Question for Nick – When are you going to break the news?

Mr Clegg is a clever chap, and a pragmatic one too, so when it comes to value of our trade with europe I have no doubt he is well aware of the declining importance it plays, if only because Osborne and Alexander will have sat him down for a little chat. However, he is bang in the middle of a gruelling battle to transform his party into something fit to govern the UK, and that requires that he doesn’t yank too hard on the baby-reins. At some point before the next election he will have to instil a more pragmatic form of enthusiasm for the EU that is able to reflect critically on its flaws, not least the damage that the doctrine of ever-deeper-union has done to public acceptance of the wider project. The uncritical europhilia that has been our Lib-Dem diet to date stems largely from the fear that without the shoulders of europe to stand upon the UK’s future is dark for we need europe’s might to keep; the money flowing, the barbarians from the gate, and to temper our anglo-saxon tendencies. Perhaps he needs to show his party this:

In the space of just ten years the value of our trade with europe vis-a-vis the rest of the world has slipped dramatically, and it has done so because europe is now a low-growth zone.

You might well ask; “surely it was only three years ago that Brussels was claiming that 60% of our trade was done within the EU, so are you not making these figures up Mr Beeftrix?” Indeed they were, so perhaps the discrepancy is attributable to trade being defined in terms of goods only, and not including the service component.  Speculation on your authors part, nothing more, but have they never heard the UK described as a service economy?

The figures provided by the ONS are unequivocal; by 1999 the value of trade in both imports and exports of both goods and services represented no more than 55% of the total. However, it is not this absolute figure that is interesting, no, what matters is that by the year 2011 this figure had fallen to less than 50%, with extra-EU trade now forming the majority in a trend that shows no sign of abating.

The source of those percentages are derived from this graph:

The cause is obvious; the growth in trade to the RoW remains vigorous while growth in trade to EU markets tails off.

The balance of trade with the EU makes equally depressing reading with a minor surplus in service trade being sunk by a huge deficit in goods trade. Contrast this with the RoW where a large deficit in the goods trade is at least counterbalanced by a large surplus in service trade.

To conclude, if Britain is to maintain it’s standard of living, during a period of declining demographics in europe and rapid development outside europe, where should we direct our attentions to ensure healthy export markets in the coming decades? Seems pretty clear from here:

In another ten years that fraction of trade we conduct with the EU will have shrunk to 40%, and then to thirty-five in the decades following, will we still be telling ourselves the fiction that peace and prosperity in Britain is the gift of Brussels, and will the Lib-Dem’s be around to say; “we told you so”?

Update 2011.11.15 – Mayhap I spoke too soon!

Mr Clegg said there was a middle ground between greater integration, favoured by France and Germany, and total withdrawal from Europe, favoured by dozens of backbench Conservative MPs:

“What we want is a European Union which is exclusively oriented towards growth prosperity and jobs,”

As noted previously, Clegg’s goal is to transform the Lib-Dems from a protest group seeking to influence what it believes should be a consensual political system, into a politcal party jostling for power in an adversarial parliamentary democracy.

Good luck.

Update 2012.06.11 – Open Europe comes up with figures for EU trade dependence:

I had always suspected this, though it has always been difficult to track figures down. The UK is less dependent on the EU for export markets than even the mighty German export machine itself.

7 responses to “Question for Nick – When are you going to break the news?

  1. “In the space of just ten years the value of our trade with europe vis-a-vis the rest of the world has slipped dramatically, and it has done so because europe is now a low-growth zone.”

    Save for the one major peak, there’s a trend that needs no statistics tools for recognition: The decline in UK-Continental Europe trade began in 2001 if not earlier.

    The reduced trade may thus show the competitive disadvantage of GBP-EUR trade in comparison to EUR-EUR trade in regard to transaction costs (including a risk premium for exchange rate insecurity in GBP-EUR trade).

    So basically, maybe the UK trades less in Europe because the other Europeans are increasingly better off trading with each other instead?

  2. Hi Sven,

    Sorry for the late response, been distracted lately.

    “So basically, maybe the UK trades less in Europe because the other Europeans are increasingly better off trading with each other instead?”

    If that is true, and it may well be, then the answer would be to join the eurozone, surely?
    But that isn’t going to happen for two reasons:

    1. it’s now understood by the british public to involve an unacceptable loss of sovereignty, and post Dec 9th no-one will be able to credibly argue otherwise.
    2. it’s a shambles, and even post Dec 9th won’t address the lack of productivity in the south, and the decades of grinding debt-deflation required to regain that productivity.

    “The reduced trade may thus show the competitive disadvantage of GBP-EUR trade in comparison to EUR-EUR trade in regard to transaction costs”

    Certainly we have maintained a deficit with europe versus a surplus elsewhere, but while a sovereign currency might be a disadvantage to our low-growth EU market it does not appear to be hindering our high-growth RoW market. If Sterling is a disadvantage in euro-trade it does not appear to offset the growing advantage seen in extra-european trade.

    However, the above aside, it is difficult to contend the relationship between low-growth in the EU and the high-growth in the RoW and how this effects the changing dependence of British trade.

  3. Pingback: ‘Britain will never accept German leadership’ | European Geostrategy

  4. Pingback: drougos.gr - ΤΟ ΛΟΝΔΙΝΟ ΔΕΝ ΘΑ ΔΕΧΘΕΙ ΠΟΤΕ ΤΗΝ ΠΡΩΤΟΚΑΘΕΔΡΙΑ ΤΟΥ ΒΕΡΟΛΙΝΟΥ.

  5. Pingback: Britain and German EU leadership

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s