The EU: Trading Network or Protectionist Bloc?

Photo: Yanni Koutsomitis

The argument most frequently trotted out by Europhiles when the question of Britain’s continued membership of the EU is raised is that of trade. They boldly state that our ability, as a nation, to trade with our closest neighbours is reliant on our continued membership of the EU. In fact, they go one further, claiming that not only is our membership important to facilitate trade with Europe, but that it is vital in unlocking the door to markets further afield. This argument is made so often and scrutinised so little that it has become an article of faith – a tale that is told to be quiet to any outists that dare to question the economic merits of EU membership. However, if one endeavours to scrape away the surface of this conventional wisdom and peep inside, it quickly becomes apparent that it is nothing more than complete nonsense.

Let us turn our attention to the first of these claims. Namely, that trade with Europe is dependent on EU membership. Put simply: nowhere in the world is free-trade dependent on political union. The idea that we have to remain in a customs union to experience free-trade is false and is proven such from examples around the world. It is, in fact, unnecessary to look further than this continent. Switzerland, for instance, has the exact same access to EU markets as the UK; trades more per capita with the EU than the UK; and is not engaged in political union unlike the UK. These simple and undeniable facts rubbish the idea that free-trade with Europe is a privilege only extended to members of the Union.

‘Hold your horses’ cry the doubters, ‘there is no way that the EU would sign a trade deal with UK in the event of its exit. It is just too stubborn for that and would not want to encourage other nations to follow Britain’s example’ (or so the argument goes). Point taken. But before we accept it as a truism, one issue remains: that it isn’t true. There are two fundamental reasons why.

The first rests on our trade deficit with the rest of the EU. EU member states export far more to us than we do to them. In fact we are the EU’s biggest export market in the world. The idea that the other 27 member states are prepared to forsake this vital trade, at a time of particular need, in order to engage in some juvenile political posturing is baffling and beyond any present-minded person.

The second, is the fact that Germany would make every effort to implement a trade deal with the UK for one simple reason: its car industry. The strength of this industry is well broadcast and the trade that it enjoys with Britain alone is staggering; an entire 2% of Germany’s GDP depends on this trade continuing. Therefore it is both reasonable and safe to assume that even if some EU nation wished to indulge in political games and threaten the continuity of this trade, they would be pushed back into line by a realistic and pragmatic Germany.

However, if for some insane reason no free-trade deal was signed, the majority of our trade with the EU would continue unabated by tariffs. This is because 80% of it is service-based – a type of trade that incurs no tariff when entering the Common market. Thus, the only reasonable conclusion one can arrive at in light of these facts, is that our trade with the EU will go on as usual whether we are in or out of political union. To claim otherwise is either to be wholly ignorant or deliberately disingenuous.

The second part of the two-pronged defence of the EU, namely the claim that the EU facilitates our trade with nations further afield, also amounts to nothing in reality. The claim is based on the assumed economic fact that the only way a nation can secure beneficial trade deals with others is by being a part of a large bloc. The idea is that a big nation (the US) can go to any smaller one (the UK) and dictate the terms it desires, leaving the smaller nation with little choice in negotiations other than with the power to accept or reject. Thus, by joining together and pooling sovereignty the EU member states can sit on a level playing field with the big economic players in the world.

This line of argument not only falsely implies that the UK on its own is not a significant economic player, but also misrepresents economic reality. There are numerous examples of small countries, such as Switzerland or Iceland, hatching beneficial deals with big countries like China or India. If a country of 300,000 (Iceland) is capable of negotiating beneficial deals, why would the UK – a country of 60 million – not be? The inability to give an adequate answer to this question exposes the seismic flaws in the EU’s economic logic. Moreover, not only does the EU fail to provide a platform for global trade it actually inhibits us from engaging in it. The EU has non-trade deals with the US, China and India. Meanwhile Switzerland enjoys one with all three.

Thus it seems abundantly clear there is little reasonable basis for us to remain within this backwards-looking protectionist institution. To avoid falling further behind, it is in our interest to remove ourselves from this declining bloc and embrace the dynamism that globalisation has to offer.


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