In The Press
BNE Chairman in the Telegraph - Britain can still profit from global trade while remaining in the EU
28 August 2012
For the first time in decades, Britain may be trading more with countries outside the European Union than within it.
According to a report by the CEBR, figures for the three months to May showed 50.4pc of UK exports went outside the EU. Exports to the EU were down 7.3pc and exports outside it were up 13.2pc.
This provoked a fierce argument on Twitter between Commission officials suggesting the figures were flawed and others arguing they were reason for Britain to pursue an independent “global strategy” outside the EU.
If we are not exporting more outside the EU now, we soon will be – but that will not be a reason for Britain to go it alone.
The reality is that to pursue a “global” strategy alone would make no sense.
First, while the EU is not growing as fast as other parts of the world, the size of the economy and its geographical proximity to Britain means that it will remain our most important export market for the foreseeable future
Second, we are much more likely to be able to negotiate advantageous trade deals from within the EU than on our own.
With GDP of €12.6 trillion (£10 trillion) in 2011, the EU is the world’s largest, richest market. It has a population of 500m, which, while not much compared with the demographic super states of India and China (1.2bn and 1.3bn respectively), makes up for it with GDP per capita of $31,607 per year. This is much greater than that of emerging economies and is made up of relatively affluent consumers buying British goods. Due to the size and wealth of this market, non-EU countries have a much greater incentive to make politically sensitive concessions to the EU than they would if Britain’s smaller market was the only prize.
Size matters in global trade negotiations. In 2003, the United States’ steel industry was finding it difficult to compete with cheaper and better products from the UK. At the time, President George Bush put tariffs on those products, putting jobs in the UK at risk. The EU, led by the UK, threatened €2.4bn of counter tariffs endorsed by the World Trade Organisation on a raft of products that were politically sensitive to Bush in the upcoming election. The tariffs were swiftly lifted – not an outcome the UK could have achieved alone.
Indeed, Europe is already doing precisely what advocates of a “global Britain” are calling for. The EU has been pursuing a “global Europe” strategy since 2006 when Peter Mandelson was Trade Commissioner.
This promotes bilateral deals with the fastest growing regions of the world. The result is that we now have trade agreements with South Korea, Colombia (soon to be the second largest economy in South America) and Peru and on-going negotiations with India, Malaysia, Mercosur, Singapore and now Vietnam.
We are also moving towards trade deals with Japan and possibly the US – both of which would prioritise “behind the border” barriers, such as domestic regulations. This is not something that Britain wants to miss out on.
A major trend in global trade is towards regional trade blocs, such as ASEAN – the Association of Southeast Asian Nations – Mercosur, the Latin American equivalent, or the prospective trans-Pacific partnership between the US, Canada, Australia and a number of other countries in South-East Asia and Latin America.
At the same time, the multilateral system is appearing less relevant and the Doha Round appears to be dead. In a world of less multilateralism and increased regionalism, Britain is surely best placed as part of the EU – the world’s largest trade actor.
Pushing external and European trade at the same time is not mutually exclusive. Every country in the EU is now trading less with its fellow members and more with rapidly developing economies. Britain is lagging compared to Germany, for example, which does not seem to be held back by its membership of the EU.
The proportion of goods that Germany is exporting to developing countries is more than double Britain’s. In 2000 just 4.5pc of Germany’s capital goods exports went to the so-called BRIC countries, in 2009 that shot up to 10.6pc.
We are trading more outside Europe because of the rapid growth of markets in Asia, Africa and Latin America. The trend is particularly sharp at the moment due to the recession in Europe.
None of this, however, means that we should reorient our trade policy away from Europe. It strengthens the case for Europe – and Britain – pressing on with a global strategy.
Roland Rudd is Chairman of Business for New Europe