How relevant is trade to the question of Brexit?

According to Project Fear and Project Dream, either we depend entirely on trade with Europe, or we don’t.

Rationally, this is irrelevant to the voter’s decision in the referendum of 23 June 2016.

According to UK Trade Info, the UK has been a net importer by ~ £10 billion (gross exports ~£22bn; gross imports ~£32bn).  The UK is a net importer from both the European Union and the outside world.  The ratio of exports between EU and non-EU roughly 50:50.

The figures appear to relate to trade volumes.  They do not reveal which is the most profitable trade.  Nor do they reveal the extent to which “carousel fraud” is detected and corrected out of the figures.

Annual trade figures (downloadable from here) reveal that the top five export and import destinations in calendar year 2015 were:

Country	Exports £m	Imports £m
United States	45,276	35,291
Germany	30,352	60,679
Switzerland	22,244	0
China	18,071	36,103
France	17,830	23,999
Netherlands	0	30,890
Sub-total	133,773	186,962
Everybody else	112,623	147,383
Overall total	246,396	334,345
Percentage of top 5	54.29%	55.92%

Most noteworthy of all is the annualised change in values over the years from 2008 to 2015.

Of the export destinations, the three markets exceeded an annualised growth rate of 10%: China (17.8%), Switzerland (14.8%) and Saudi Arabia (11.5%).  Other markets that grew - albeit slower than 10%pa - were all-but-one outside of the EU.  Nine destinations saw a decline in UK exports, of which all-but-one were inside the EU.  In other words, between 2008 and 2015, the trend for UK exports favours a view outside the EU.

Of the import origins, no markets grew between 2008 and 2015 by more than 10%pa.  The top five were Poland (8.4%pa), China (6.4%), Turkey (6%), India (4.5%), Czech Republic (4%).  In other words, between 2008 and 2015, the trend for UK imports neither favours nor disfavours the EU.

Again, the above figures are taken at face value, with no further inquiry as to their calculation, so they might be complete nonsense.  Who knows?

Even at face value, however, the conclusion is inescapable.  Data relating to trade volumes is irrelevant to the voter’s choice on 23 June 2016.  Data relating to the relative profitability of trade would be interesting - especially if non-EU trade were more profitable than EU trade - but this data is not available and, even if it were, it still would be irrational to consider it any further.

Consequently, it also means that:

• Project Fear is talking nonsense when it attempts to pin Britain’s economic survival with trade with the EU.
• Project Dream is talking nonsense when it attempts to claim that Britain can survive without Europe.

As a follow-on, to check the conclusion, consider the vested interests behind this trade.  Who wants any of this trade to stop just because Britain might leave the EU?  Answer: no-body!  Trade will not immediately cease the day after the referendum, and traders will almost certainly find a workaround within the two-year negotiating period if the negotiations end up sabotaging trade.  Deliberations about trade volumes are therefore irrelevant to the voter’s choice on 23 June 2016, QED.

The referendum cannot become a false choice between Fortress Europe and Fortress Britain.  Post-referendum negotiations - which clearly would need to happen irrespective of the referendum’s outcome - must similarly do whatever they can to ensure that the “Fortress” mentality does not take hold.  However, I am under no illusion that, of all states of Europe, France is the state most likely to sabotage its own economic interests in order to sabotage Britain’s economic interests, even though Britain is more likely than France to find a workaround.

Review of the week: the hysteria continues (still)

Well, what a week it’s been!

Project Fear remains in charge of the media.

In this review:

• UK Govt Project Fear: electricity prices
• UK Govt Project Fear: the end of the NHS
• ING Bank of the Netherlands wades in
• Richard Branson wades in: EasyJet and Ryan are apparently “shitting themselves” about Brexit
• BBC Desert Island Discs dips a toe in: John Timpson supports Brexit
• Petraeus wades in: Brexit would be dangerous
• And still not a peep from the EurIn campaign about the optimal strategy of the European Union over the next 50 years that would make British membership compelling!

UK Govt Project Fear: electricity prices

On 24 March 2016, British Energy Secretary Amber Rudd injected some classical hysterical Project Fear bullshit into the blogosfear.  According to the Guardian, she said:

“If we left the European Internal Market, we’d get a massive electric shock because UK energy costs are likely to rocket by at least half a billion pounds a year – the equivalent of British bills going up by around £1.5m pounds each and every day.”

