The UK’s strong hand in trade negotiations

The war of words between UK ministers and EU officials continues. Donald Tusk, the President of the European Council, insisted that the only choices available ot the UK were “Hard Brexit ” or No Brexit” – in other words,  give up trying to leave the EU or accept that if we will not accept freedom of movement, we canot have access to the single market. The article mentioned Norway and Switzerland, which both accept freedom of movement. It failed to mention Liechtenstein which, as we have frequently mentioned before, does not.   

As we have pointed out, this is not he first instance of the media being less than helpful in reporting the prelimiarnbies to the negotiations. However, sometimes, some useful facts to appear. The article below, from the Economic Research Council,  indicates the importance of the UK as an export market for several leading EU nations. Of course, the UK needs to ensure that our goods meet all the EU’s complex regulatory requirements to access the Single Market, but if we adopt the Liechtenstein route or some sort of shadow-EEA arrangement, we do have quite a bit of leverage.

Summary: The chart shows some aspect of each nation’s position on trade with the UK in the run up to Article 50 negotiations with access to the single market being the key issue. Theoretically, countries with a greater reliance on the UK for exports could (or should!) take a softer stance on Brexit negotiations, in order to safeguard these trade links. Where the export/import ratio increases; this pressure to achieve favourable terms should be compounded.

What does the chart show? The blue bars show the export/import ratio of each nation. Values above 1 denote that the country is a net exporter to the UK, and values below 1 show that the country is a net importer from the UK (of the nations shown, only Greece and Ireland are in this category). The red dots show each country’s exports to the UK as a % of their total exports to EU28 countries, so higher values therefore signify a greater reliance on the UK trade in their dealings with other EU nations. The data represents trade in goods only (not services) and is from 2015.

Why is the chart interesting? The chart shows that the key European nations individually have a very significant reliance on trade with the UK, with five of the key players doing over a tenth of all their export trade in Europe with the UK. What is also underlined is that, unless a united front from the EU states is shown in negotiations, Britain has serious clout with each of them through the sheer scale of its buying power. In addition, the graph only displays trade in goods not services, which might increase EU state’s reliance on Britain yet further.

There has been much speculation on the tone Article 50 negotiations are likely to take, not helped by entrenched ideological positions. We have seen firm and unequivocal comments from some ministers in EU member states who are taking a decisive ‘all or nothing’ stance. This toughening of tone stands in contrast to early conciliatory statements in the days that followed the result. On the other side, the self-assured attitude of some members of the British government, particularly Johnson and Gove, stems from their confidence in the UK’s strength based on the EU’s reliance on UK trade.

What the chart illustrates well is that for the key states in Europe, these negotiations are about far more than trade, indeed they may well allow their economies to take a hit for the longevity of the political union.
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  1. George ThomasReply

    The reason why the EU has concluded no significant trade negotiations with any major trading nation (a point often ignored) is that as all its members have to agree to any such agreement there is always one that can kill it – viz the current situation with Canada which could be the only significant trade agreement if ever concluded. So there is no avoiding the fact that a hard Brexit is probably to only workable exit option BUT we knew that when we voted and the majority judgement was that the barriers to the USA/China/India etc trading with the EU are clearly not that forbidding. The new value of the pound already more than offsets any cost disadvantages. BUT we must stop talking as if freedom of movement was what we voted for. We wanted to be sure that we, the people, have the right to control all our domestic laws through a democratically accountable government – that would include setting rules for immigration (which in general we should welcome) – which is long term not short term, constitutional thinking. Some did vote Brexit for unattractive reasons but that must not be allowed to stain our cause or we might find our recent victory becomes phyrric not real. And finally, foreign students coming to UK universities is surely one of the best long term investments we could ever make and discouraging this is madness and must stop! Every foreign student who enjoys his time in the UK is just the person our salespeople will want to meet when they go into that potential buyer’s office.

  2. Phil JonesReply

    George, I’m all for young people being able to enjoy studying in the UK, BUT only young people that the UK itself decides will be in the UK and not young people that the EU decides will be in the UK. A territory that does not fully control its borders is not a country. Scotland and Florida are not countries — except in the vague secondary sense of having residents with a common history and culture. Outside of the UK everyone uses the word ‘country’ to refer to a territory in total control of who can enter it. The UK has been a province (sorry: Member State) of the European Union since 1992 and as such it has had to put with the EU’s ‘freedom of movement’. This is what has to stop. China, the US, Brazil, etc. don’t reach trading agreements with other countries where the citizens of those other countries as part of the deal have a right to walk into China, the US, Brazil, etc. My vote for Brexit was for the UK to regain total control over who may enter its borders, with the French, Germans, etc. having no better right of entry than people from anywhere else in the world. I think that is what is now being referred to as ‘Hard Brexit’. I never realized that there was any other type. The fate of the Canada/EU trade agreement shows that the EU is simply incapable of reaching such agreements. The UK trying to strike a trading deal with the EU is a total total waste of time. Mrs. May should simply pull the plug and not even waste time trying to get such deal. I don’t think that anyone has talked about totally stopping immigration into the UK, including young people who come to study, but the UK itself has to have final say on who has the right to enter. Otherwise the UK will remain the equivalent of a Florida or Scotland or Quebec or New South Wales.

  3. PipReply

    I have no time for the pathetic sabre rattling of the EU ‘ methinks they protest too much’ which usually is a sign of great insecurity and weakness
    Its a fantasy to think that the EU would suddenly undergo a volte face they simply do not understand the meaning of co-operation and they are now so self deluded they even believe their initial illusion
    Just as the EU is NOT Europe neither is the SNP Scotland
    The SNP has limited power and the sooner that party realises that they do not represent Scotland then their sooner their bellicose leader will make political progress
    Speaking with Scots regularly there is a great feeling of disquiet regarding the SNP and it unpleasant posturing
    There really is no option but to just pull out- the markets will take care of themselves as they have always done and we can then negotiate freely
    Its a complete waste of time negotiating on the EU terms, that’s exactly what they want .A bureaucratic technocratic morass that’s meat and drink to them

  4. Gordon WebsterReply

    I agree when you use the word “Province,” Phil, for that is the way Brussels perceives all member states. However, the fact remains, and it was made clear to Heath by Lord Kilmuir in his Letter, that joining the Common Market, then the EEC, and then The EU, may amount to an Act of Treason. Every Government since Heath may be considered equally guilty, and they should remove the European Acts and Cede from all EU Treaties to remove that ” Stain Of treason.”
    On the subject of Mass Immigration, The Daily Express today reports that Immigrants to Germany are demanding an end to the flood of refugees, on the grounds that it is ruining their standard of living. You really couldn’t make it up.

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