I picked up an incoming Tweet this morning from my good friend and colleague Dan Hannan MEP. It reads: “Denis MacShane told me, didactically, that we sell more to Belgium than Brazil. That, Denis, is precisely our problem.”
Dan makes an important point. The fact is that between 40 and 50% of Britain’s international trade is with the EU’s 26 (EU less UK). The exact figure is debatable, because of the Rotterdam effect and other technical problems with analysing the trade statistics.
There is the standard, familiar Europhile interpretation of this simple fact. “50% of our trade” (they say) “is with the EU. This, by itself, justifies our membership, and means that the costs are worth it”. You will have spotted the errors in this statement. There is the implicit assumption that trade depends on membership (Not true: ask Norway or Switzerland). There is the nice round 50%, which is almost certainly exaggerated. And there is the failure to address the European Commission’s own estimates that the trade benefits of membership amount to around 1.8% of GDP, while regulatory costs amount to about 5.5% — three times higher.
But let it stand for the moment, and contrast it with the alternative interpretation. The EU is (in very round terms) about 20% of global trade and GDP. But because we have been too focussed on the EU, because we have failed to look outwards and engage sufficiently with the global economy, our trade with the EU is 40%+, while our trade with the rest of the world is shamefully stunted — and indirectly, that is part of the price we pay for EU membership. Dan is right. It’s not so much that we’re doing well in Belgium. More that we’re failing to do well in Brazil.
And remember that although we do a great deal of our trade with the EU, we also have a massive trade deficit with the EU, whereas we’re (more or less) in balance elsewhere.
It gets worse. Estimates from a number of major international organisations predict that the EU’s 20% share of global trade will have shrunk to around 10% by 2050. The growth is — well — everywhere else. We should be moving our focus outside the EU, not only because we’re relatively undeveloped in the rest of the world, but because that’s where all the growth will come in the next few decades. China, India, Brazil. The new Indian owners of Jaguar, Tata, deserve our congratulations for their aggressive moves into Asia and the rest of the world. But they’re a standing reproach to British companies that fail to emulate them.
So when they tell you that half our international trade is with the EU, that’s not a good reason to focus more on the EU. It’s a good reason to redress the balance with the rest of the world.
All this was true before the €uro crisis came along to deliver the coup de grace to the eurozone. In this context, I was struck by a recent piece in Money Week by Matthew Lynn, who takes a counter-intuitive view of the likely impact on the UK of a €uro melt-down. Well worth a read. (Hat-tip to my brother-in-law Roger Price for pointing me to the article). Noting that many of the UK’s major exports are less susceptible to recession (e.g. services, pharmaceuticals), and that a eurozone melt-down would enhance the UK’s surprising new status as a (relatively) safe haven, he believes that the €uro débâcle may do us less damage than most pundits predict, and might even have a positive effect.
And since a €uro melt-down in 2012 seems to be a racing certainty, that’s a rare piece of good news to treasure for the New Year.
This blog post first appeared on ConservativeHome.