Supposedly, this data came from the National Grid, a monopoly of electricity and gas distribution in the UK.  So the forecast of bills rising by £1.5m pounds per day is questionable.

Rudd also went on about energy security.

“Relying on energy from abroad is not without risk. We have seen how countries such as Putin’s Russia use their gas supplies as a tool of foreign policy. Threatening to cut off supplies or drastically increase prices.

“We can’t let our energy security be hijacked as a political pawn to bring Europe to its knees. By working together in the European Union each member state can stop this becoming a reality.

“As a bloc of 500 million people, we have the power to force Putin’s hand. We can coordinate our response to a crisis. We can use the power of the internal market to source gas from elsewhere. We can drive down the price of imports, as has happened recently in eastern Europe.

“To put it plainly – when it comes to Russian gas, united we stand, divided we fall.”

A wonderful little theory, shame it doesn’t stack up to the real world.  Aside from the West’s relative impotence in dealing with Russia regarding Syria, Germany already relies upon Putin’s gas (so to speak).  So much for solidarity.  More like an untied Europe than a united Europe.

Project Fear in motion.

UK Govt Project Fear: the end of the NHS

On 26 March 2016, UK Minister Jeremy Hunt, Secretary of State for Health and thus responsible for the religiously sacrosanct National Health Service, commented in the Guardian that the economic shock of Brexit would imperil the NHS.

Hunt writes:

Even the most bullish Brexiteers concede that the short-term impact on the British economy would be a period of uncertainty and volatility. The independent Office for Budget Responsibility has said that “there appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty while the precise details of the UK’s new relationship with the EU were negotiated”. And therein lies the risk to the NHS of leaving.

So the short-term cash flow issue is apparently more important than the long-term strategic issue.

Hunt then goes on to recycle numbers from economic models rigged to show what a complete disaster Brexit would be.

All nonsense.

Project Fear in motion.

ING Bank of the Netherlands wades in

On 25 March 2016, the Telegraph reported an analysis by Dutch bank ING about the impact of a Brexit on the Eurozone.  0.3% of Eurozone GDP would disappear and Ireland would lose 1.1% of its GDP.

Said the article:

Falling exports, weaker investment and a shift in the direction of EU economic policy away from free market reforms, would all combine to create a sizeable adverse shock to the continent, said Peter Vanden Houte and Carsten Brzeski, economists at ING.

Really?

The article reveals the underlying economic model assumes a fall in the value of the pound relative to the euro.  In other words, the model is rigged to show the effect of the assumption, but does not - cannot - prove the assumption.  But ING can’t know what effect Brexit might have on foreign exchange.  For all they know, the foreign exchange traders might have already priced-in the effect of Brexit, or might have already started adjusting their exposure to movements in GBPEUR.

As for the comment that Brexit would “shift the direction of EU economic policy”, this is laughable.  The UK is in the losing minority of votes at the Council of Ministers way more often than any other government.  Although there are caveats to this analysis, the message is clear enough: Europe really doesn’t need the UK.  The Bank Recovery and Resolution Directive (Lex) is a case in point: Germany wants shareholders and depositors to “bail-in” failing banks instead of taxpayers taxpayers “bailing out” failing banks, ramming directly against the cretinous “nationalise everything” mentality of Europe’s socialists.

Project Fear in motion.

Richard Branson wades in: EasyJet and Ryan are apparently “shitting themselves” about Brexit

On 27 March 2016, the Daily Mail reported an interview of Sir Richard “Beardie” Branson by Event magazine.  Branson thinks that Brexit means an immediate loss of access to European airspace.

I wonder if the Spanish and the Greeks are ready for the huge losses that would then arise from the holiday industry?  Will they just shrug and say, “Hey ho, c’est la vie.  Let’s get poorer.”?

I suspect that an immediate loss of access to European airspace is bullshit.  The Europeans aren’t stupid: if there’s money to be made, mountains will move, and surprisingly quickly.

But Branson might have a hidden agenda anyway.  The Mail quotes him:

“We [Branson] don’t believe a Brexit alone would drive up air fares, but the cost of travel could rise if Britain leaves the EU and the UK Government increases passenger duty and limits competition by allowing only one runway to be built in the South East of England.”

