Interestingly the UK has the lowest exports as a % share of GDP in the EU, France comes a very close second worst. This statistic surprised me a lot, I’d assumed the UK exported a lot, but relative to most EU countries we are the worst!
The EU average is around 45% (Germany 47%), whilst the UK and France are around 30% of their GDP is due to exports.
Germany (~47%) as a % share of GDP basically exports 50% more than the UK (~30%) and France (~30%) export.
The Maths: The German GDP is 47% due to exports. The UK & French GDP is 30% due to exports. 47% is roughly 50% bigger than 30%.
The Remain narrative is the UK economy thrives due to EU membership, the EU facilitates an awesome UK export market. Clearly this isn’t the case otherwise the UK’s GDP would be comprised of a much higher percentage of exports like we see with Germany (47%) or the EU average (~45%).
We do OK economically, but it’s not due to exports to either the EU or rest of the world! The UK economic success (6th largest economy as of June 2019 is a success by any measure) is the home/domestic market (generates 70% of the UK’s GDP), in particular in services which the EU in trade agreement terms hasn’t done a particularly good job promoting.
Consider most EU FTAs barely touch services, EU FTAs are goods focused which is only 20% of the UK and France’s economies!
If this were just a UK problem we could blame the UK (successive governments messing up), but this also impacts France. Both the UK and France have mostly services based economies, both economies are pretty much 80% services and where the UK exports the least in the EU, France exports the second least (it’s pretty much the same amount: UK 30.5%, France 30.9% : 2017 data)!
The EU appears rubbish at promoting the export of services and as service based economies both France and the UK can’t take full advantage of the EU trade agreements like Germany can: the German economy is close to 70% services, relative to the UK/France the German economy has a huge exportable goods market (basically 50% bigger) which takes advantage of EU trade agreements.
With an 80% services based economy, post Brexit the UK government should set out to negotiate FTAs which are services focused. This doesn’t mean ONLY focus on services, but when we negotiate FTAs the UK gains more access to our trade partners service sectors (so UK businesses export more services) in return for better access to export goods into the UK.
With an economy with only 20% goods, if we trade with a country with say 30% goods, that country have 50% more businesses producing goods the country can potentially export to the UK. With a goods focused FTA the UK will always export less goods than it imports: the FTAs won’t be fair/balanced.
The UK’s leverage is it’s a net importer of goods: the UK imports significantly more goods than it exports. If we do nothing special and focus on goods focused FTAS (like the EU does), the UK will remain a net importer and our services based businesses won’t export more.
The UK government should leverage countries against one another. Currently the EU27 exports lots of goods into the UK because it has preferential access via the EU SM/CU (zero tariffs on everything and low barriers to trade). The US in comparison trades with EU members (including the UK) on mostly WTO GAT and WTO GATS terms, relative to what the EU27 has, the US has a terrible deal with the UK.
The EU and the US are in direct competition for trade around the world. The US wants to export more to the UK, the EU27 won’t want to lose their current exports to the UK post Brexit. If the UK leaves the EU with no-deal, trade with the EU reverts to WTO GAT & WTO GATS terms (they become equal with the US). This will almost certainly mean the EU27 exports less to the UK (and the UK will also export less), but this makes US products more attractive to the UK, we will likely buy more from the US and other countries we currently trade mostly on WTO terms with.
If the US can negotiate an FTA with the UK before the EU negotiates an FTA with the UK, the US will start to export more into the UK at the expense of EU27 exports into the UK.
There’s going to be a competition for which countries negotiate best access to the UK post Brexit, we need to use this competition to leverage the more services access from whichever countries we are in FTA negotiations with.
Read Full News Story » I Used to be a Remainer, but I'm Alright Now!