One of the latest lies in the arsenal of those who still dream of overturning the referendum result and keeing us in the EU is the warning that Brexiteers lied when they said after Brexit we will be able to trade with the whole world when in fact nations will not want to trade with us for fear of antagonising the EU which is a much bigger market.

First can anyone spreading this lie name just one country with which we cannot trade now as EU members? Britain can trade with any nation now and I’m not aware of anybody having said otherwise. Where misunderstandings have arisen is that people in the Leave campaign spoke of making our own bilateral trade agreements with the rest of the world.
At the moment we can only trade with non EU nations on terms agreed by the EU on behalf of all it’s member states. Economic sanctions imposed on certain nations by the USA and supported by the EU severely restrict our ability to trade with the sanctioned nations, but it is extremely unlikely that after Brexit any British government would refuse to back US sanctions on, for example Iran or North Korea so nothing will change there.

 After Brexit, it will still trade with the whole of the world. The point is the nature of the trade agreements. Post Brexit, it is reasonable to expect the UK to prioritise trade agreements with its most important partners. While in the EU, it has to accept the EU’s trade agreements, which from the UK’s perspective are poor.

The EU’s trade agreements haven’t prioritised the UK’s most important trading partners. It has only one trade deal with a top-10 economy; Canada and even that took it until 2017. And only 3 of the world’s top 20 economies (Canada, South Korea, Mexico). Furthermore, 32% of its trade agreements don’t cover services. The UK is the world’s second largest exporter of services.

Contrast this with much smaller countries like Singapore, Switzerland, Chile and Australia. They have prioritised and have achieved, trade agreements with the world’s largest economies eg the US and China, and 95% of their trade agreements cover services.

The issue with the EU is that it has not prioritised the UK’s interests in pursuing trade deals. There’s no reason why it should have done but the lack of priority is a fact. Frustratingly for British businesses, EU trade agreements have prioritized German and French interests, even the single currency system, of which luckily we are not members, is rigged in Germany’s favour. And despite all that, the UK economy is still growing while that of Germany is contracting.

We can trade with a country without a trade agreement of course. If the country is a WTO member, it is required to trade on the minimum terms laid out by the WTO. But trading under a trade agreement is better because it removes tariffs and opens more sectors to trade. About 43% of our exports are already done under WTO terms. That’s about the same as our exports to the EU.

The 43% that’s under WTO terms is more important than the 43% that’s with the EU because. Why? Because it’s growing as a proportion of the total and we earn a surplus on it. By contrast, the 43% that’s to the EU is proportionately shrinking and we earn a deficit on it.

Obtaining better trade agreements is one of the trade-related benefits of Brexit but not the only one.

If you accept protectionism as a viable strategy to promote your interests (I don’t but let’s go with it for the sake of argument), the ideal protectionist policy is one that imposes large barriers to trade on the things you export and none on the things you import. The EU, however, does the exact opposite. It charges high tariffs on the things the UK imports such as food, clothes, vehicles and shoes. As for the things the UK exports, studies of trade in services have shown the EU’s internal market for services is no more open than its market for services imports.

That means as regards services exports, it is of no benefit to be in the EU versus not being in the EU. Meanwhile, the EU’s tariffs on essential imports raise prices, to the harm of British consumers and to the benefit of non-British producers.

 

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