Ah, so it’s more about UK Govt policy than EU market access.

And:

“I see this as the end of Great Britain as we know it today. I think it’s that serious. Great Britain may not stay Great Britain if we leave, Scotland could well depart [the UK]. We could become little England.”

Sounds very similar to former Prime Minister John Major’s narrative during the Scottish independence referendum campaign.

BBC Desert Island Discs dips a toe in: John Timpson supports Brexit

On 27 March 2016, the Telegraph reported the broadcast of John Timpson, chairman of a consumer-service business (a key cutter and cobbler), on Desert Island Discs.  The Telegraph wrote:

The retail magnate told BBC Radio’s Desert Island Discs that “risk averse, process-driven sort of people” want to stay in, but that “maverick” people like him are more likely to want to be out.

That does indeed seem to be the pattern of Brexiteers v EurIneers.

And as mavericks normally observe, risk-averse people - conservatives by nature - are often so risk-averse, they often resort to groupthink to rationalise their denial of an issue, so justify doing nothing… which is often the riskiest choice of (in)action.  Doh!

And this matters, precisely because of Cameron’s deal of 19 February 2016. Who is naïve enough to believe that the European Union in two years time will be anything like what it was on 19 February 2016, irrespective of how the British vote in their referendum? Former Polish finance minister Marek Dabrowski blogged on 09 March 2016 that the die is already so cast (Dabrowski's blog is well worth reading).

Petraeus wades in: Brexit would be dangerous

On 27 March 2016, the Guardian (amongst others) reported comments by David Petraeus - former US general and head of CIA, subsequently convicted of leaking secrets to his then lover - that Brexit would be dangerous for us all.

Petraeus reportedly said:

Given the dangers and challenges that threaten us around the world, this is a moment when the west and its institutions, including the EU, need to be drawing together – not pulling apart. At least from a national security standpoint, none of the problems the US and UK face will become easier to solve if the UK is out of the EU; on the contrary, I fear that a ‘Brexit’ would only make our world even more dangerous and difficult to manage.

It is, of course, nonsense.  Petraeus’ comments makes sense if the agenda is isolationism - like Donald Trump’s agenda - but Brexiteers all seem to be expansionist than isolationist.  Certainly for the traders amongst them, they seem to want better access to non-European markets than be hobbled with amazing access to dysfunctional European markets.

I’ve commented already on security matters; Petraeus’ comments are accordingly irrelevant.

Project Fear in motion.

And still not a peep from the EurIn campaign about the optimal strategy of the European Union over the next 50 years that would make British membership compelling!

Project Fear in full swing motion.

Thoughts on a flyer from Britain Strong In Europe

On Easter Saturday 26 March 2013, I received two flyers: one from a Brexit group, one from the EurIn group.

This blog documents my immediate reactions to the EurIn flyer, limited to the material assertions.  The Brexit flyer is in another blog post.

About the flyer:

• the flyer takes the form of a single sheet of glossy, double-sided, multi-coloured A3.
• the flyer lists six false narratives about why being part of Europe is good for Britain.
• the flyer lists six facts (overlapping the narratives), citing sources, presented in a deliberately misleading way, i.e. the raw facts don't support the way the flyer presents them.
• the flyer engages in active scaremongering, playing exclusively to emotions and essentially slamming the door on rational thought.
• the flyer attempts to socialise, emotionally-blackmail, manipulate and engage the casual reader into ‘groupthink’.
• the format of the flyer is such that it makes it hard to identify a single, coherent headline!  It does resemble most junk mail!
• the flyer quotes three newspapers in the context of “experts”.

It doesn’t seem to be a rational use of time to unbundle this flyer, but for the record, here goes.

