My usual pattern is to lay the basis with detail, then build to the “punch line” at the end. I prefer foundations first, generally. In this case, I’m going to “do it backwards” since the complexity hides much in the foundation, and knowing what you are looking for in the data helps to see it. So first up is the conclusion, then we’ll explore some alternative detailed views of the data.
FUD – Who Wins if Britain Stays?
FUD is the abbreviation for Fear Uncertainty and Doubt. It was a widely recognized strategy used by I.B.M. to sell mainframes in the ’70s and ’80s. “Nobody ever lost their job for buying I.B.M.” not so subtly said if you bought Amdahl (or any of the half dozen other sellers of ‘me too’ mainframes) you could be fired if anything didn’t go perfectly. Generally, the strategy worked. Now we see FUD used as a strategy all over the place. “Be afraid, be very afraid” of all sorts of things someone wants you to buy. From “Don’t insult muslims, they might get angry” to “don’t eat eggs you might get a heart attack” to “don’t use oil, you could be burning up the planet”. Always be on the lookout for FUD. The FUD Factor is gigantic.
In BrExit we see a lot of FUD, IMHO. From ‘it will wreck the economy’ to ‘the EU will collapse’ to, well, it’s a long list. I’m only going to look at the economic issues, and in particular, the idea that the British Economy just can’t hack it in the greater world and is woefully dependent on the EU to thrive. The implication is that Britain exports a LOT to the EU, that the EU doesn’t export just as much to Britain, and that Britain can’t possibly find another partner (doubt) to trade with nearly as much; so will have economic catastrophe and hard times. (fear)
I really like looking at the “negative space” of problems. Everyone is “panties in a bunch” over exports from Britain. But what about imports? What does the EU stand to lose if it freezes out Britain? Hmmm?
Graphs in this article come from the Harvard Atlas of Economic Complexity. I’m just going to give one link, and you can play with all the knobs to get the rest yourself:
Their image export function doesn’t handle the legends very well, but “red” is a lot, and yellow not so much.
Notice that THE country shipping LOTS of stuff to the U.K. is Germany. They are the ones with the most to lose if BrExit happens, as they lose their captive export market. Next behind them are China and the USA. Outside the EU, so no real dog in the fight. Yet it does say that anything the U.K. needs to import to replace EU exports is just one boat ride away in the USA and China. You might prefer a French Wine, but California wines are just as good…
Now lets look at the other side. Where do UK Exports go? What might get ‘cut off’ in a messy angry BrExit?
Inside the EU, the biggest customer is Germany. Second is France. Yet at about the same “color” we have the USA and China. Outside the EU… Hmmmm… So it looks like Britain does a dandy job of exporting to non-EU places.
Furthermore, it looks like if Germany and the EU gets “pissy” about trade, Germany has as much or more to lose on their exports to the UK…
Frankly, to me, it looks like Britain can easily swap USA for Germany and China for France and dump all the EU crap. But I’m just an uninvolved observer from the other side of the planet…
In no case does this map show any trouble for the U.K. to export to non-EU countries, and it does show that Germany (and to a lesser extent France) has as much on the line as Britain in any exit negotiations. Britain can bargain from strength in a BrExit. Where’s the FUD in that? (Maybe that’s why it has not been mentioned?)
We can look a bit closer at the “comes from goes to” maps.
Where did the U.K. import from?
Where did the U.K. export to?
Taken together, there is a LOT of EU in the Imports, somewhat less in the exports, to my eye. Switzerland just withdrew their application to join the EU, and IIRC Sweden is outside. There is a net imbalance with China in the favor of China, and the USA imports more from the UK than it exports to the UK, so we net fund the UK. Germany has a 5% surplus vs the UK, so in any trade shut off, they lose, Britain gains. (Though The Elite might need to give up their new Mercedes in favor of a U.K. brand…)
I would further point out that NOT having the EU taxes and legal entanglements in the way might well lead to easier and larger trade with the U.S.A. and China. I’m certain it would improve trade with Australia, Canada, and New Zealand (who had trade drop off when the U.K. joined the EU). New Zealand lamb is great, BTW…
But What Products
It’s all well and good to have these gross aggregates, but just which industry gets its ox gored? Eh?
