Trade advantages of EU 'imaginary', claims report

Published on Tuesday, 06 May 2014 13:56
Written by Govtoday staff

Britain's membership of the European Union is shown to have had no positive impact on trade with other members in a detailed analysis of UK exports published by the cross-party think tank Civitas.

A painstaking study of British export figures since 1960 exposes the "empty rhetoric" behind oft-repeated claims that the EU gives the UK an essential trade advantage.

Britain's trade with other EU nations accounts for no more of its trade with all leading economies than it did on joining the European Economic Community in 1973, the report shows. Meanwhile, exports to non-EU nations Iceland, Norway and Switzerland have increased enormously over the same period.

"While the share of UK exports to fellow EU members has been virtually stable, the share going to non-members in Europe has risen steadily, leading one to suspect that both insider advantages and outsider disadvantages are imaginary," the report's author, Michael Burrage, writes.

"Thus far, the single market has not enabled UK exports of goods or services to other members to grow at a faster rate than those of non-member exporters, nor at a faster rate than UK exports to non-member markets. It has been an era of decline for UK exporters, relative to both non-members in the same market, and to UK exports to other markets."

Burrage has held academic positions at the London School of Economics and Harvard, has conducted research for Ernst & Young and NTT and is now a director of Cimigo, which conducts market and corporate strategy research in China, India and throughout South-East Asia.

In the report - Where's The Insider Advantage? A comparative study of UK exports to EU and non-EU nations between 1960 and 2012 - he conducts a meticulous examination of OECD figures which demonstrates how:

  • UK goods exports to the other 14 pre-2004 EU nations have not increased as a proportion of its trade with OECD nations since Britain joined the European Economic Community in 1973.
  • UK services exports have also not improved as a share of trade with OECD nations since 1999, which is as far back as comparisons can go.
  • The proportion of UK goods exported to non-EU Iceland, Norway and Switzerland has doubled from 5.1% in 1973 to 10.7% in 2012. Services exports to these nations trebled from 6.1% to 20.2% over the same period.
  • • The UK ranks only 28th in a list of the world's 35 fastest-growing exporters to the other 11 founding members of the single market.
  • UK exports to the other 11 single market founders grew at a markedly faster rate prior to the single market - by 192% during the 20 common market years compared with 80% in the 19 subsequent years.
  • UK goods exports to non-EU countries have grown at a much faster pace than those to other founder members of the single market.
  • There is no evidence that the 'clout' of the EU has helped secure more free trade agreements (FTAs): there were 25 EU FTAs in force in 2012 while the Swiss had independently negotiated 26, 14 of which came into force before those of the EU, and three in the same year.
  • Neither are the EU's FTAs better than those of Switzerland: 20 of the Swiss FTAs include services, compared with only seven of the EU's FTAs - the Swiss FTAs appear to be far more effective at increasing Swiss exports.

Burrage says the evidence contradicts those claiming Britain has enjoyed an insider advantage from its EU membership.

"The growth of UK exports to other founder members of the single market was low when compared with UK exports prior to its launch, when compared with the exports of goods of 27 non-members to the other founder members of the single market, and when compared with the exports of services of 21 non-members to the other founder members. It was also low when compared to UK exports to non-member countries.

"To accept the idea that, despite the absence of prima facie evidence of insider advantages, the UK exporters have nonetheless benefited from them obliges one to accept some scarcely credible, counter-factual propositions."

The Department for Business, Innovation and Skills has claimed that the UK and other EU countries trade twice as much with each other as they would do in the absence of the single market.

But Burrage says: "To present it as a success, in the manner of the UK Department of Business, Innovation & Skills' recent portrayal of the doubling of exports to new member countries, or to claim it is a prized achievement, or a 'privilege', or 'a vital national interest' that must be defended at all costs, only sounds vaguely plausible if UK exporters are never compared with those of other member or non-member countries, and if their performance in the Single Market is never compared with their performance before it existed, or with their performance in other markets.

"Once such comparisons begin to be made, these claims are seen to be empty rhetoric, and those who repeat them may be seen to have been misleading themselves and others about the merits of the single market.

"Unfortunately, constant repetition of them over recent years has already done immense harm, since they have discouraged close investigation, measurement and analysis of the UK experience within the single market. We have, therefore, still not begun to understand what has gone wrong and how it might be fixed."

Source: Civitas

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