The flyer said	My immediate reaction
More jobs lower prices your family is better off with Britain in Europe	Evidence? How does food price rise when, post-Brexit, the UK would import directly from world markets, by-passing price-inflated European food markets? The European Union already dumps food onto world markets, causing poverty around the world.  Refer to the UN Special Rapporteur Olivier de Schutter. Historically, food prices rose substantially in the early 1970s because of i) decimalisation; and ii) Britain’s requirement to obey the European Union’s Common Agricultural Policy.
Good for families with lower prices in our shops because it’s cheaper to trade and there’s more choice - helping family budgets.	Deliberately wonky thinking.  This is pure scaremongering. There’s no point asking for evidence: the EurIn campaign clearly have none, otherwise they’d have pointed to it. The claim that trade within the European Union is cheaper is likely to be false: social legislation makes the cost of employing European national very expensive, so whatever is saved in, say, import tariffs would be more than outweighed by the labour cost of any European workforce.  In economists-speak, the marginal cost of European labour would likely exceed the marginal cost of import tariffs.
Good for workers with over 3 million UK jobs linked to our exports to the EU (source: HM Treasury) and vital workers’ rights - including paid holiday leave and maternity and paternity leave - protected by the EU.	Deliberately wonky thinking.  This is scaremongering combined with emotional blackmail. The deliberately misleading narrative is that 3 million jobs would suddenly disappear if we voted for Brexit.  This is obviously false; I wonder how stupid the flyer’s authors think its readership might be? Workers rights are enforceable only by national institutions, not European ones, so the “protection” invoked by the flyer is a blatant falsehood. Whether we can continue to afford such lavish workers rights - whether at a British or European level - is potentially still an open question.  There are plenty of people on the European left who would rather China make all of us unemployed (and unemployable) than we make our welfare states affordable.  Would that be in our interests? Note that no major economy outside the European Union seeks to replicate the social model of employment law, presumably because they can see from the European experience just how much of the citizens’ future it mortgages (i.e. Eurosclerosis).
Good for small businesses who are free to trade with 500 million people across the EU the with no tariffs or barriers.  Over 200,000 UK businesses trade with the EU, helping them grow and create jobs in the UK.	Deliberate misrepresentation of the facts bundled in with a falsehood. When an English company owns, say, a German subsidiary company, why does the English subsidiary still need to apply for exemption for withholding taxes under the UK-German tax treaty? Whatever happened to the single market for services that we were promised in 1976?  Why, when I invest in a European Union country, do I still need little tin-pot local book-keepers, little tin-pot auditors, little tin-pot tax advisors and little tin-pot form-fillers?  The United States of America doesn’t require this little tin-pottism for each little tin-pot state, so why does Europe feel the need to be so pointlessly bureaucratic?  Non-job creationism? Why is it already nigh impossible for me to open a bank account in another European Union country?  Why does a British bank obsess with needing to see identity documentation of a European Union citizen, even if that European Union citizen lives in a ‘paperless’ country? Where is the evidence that the European Union is still moving towards removing the remaining barriers? Without answers to the above questions, there is a fundamental limitation to how much growth and job-creation can happen at all. The EurIn campaign need to spell out how this trade-equals-growth ideology works - especially with current inflationary monetary policy of the European Central Bank - because the status quo doesn’t support the EurIn view.
Good for young people giving them the freedom to live, travel, study and work abroad - and UK universities get nearly £1 billion a year in funding from the EU, helping students get on in life (source: European Commission).	The source is biased, so this is undoubtedly going to be deliberate misrepresentation of the facts. UK universities would continue to attract funding from anywhere in the world if their academic abilities were good enough. Being addicted to the opiate of European funding is not a valid reason to remain addicted to Europe. I’m not sure why we have allowed universities to become replacement secondary schools; they are a very expensive and inefficient method of education. Anybody with useful skills or qualifications has enough freedom throughout the western world already; the European Union’s contribution is trivial. And, in any event, the future for our young people is Asia, not Europe.
Good for women with the EU protecting women’s rights in the workplace, including vital anti-discrimination and equal pay laws.	Deliberately wonky thinking.  This is scaremongering combined with emotional blackmail. The deliberately misleading narrative is that the Equality Act 2010 and Sex Discrimination Act 1976 - both Acts of the British Parliament - would suddenly disappear if we voted for Brexit. I ask again, I wonder how stupid the flyer’s authors think its readership might be? Workers rights are enforceable only by national institutions, not European ones, so the “protection” invoked by the flyer is a blatant falsehood.
