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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2018/dec/27/four-reasons-jeremy-corbyn-wrong-eu-state-aid
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| Four reasons Jeremy Corbyn is dead wrong about EU state aid | Four reasons Jeremy Corbyn is dead wrong about EU state aid |
| (21 days later) | |
| The most depressing aspect of Corbyn’s recent interview in the Guardian was his claim that the European Union’s state aid rules “need to be looked at again, because quite clearly, if you want to regenerate an economy … then I don’t want to be told by somebody else that we can’t use state aid in order to be able to develop industry in this country”. | The most depressing aspect of Corbyn’s recent interview in the Guardian was his claim that the European Union’s state aid rules “need to be looked at again, because quite clearly, if you want to regenerate an economy … then I don’t want to be told by somebody else that we can’t use state aid in order to be able to develop industry in this country”. |
| That statement shows no sign that he has followed any of the debates about whether the state aid rules are, as Lexiters claim, a reason why Labour should oppose membership of the single market. | That statement shows no sign that he has followed any of the debates about whether the state aid rules are, as Lexiters claim, a reason why Labour should oppose membership of the single market. |
| There are several reasons why the Lexit claim fails to stack up. | There are several reasons why the Lexit claim fails to stack up. |
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| First, a quick glance at Scandinavian countries or Germany – all in the single market in one way or another – shows that there is no inconsistency between the state aid rules and an active and effective industrial strategy. For a start, there are so-called “block exemptions” from the state aid rules for things that are not considered to distort competition, such as all regional aid, investment aid for small- and medium-sized enterprises, research and innovation aid, and support for broadband and local infrastructure. These permit large amounts of aid to industry. | First, a quick glance at Scandinavian countries or Germany – all in the single market in one way or another – shows that there is no inconsistency between the state aid rules and an active and effective industrial strategy. For a start, there are so-called “block exemptions” from the state aid rules for things that are not considered to distort competition, such as all regional aid, investment aid for small- and medium-sized enterprises, research and innovation aid, and support for broadband and local infrastructure. These permit large amounts of aid to industry. |
| The real problem is not the state aid rules but the UK’s own policy. The UK gives much less state aid per head than most EU countries, under-using the scope that it has within the state aid rules to support (for example) industrial training and regional development. And though Lexiters complain that the state aid rules could be an obstacle to a Labour government, in my experience they never get beyond abstractions about the “neoliberal” nature of those rules to actually set out the policies that a Labour government may want to implement that would not be permitted. | The real problem is not the state aid rules but the UK’s own policy. The UK gives much less state aid per head than most EU countries, under-using the scope that it has within the state aid rules to support (for example) industrial training and regional development. And though Lexiters complain that the state aid rules could be an obstacle to a Labour government, in my experience they never get beyond abstractions about the “neoliberal” nature of those rules to actually set out the policies that a Labour government may want to implement that would not be permitted. |
| Second, in the single market the state aid rules act as a powerful brake on the ability of large corporations to extract tax breaks and subsidies from national governments in return for locating in their country. This is a real problem in the US, where there are no equivalent rules and where, for example, Amazon recently had state and city governments falling over themselves to give it tax breaks and expensive perks for its employees in return for locating its headquarters in their area. If there is a democratic socialist case for going down the US road and permitting what are in effect large bribes to big corporations at the expense of ordinary citizens, I have yet to see it. | Second, in the single market the state aid rules act as a powerful brake on the ability of large corporations to extract tax breaks and subsidies from national governments in return for locating in their country. This is a real problem in the US, where there are no equivalent rules and where, for example, Amazon recently had state and city governments falling over themselves to give it tax breaks and expensive perks for its employees in return for locating its headquarters in their area. If there is a democratic socialist case for going down the US road and permitting what are in effect large bribes to big corporations at the expense of ordinary citizens, I have yet to see it. |
| Third, the idea that the UK can conceivably “escape being told by somebody else that we can’t use state aid” is a unicorn of which the most fantastical no-deal supporter would be proud. Even if the UK rejected any trade agreement with the EU, it would still be bound by World Trade Organisation anti-subsidy rules, which cover all manufacturing industry (and goods generally). Those rules cover much of the same ground as the state aid rules, and they would be enforced by the EU, which would use its rights to impose countervailing measures (protective tariffs) as soon as it detected any state aid to which it objected. | Third, the idea that the UK can conceivably “escape being told by somebody else that we can’t use state aid” is a unicorn of which the most fantastical no-deal supporter would be proud. Even if the UK rejected any trade agreement with the EU, it would still be bound by World Trade Organisation anti-subsidy rules, which cover all manufacturing industry (and goods generally). Those rules cover much of the same ground as the state aid rules, and they would be enforced by the EU, which would use its rights to impose countervailing measures (protective tariffs) as soon as it detected any state aid to which it objected. |
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| Fourth, what is perhaps most extraordinary about Corbyn’s comments is that he ignores the glaring contradiction between his own policy of being in a customs union with the EU and his opposition to the state aid rules. As anyone who has read the “backstop” protocol will have seen, the EU is determined that if the UK as a whole is to be in a customs union with the EU during the operation of the backstop, it must comply rigorously with EU state aid rules. That determination is well-founded and non-negotiable: it is because a customs union removes the EU’s power – which it would otherwise have under WTO rules – to use tariffs to protect itself against subsidised exports. | Fourth, what is perhaps most extraordinary about Corbyn’s comments is that he ignores the glaring contradiction between his own policy of being in a customs union with the EU and his opposition to the state aid rules. As anyone who has read the “backstop” protocol will have seen, the EU is determined that if the UK as a whole is to be in a customs union with the EU during the operation of the backstop, it must comply rigorously with EU state aid rules. That determination is well-founded and non-negotiable: it is because a customs union removes the EU’s power – which it would otherwise have under WTO rules – to use tariffs to protect itself against subsidised exports. |
| As the backstop provisions show, the EU would not for a moment consider relinquishing that weapon unless it was sure that the UK would not breach state aid rules; and to be sure it will require cast-iron and enforceable treaty commitments binding the UK to the EU state aid regime. So Corbyn’s complaint is actually no more than a howl to the moon about the inevitable consequence of his own flagship Brexit policy. | As the backstop provisions show, the EU would not for a moment consider relinquishing that weapon unless it was sure that the UK would not breach state aid rules; and to be sure it will require cast-iron and enforceable treaty commitments binding the UK to the EU state aid regime. So Corbyn’s complaint is actually no more than a howl to the moon about the inevitable consequence of his own flagship Brexit policy. |
| • George Peretz QC is a barrister at Monckton Chambers in London | • George Peretz QC is a barrister at Monckton Chambers in London |
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