Hugo is a Researcher for Open Europe. In the third instalment of a series on how the
EU constitution is returning by stealth, he explains how business could be affected.

Business people in the UK have fallen
out of love with the EU in recent years.  It isn’t hard to see

Brussels has produced a torrent of costly
regulation. Of the 22,000 pieces of legislation on the EU statute book,
more than 12,000 have been introduced in the ten years since 1997, compared
to 10,000 during the forty years from 1957 to 1997. The EU law book
runs to
a staggering 170,000 pages. 

Such huge number make the eyes glaze
over.  But its worth remembering that even a single regulation
can shut down an industry.  For example, last week the commission
casually banned the manufacture of traditional barometers, and closed
down a whole industry with the stroke of a pen.

A study by the British Chambers of Commerce,
using the government’s own impact assessments, found that EU regulation
has cost the UK economy £40 billion since 1998 alone. According to a
recent ICM poll of 1,000 UK chief executives, 54% of businesses think
that the cost of EU regulation now outweighs the benefits of the single

So far a lot of media attention has been
focused on the issue of giving up the veto in new areas, and moving
to qualified majority voting (QMV).  But even more importantly,
the constitutional treaty proposes to change the way that votes are
taken in the areas where majority voting does apply. That’s
very significant because majority voting already applies to about half
of EU legislation.

Under the proposed new system the number
of member states votes needed to block a new law would be substantially
increased.  Meaning that in areas where the UK is currently blocking
legislation with the help of a couple of other countries, we would need
to find even more allies if we wanted to carry on blocking the proposal.

Overall, academic work shows that the
new voting system would reduce the UK’s power to block legislation
by almost 30 percent.  This means that the EU would inevitably
be producing even more regulation, with even higher costs for business.

Despite this, a recent joint paper
from two pro-euro groups, “Business for New Europe” and the Centre
for European Reform, attempts to make a “business case” for adopting
the new version of the constitutional treaty. It makes for pretty extraordinary

The paper argues that: “Under the new
system, those opposing a law would find it slightly harder to block
it. But that should not concern the UK or businesses, since most of
the draft laws coming out of the Commission are liberalising measures.”

Ah, so no need to worry then. Business
can trust the lovely European Commission to always uphold its interests
– even if the UK Government is opposed to a given measure.

This is clearly a mad argument. 
However, the report will be formally launched at an event next monday,
entitled ‘Why treaty change matters for business and for Britain’. 
Intriguingly, CBI Director General Richard Lambert is among those taking
to the podium.  Europhile hacks have been briefed that he will
support the line taken in the paper and swing the CBI behind a campaign
for the constitutional treaty (as it once campaigned for the euro).
But if he does so, he risks splitting his membership. 

Former CBI Director-General Digby Jones said
back in 2004 that his organisation’s key concerns on the original
EU Constitution were clear: “We don’t want anything that weakens
UK control of decisions on employment law, financial regulation or energy
policy.’  But the new voting system would weaken the UK’s control
of all of these issues and more besides.

Even just looking at the proposals that
are currently in the pipeline, we can see that less power would mean
trouble for UK business – never mind anything nasty that might be further
down the line.

The UK and a few other liberal states
are currently blocking the Temporary Agency Workers Directive, which
would give the temporary workers the same rights as permanent workers.
The UK has more temporary workers than any other EU country (700,000),
and lots of businesses, particularly the smaller ones, rely on them.
If the measure came through it would be more expensive to hire temp
workers, reducing competitiveness and increasing unemployment. The BCC
strongly against this coming into force, saying that it will lead to
reduced employment opportunities for those who need it the most.

France, Spain and others, backed by the
EU Commission want to get rid of the derogation that allows the UK to
opt-out of the EU’s 48 hour working week. The UK is able to block
it through alliance with a few other member states. But under the revised
Constitutional Treaty, the UK might need to either extend its list of
allies or accept giving up its opt-out. The DTI estimates that losing
this opt-out on the working time directive would cost the UK economy
£9 billion a year. 

The idea that Britain should hand over
its powers, safe in the belief that the Commisison has changed its spots
is ludicrous.  Yes, Portuguese Commission President Jose Barroso
has talked a good game, and promised a more business-friendly approach. 
He has even promised to roll back EU regulation.  But what has
actually happened?

The Commission promised
a ‘bonfire of the diktats’, and talked about axing over 200 regulations. 
But how many have gone? Just two. The Commission last month finally
managed to get rid of the “knots in wood” directive from the 1960’s
and the 1968 food packaging sizes regulation.  It would be fair
to say that this will not transform the European economy – particularly
given that the EU adopts about 1,200 pieces of new regulation a year.

There are several well intentioned free
marketers in the Commission.  But they seem unable to make a difference. 
Industry Commissioner Gunter Verheugen has taken the extraordinary step
of going on the record to complain that powerful civil servants have
tried to obstruct his deregulatory moves. He
that EU mandarins often take the view that “more regulation equals
more Europe.”

Let’s look at the big picture. Given
Europe’s chronic decline in international competitiveness relative
to China and the US, the EU needs to be regulating less, not more. Is
it really in the interest of British business to reduce the UK’s power
to stem the flow of EU regulation? For the sake of UK business we need
a referendum to call a halt to this, and force a fundamental shift towards
a real reform agenda in Europe.

Related links: The first and second parts to this series

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