run the risk that in the future a Tory government might overturn their socialist measures.  One is reminded of Harold Laski’s famous quip, that “the gentlemen of England will always play the game, but they reserve the right to change the rules”.

The puzzle in the story of Britain’s relationship with the EEC is that in the mid-1980s the two parties swapped positions.  Jacques Delors’s speech to the British TUC in September 1988, in which he argued that that the EEC could be the guarantor of workers’ rights, is conventionally taken to be the point at which Labour abandoned its stance of opposition, while Thatcher’s speech in Bruges twelve days later is conventionally taken to be the point at which the Tories abandoned their support for the EEC because of its move to the left under Delors.  The conventional story, however, remains puzzling.  No one who had thought clearly about the EEC should have been won over by Delors’s speech, which essentially offered the kind of workers’ rights in the context of liberal capitalism with which the Continent had long been familiar, and the promise that regional aid would be delivered by the EEC, and not (though he did not say this) by national governments.  Equally, Thatcher, the great enthusiast for the single market, should have been able to live with some version of what Delors outlined, if it was a necessary condition for the integrated market which she wanted.

The real reason why Labour leaders changed their position, I think, is that they had been psychologically undermined by Thatcher’s electoral success; this is clearly true of Blair.  They had come to believe that a Labour Party dedicated to the policies of 1983 could never win again, and that it had to be prevented from reverting to those policies after Blair’s success in eliminating the old clause four.  The idea that the manifesto of 1983 had been (in Gerald Kaufman’s words) “the longest suicide note in history” gripped them to the exclusion of other, straightforward reasons for Labour’s failure, such as the unimpressive leadership of Michael Foot and the split among the old grandees of the party (those two things being connected, since in happier days one of the SDP defectors would have been a natural choice for leader) .

There did not have to be any deliberate plan to use the EU (as the EEC had become in 1993) for this purpose: an instinct that “Europe” and “modernisation” went together was enough to do the job.  Blair himself, it is easy to see, came in addition to covet the global role which attached to a leading politician within the EU; the temptation which European union offered to the British establishment in the 1960s of reliving their dreams of empire had not gone away.  These politicians were not particularly troubled by the thought that a Labour party of this kind had little that was distinctive to put in front of the electorate, since they seem to have thought of themselves primarily as being more skilled managers of a late-capitalist economy than their rivals.

It is much harder to say why the Tories changed – and it should not be overlooked that the majority of the Parliamentary party never did.  But by the time of the Cameron government there were enough prominent Tories who were willing to deny themselves the benefits of the EU, that they could deliver the stunning result of the 2016 referendum.  Partly this may have been the result of a romantic nationalism which (as Marx and Engels frequently observed with some respect) has often been at odds with the requirements of modern capitalism, and partly it may have been Thatcherites who took the logic of their position to imply much more extensive global free trade. The EU in their eyes had turned into the kind of protectionist distortion of market forces which the institutions against which they had fought in Britain had formerly represented.  In some people (Daniel Hannan is a good example) these two things could be combined, though with some degree of latent difficulty: immigration, for instance, was always a theoretical problem for the Thatcherites, since a fully free market should imply a free market in labour, and why should that stop at national boundaries if the rest of the market does not?

At all events, the swapping of positions continued down to the eve of the referendum; but we then discovered that the Labour Party was now being led by people who had always understood the logic of the EU, and had not changed their position on it.  Whatever his faults, Brexiteers of all stripes owe a considerable debt to Corbyn, who (like Bernie Sanders in America) emerged from relative obscurity to utter political sentiments which had been treated as outlandish for thirty years or more.  Acute Conservative commentators also began to remember why their party had once been the prime mover behind Britain’s entry into the EEC; one of the most acute, Charles Moore, asked in June last year

Could the EU prevent a government led by Jeremy Corbyn? Since our confusing general election result last month, I find significant numbers of people asking this question. Such people do not like Mr Corbyn. Indeed, they regard a government led by him as the worst of all the imaginable possibilities facing our country. It spooks them because, before June 8, they had considered it all but unimaginable. They tend to think that if the EU could keep Mr Corbyn out, perhaps we had better stay in.