Good for pensioners giving them the freedom to live, travel and retire abroad - and with our economy strong as part of Europe, pensions are more valuable.	I ask for the third time, I wonder how stupid the flyer’s authors think its readership might be? The flyer cleverly manipulates a message, that could apply to all of us, applying it just to pensioners, as if they are special. And the point about the value of pensions is a blatant lie: the authors cannot possibly know that, and with central bankers still printing money, the underlying purchasing power of any fixed saving scheme can only fall. I’d guess that the flyer’s authors were struggling to type something into this corner of the flyer.
“Being in Europe makes the UK safer.  It gives us access to the European Arrest Warrant, which helps us fight crime and terrorism - and helped bring Hussain Osman, one of the July 2005 London bombers, to justice.”  Sir Hugh Orde, former President of the Association of Chief Police Officers.	Bullshit. The European Arrest Warrant is a fundamentally a re-working of extradition treaties.  Osman would have been extradited using those treaties had the European Arrest Warrant not existed, without quibble.  I’ve already commented on the European Arrest Warrant and security generally. Orde’s expertise is questionable.  In spite of extensive experience in policing Northern Ireland during the “troubles”, Orde still seems to think that identity cards are worthwhile having (something that the Home Office rather liked), which would only work against terrorism if terrorists applied for such an identity card and ticked the box “I am a terrorist”, which somehow I doubt they would do.  In turn, that means the average plod would have to wade through millions of records of law-abiding citizens to find the one terrorist he wants to find, from a list in which the terrorist doesn’t appear anyway.  So, for me, to have Orde ordain a flyer for EurIn is counter-productive. The flyer appears to have pretended that the immediate lessons of Brussel’s bombing of 22 March 2016 didn’t exist.
Leaving Europe is a leap in the dark for you and your family.  Experts agree that jobs would be lost and family finances hit if we left - and our security would be put at risk. “Brexit puts jobs at risk say 200 business chiefs.” Times 23Feb2016 “AA warns of pain at the pump with possible 19p rise if Britain leaves EU.” Sun 18Feb2016 “Brexit would leave Britain vulnerable to threats of Isil and Russia, say military chiefs.” Telegraph 24Feb2016	Bullshit. The world without European Union rules is very clear.  A lot of international law is already harmonised, even in Asia and even in respect of corporate law.  So where is this ‘dark’ to which the flyer points?  Is this just another appearance of Project Fear? The 200 business chiefs turned out to be excessively-paid private-sector bureaucrats whose job is to tick boxes at the top-end of the corporations listed in the FTSE100.  The fact that it took them less than four days to co-sign the same letter smacks of very careful choreography orchestrated by Project Fear.  So this headline can be ignored.  Subsequently, a pile of entrepreneurial business leaders voiced support to leave the European Union. The AA’s wittering about petrol prices turned out to be based on an expected fall in the value of the pound on foreign exchange markets following a Brexit, making imports more expensive.  The AA doesn’t say why it chose to believe economic models that are rigged to assume that Brexit shall cause the exchange rate to fall.  In any event, movements in the exchange rate are irrelevant to the issues of Brexit or EurIn, because foreign exchange rates vary for all sorts of reasons (exchange rates are practically random by nature). So this headline can be ignored. I’ve already commented on security threats.  Russia is more of a threat to the European Union because the Union’s paymaster, Germany, relies on Russian gas to warm its citizens’ homes.  The Russian state holds this particular ace card.  So this headline can be ignored.
For every £1 we put into the EU, we get almost £10 back through increased trade, investment, jobs, growth and lower prices.  Sources: CBI, OBR.	The sources are both partisan, so the presentation of the figures is going to be dodgy.  This flyer further distorts them. In short, such numbers are objectively incalculable.  They depend upon a counterfactual analysis, which, of course, this flyer carefully chooses to avoid.
The UK gets £66 million of investment every day from EU countries, creating more jobs and opportunities in your area.	In short, such numbers are objectively incalculable.  They depend upon a counterfactual analysis, which, of course, this flyer carefully chooses to avoid. To validate this claim, the flyer would need to spell out how much of this £66 million would not happen post-Brexit, and why it wouldn’t happen. The flyer implies heavily that Brexit means Fortress Britain, which is not what the Brexiteers say they want.  This is a clear example of how the flyer seeks to manipulate the reader’s emotions and mislead the reader about alternative narratives (groupthink again!).