These two maps have a lot in common. Gold, oil, oil products, cars, car parts, jet engines (Rolls Royce sells world wide, the USA buys a lot of their jet engines). Gold is a global market. Oil is a global market. Cars are a global market. Jets are a global market. Hmmmm…. Oh, and drugs / medicines too. Does anyone really think that UK Oil and Oil Products would not continue to be in demand in the R.O.W. (Rest Of World) if the EU decided they didn’t want them? Or gold and gold products? (My read on this is that the UK looks to import raw gold and export processed goods like jewelry, but that might just be me “projecting” based on the U.K. not being known for gold mines and exports of gold being more valuable than imports…)
It also looks like the UK net imports computing machinery (that upper left blue block) and next exports jet turbines. So we swap computers for turbines. Much of that, IMHO, will be USA and China trade, since we source computers and are known to buy U.K. turbines.
On medicines: Does anyone really think that if we need an antibiotic the U.K. makes, and the U.K. needs a cat scanner we make, that we will NOT buy the essential drugs and sell the scanner? Really? (The Germans mostly look to be selling cars to the U.K., so for them it becomes “Will you not buy a needed drug because you don’t want to sell V.W.s in Britain?” They do sell Mercedes in the USA, after all.)
Again, the legend doesn’t come across well in these captures. Most of the smaller more colorful “bottom right” are the things folks think about. Fruit and vegetables from Spain and Italy, Italian shoes and French shirts. Basically, that’s in the small scale. Furthermore, people have brand preferences. Folks who wear a particular shoe will not change if it costs 5% more, or less. France will still want to sell wine in Britain and they will still want to buy English beer and Scotch whiskey.
(IF the EU doesn’t want it, I’ll take it!!!)
But can we zoom in even more? What is the “net” for a given kind of product? I can swap English Beer for German Beer if imports get blocked (or taxed too much) but what’s the thing that I can’t swap for a domestic product? What is the net U.K. export that MUST be sold “somewhere”? The net import that MUST be sourced?
It looks to me like computers and similar goods, crude oil & gas, wine, trucks and some car parts, and then a smattering of particular agricultural and soft goods. All widely available on the global market. It might be interesting to “click the boxes” on the original and go into even more detail, but I’ll leave that for others.
What about “must sell”?
Oh, gee, Gold. That will be hard to sell /sarc;
(Saudi Princes, Russian Oligarchs, and Chinese Party Members abound).
Metals of many kinds – global market.
Alcoholic Preps for Beverages? One presumes that mass of odd bottles behind bars world wide to mix up particular drinks… Folks in Mexico and vacationing in Australia will continue to want their favorite Gin and Tonic and their preference in “bitters” will not change…
Similarly, aircraft parts will still be needed by those aircraft and the demand for centrifuges and specialized chemicals is global.
I don’t see anything on that list that shouts “depends on EU or dies”.
Looked at from this 50,000 foot elevation, a BrExit is most likely to be a pain in the tush for Germany, not Britain. Germany needs to export cars, a lot of them. France needs to export wine. THE worst case is the UK is shunned, Germany has a rise in car inventory while Britain learns to live without Mercedes and V.W. (it isn’t like there is a shortage of car suppliers in the world) and you get your wine from California, Australia, and South Africa for a while. (Though I have to promote the New Zealand whites… very German style! And the South American, especially Chilean, reds nicely compete with Italian and Spanish… but I digress)
To me, it looks like there is a giant global market being given second place in the mindshare (not just the USA and China, but the whole Middle East buys a lot of U.K. goods, and then there is the Commonwealth to revive… shunning Australia, New Zealand, and Canada not to mention India as you did on E.U. entry was a big loss.)
The “risk” looks to be pissing off Germany and not buying as many German cars and French wines. Maybe getting your fresh vegetables and grains from a bit further away (assuming they decided not to sell, so as to remove their nose from their own faces…) But we already get vegetables and fruits from all over the globe, and Australian wheat is shipped globally. (Don’t know if they grow barley, but Canada does, so no worries on the mash, eh?)
Oh, and per “trade deals”: I’m pretty sure all of us on this side of the pond and down under would be happy to sign an emergency zero tariff trade deal, if asked. Heck, just a ‘glue on’ to NAFTA would get you all of North America. “The United Kingdom is added to NAFTA” doesn’t take long to write or sign. (But frankly, I don’t see that as needed unless you wanted it.)
So that’s my take on what these charts and this economic data says. There is far more FUD than truth in the Exit Scare. The British Economy is net gaining vs the Rest Of World, and net losing vs the EU, with Germany the big winner, and that is why Germany and the EU is so against a BrExit.
IMHO, you ought to “feel free to jump on in” the global swimming pool. The water’s fine! ;-) We will welcome you with open arms (and with open wallets… Tanqueray and Tonic, please…)
Or you can stay tied to the EU. Your choice.