Wednesday, 30 March 2016

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:

Exports £m
Imports £m
United States
Everybody else
Overall total

Percentage of top 5

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.

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