Let’s Talk Trade

In this short opinion piece I shall be looking at various claims made relating to the UK’s future trade position and statements commonly made about it now relating to the EU.

 

The EU needs the UK more than we need them

In 2016 the UK exported £240 billion worth of goods and services to the EU while the EU exported £310 billion to us.  We run a trade deficit with the EU of £70bn
Trade with other European countries

and the UK is definitely an important market as a percentage of exports.  About 8% of the EU’s goods and services exports to EU and Non-EU countries went to the UK in 2015.

Furthermore the UK is one of the few net contributors to the EU budget sending £24 million more than we get back in direct rebates and grants every day.

So they need us more than we need them right?  Well no.   Exports to the UK represent 3-4% of the EU economy  while the £240 billion the UK exported to the EU in 2016 represents 12% of the value of the British economy.  Or to put it simply the EU can afford to lose (or damage) 3-4% of its market more than we can afford to lose or damage 12%.  This point has been nicely driven home by the German car makers.  We are the biggest export market for German cars with between 1 in 5 or 1 in 7 of German cars destined for the UK and there is no doubt that Brexit has the potential to be hugely damaging the German car industry with potential for 18,000 jobs lost.  Despite this the German car makers have said that they will not lobby the German government and are re-orientating to focus more on the EU rather than the UK and changing supply chains.  The German car industry argument has several flaws.  First the German economy is not as dependent on cars as it is on a functioning single market.  Second, Germany is only one country in the EU and all 27 have a veto.  Third 52.8% of British car exports go to the EU.  Whether you look at the trade deficit or the German cars argument neither stacks up.

The other argument often raised is that we contribute more to the EU than we receive.  While it is true that we give £24 million more to the EU than we receive back directly from the EU, this only looks at direct payments.  The indirect benefits are huge and to simply equate direct money in with direct money back misses the much larger picture.  The economic hit by leaving the EU is predicted to be – between a drop of 3.8% – 7.5% GDP with the worst case scenario of WTO rules  after 15 years  or a drop of 2.5% after 2 years.  A 2.5% drop is £48.5bn a year or nearly 6 times our EU contribution!  That £24 million a day brings in £109 million a day in profit.  Rather than having an extra £350 million a week for the NHS we are looking at having £763 million a week less to spend on anything.