All over the the news is the pervasive lie that if the UK leaves the EU system it loses access to something like 500 Million folks worth of market. The clear assertion is that if the UK is “outside the EU” it can’t possibly sell products and services into the EU.
In my opinion, that is a flat out lie.
Further, there is the implicit assertion (sometimes explicit) that some magic “trade deal” needs to be instantly negotiated. IMHO, that, too, is a lie. Trade deals sometimes help trade, but a great deal of trade happens without them.
To illustrate that point, a couple of maps of OTHER EU Countries, and from where they buy things.
The source for these maps is the same is in the prior BrExit posting:
As before, this is one link, and you can ‘go there” and change the knobs as you like to get any other graph I use here.
So let’s start with Germany. THE powerhouse of the E.U. From where do they buy things? Surely it must be dominated by the U.K. and France as the other two major E.U. countries, followed by Italy and Spain? IFF it is so horridly difficult to sell into the E.U. from outside, it simply must be that large internal trade partners will dominate? No?
As before, the dark red is a lot, the lighter yellows progressively less. Why their saved images have poor legends is beyond me, but for actual dollar bands, hit the web site.
Oh Dear! Most comes from China… I guess being “outside the EU” is not hurting them much. Hard to see, but if you hover over it at the original site, Holland is next with $96 Billion. One presumes due to buying a lot of external goods and materials needed by Germany, but we’ll chart them next. The UK eventually shows up at $43 B, but after Switzerland $50 B and the USA $62 B.
Golly. Both not in the E.U.
It sure doesn’t look like being “inside the E.U.” is very essential for trading with it.
The Netherlands? It is interesting in that Holland looks to be importing from just about the whole world. They do seem to buy a lot from Germany, too. Perhaps cars? Or maybe things for export… At any rate:
Golly, China again. Though in fairness, it is Germany that dominates them. How about the UK? $32 Billion, tied with the USA. We don’t seem to have a problem “trading in”. Nor, given the widespread yellow on that map, does most of the world. I took a look at the Netherlands by product map and it is mostly petroleum & petroleum products, computers, phones, cars, and medicines. The UK is in a global market for Petroleum, so that isn’t going to be a BrExit issue. Phones? China I’d bet. Maybe cars and medicines from the UK? Or cars from Germany, medicines from the UK… Medicines being dominantly a proprietary business it is unlikely to take a hit from being outside the E.U. It, too, is a global market.
Oh Dear, Germany again. It is starting to look like the E.U. is a Germany Trade Promotion Authority… Then China. The UK ships $25 Billion, well behind the USA at $40 Billion, and even Spain at $38 Billion. It sure is starting to look like Germany sells most to the EU members, but nobody else is really winning much from the deal. It also looks like China and the USA are quite happy to sell lots into the EU… from outside…
You can go right on down the list of major E.U. economies and the picture is the same. Italy, Spain, even Poland. All economic satrapies of Germany. In fairness, it is the case that Portugal mostly trades with Spain and Ireland with the UK. Their prior dominant partners.
My conclusion from this is pretty simple and direct. Whatever is asserted to be the benefit of being “inside the E.U.”, the major benefit accrues to Germany. All over the E.U., countries “inside” are dominated by it. Those countries outside, with desired products, have no problem “trading in”. Products from all over the world flow in to the E.U.
A second necessary consequence is simply that to the extent there is an artificial trade barrier with the E.U., the UK inside of it is blocked from the Rest Of World.
Which is bigger: the R.O.W. or Germany? Which do you think is the better trade partner? Is it better to have a negative balance of trade with Germany, as the UK does now, or a positive one with the R.O.W.?
One final note:
Hong Kong. Hong Kong became a global trade power of fierce size via the simple expedient of lowering their own tax and tariff barriers. They didn’t give a whiff what their potential trade partners did, they just provided an easy trade station. The rest was history. One of the most astounding growth and wealth creation cycles in economic history. That policy was created by a Brit. It works. To the extent the E.U. wants to pursue high taxes and high barriers to trade, it is much much better to be outside of that trap than inside. There is a long history and large body of evidence for that observation (and it is an observation, not a surmise).
So that, IMHO, is the choice facing folks in the U.K. today. Satrap to Germany, or free trader to the world. Your choice. Choose wisely.