They are not wrong to raise this question. In the now largely forgotten days when most Conservatives were strongly pro-European, the threat of the hard Left helped explain why…

            In a Britain dominated by strikes, “Europe” beckoned. The EEC was scarcely a paragon of free-market virtue, but it seemed to offer relative industrial peace. Right-wing Labour supporters thought it could marginalise the extremists. A lot of Tories thought decent, free, bourgeois Britain was finished. Perhaps Brussels could rescue it…

            It probably is true that a Corbyn government could be much more easily beaten down with Britain in the EU than outside it. His socialism-in-one-country would quickly fall foul of single market rules and be squashed by the commission (Brussels) and the European Court of Justice (Luxembourg)…[2]

To his enormous credit, Moore resisted the temptation to look to the EU for protection against a Corbyn government, stating clearly that it must not be the case that it should be “virtually unconstitutional for there to be a Labour government”; but his article was one of the few I have read which recognised the fundamental issues at play in the last forty years of British politics.

And this is now the key issue to be resolved in Britain’s so-called “negotiations” with the EU over our future relationship with the Union.  What May let slip on March 2nd was that the Tories still want to use the EU as a means of blocking Corbyn-style politics in perpetuity.  They will now not do it through membership of the EU, at least at the moment, but they will do it through something equally effective and without any of the EU’s irksome baggage, namely a “binding commitment” to just those aspects of EU membership which prevent effective socialist measures within Britain.

It is no surprise that Corbyn spotted this, given his familiarity with this history, and also no surprise that Tory Brexiteers (who still dominate the Brexit debate) kept quiet about it.  But the urgent question is whether Corbyn and the Labour Party can do anything to stop it.  Technically speaking, the commitment they have recently entered into to join a customs union with the EU does not entail these kinds of institutional constraints on state aid etc; but a customs union even of the kind they are officially endorsing – that is, a bilateral arrangement between the EU and the UK, rather than simple membership of the EU’s customs union – puts a great deal of British domestic politics potentially under a juridical regime which is likely to insist on uniformity in market behaviour across the customs union, in order to prevent competitive gaming of the customs regime by the countries involved.

Once one is in structures of this kind in the modern world they tend to move in only one direction; this was at the heart of Sanders’s opposition to the TPP and TTIP.  It is true that membership of the WTO imposes certain restraints on what governments can do with regard to political intervention in the economy, but the restraints are far less than (for example) those imposed on its members by the EU, since they refer exclusively to interventions which affect external trade.  A full-scale renationalisation of the British railways would encounter no problems from the WTO, but would at the least have to be defended in front of the ECJ if Britain were still to be in the EU.[3]  The difficulty with Labour’s current proposal is that even if (miraculously) it were to be accepted as it stands, we have no idea what it is going to look like once the administrative and judicial institutions get going on it, but we have no grounds whatsoever for optimism.  And of course, it will not be accepted as it stands.

Corbyn’s leadership of the Labour Party has offered the chance of breaking out of the strait-jacket into which the EU has strapped all the political parties of Europe.  As we can see in country after country on the Continent, it is the old left-wing parties which have been the chief victims of this strait-jacket.  They have all suffered from the inability of their leaders to renounce their old allegiance to the European project, and it is no accident that the new left-wing parties such as Syriza which have begun to fill the gap left by the electoral implosion of the old parties are almost all in varying degrees opposed to the EU.  The British Labour Party is at the moment the one exception to this rule, and at times in the recent past it has come perilously close to succumbing to the same fate as its Continental equivalents.  Corbyn’s remarks on March 5th show that at some level he understands this, and it will be tragedy of historic dimensions if he allows himself to be forced back into the strait-jacket by timorous (or worse) colleagues in the shadow cabinet.           .


[1]  Richard Crossman, The Diaries of a Cabinet Minister II (London: Hamish Hamilton and Jonathan Cape 1976) p.83.

[2]  The Telegraph 30 June 2017

[3]  See the extremely helpful briefing paper by Federico Mor, EU State Aid Rules and WTO Subsidies Agreement (House of Commons briefing paper 06775, 9 June 2017).

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About the author

Richard Tuck