The EU and I: Trade with the EU

For myself and many others, the economy is the big issue at stake in the EU referendum. For some it’s politics (an issue I will hopefully delve into in the future) and for some it’s just closing the borders (again a discussion for a later date). This post will look at the biggest economic issue in my mind, the issue of trade.

The single market is a crown jewel of the European Union. It allows for free trade amongst 500 million people and for many UK businesses, it’s a lifeline. The removal of tarrifs in Europe is very popular with business people, particularly those in large companies who trade internationally as can be seen below.

Business opinion

Source 1

I will not attempt to cover the truth here. While some of those statistics look favourable towards the EU, the SME column is far more diluted in opinion. So now I will discuss this column. Firstly 95% of SME businesses are small and employ less than 9 people. The contribution to the UK economy in terms of turnover is greater from big businesses. The most important factor in explaining the attitudes of SMEs, in my opinion, is that the vast majority of SMEs don’t trade internationally, so the EU will most likely have little effect on them and it comes down to personal opinion. Self-employed people are politically inclined towards conservatism so the only surprise is that the statistic there isn’t higher thanks to general right wing euro-scepticism.

“We will get a fair deal, they need us more than we need them”.

51% of British exports go to the EU and 55% of British imports are from the EU. As the EU account for only 7% of the population, that shows how important they are to Britain. A common Euro sceptic argument is ”

Source 2

 

This shows that 6.6% of EU exports go to Britain. If we mean more to them, then why is it that our exports to them are a far greater percentage than their exports to us. It is clear that while Britain is important to the EU, this is not as much so as the EU is to Britain in terms of trade. Therefore by attempting to leave, Britain is the weaker party in any negotiation with more to lose.

Countries are more inclined to trade with countries near them. This is because of fewer travel costs and also company clients and customers can meet up face to face and build a greater rapport. Therefore the links with other countries outside of the EU would be unlikely to be as great with links to countries inside of the EU.

Oh Cap

One thing I despise about the EU is the Common Agricultural Policy (CAP). If you are a euro-sceptic who doesn’t know about this, learn about it. It will be a key weapon in your arsenal.

The CAP is a set of subsidies which help European farmers stay in business. It is the largest expenditure in the EU budget and it costs way too much money (40%) for the value to GDP (1.7%) in Europe.  It can be argued that the set of subsidies also increase land price as land owners are aware of more money available. Oh dear, it seems that I have rather shot myself in the foot here. Well I promised to be fair and there we go, so now I have the difficult job of defusing the argument.

I will make some points I see as important as to why we should remain in the EU, despite the CAP. The first is that in the case of Brexit, high tariffs would create tariffs (a trading tax) for British exports such as 55% on dairy and 12% on clothes. This would really push milk farmers in the UK over the edge as they already have to sell for cheap prices. The tariffs also mean that Britain will suffer increased inflation on certain imports, such as food and dairy from Europe. The second point is that the only way we can change the CAP, which is in desperate need of reform, is to remain inside the EU, otherwise we will have no say  or influence over it. In the long run it would be great to see the CAP abolished, however the best way we can make it happen is to remain in the Union.

Regulation, Regulation, Regulation

One argument commonly used by eurosceptics is the red tape argument. That is that the EU are overbearing with their regulations.

If you aren’t in the EU and you wish to export to the EU, you still need to follow EU regulations. Therefore, in the case of Brexit, these regulations would still apply to the majority of exporters. But with no membership of the EU, Britain will have no influence over regulations (as Switzerland also currently don’t). It has also been stated that the biggest 100 EU laws benefit the British economy by £57.1 billion (B).

Not all EU laws are bad. I once gave a presentation on the EU and presented 3 reported laws by the press and asked which one was correct and which two were incorrect. Many people got them wrong. The press creates a bad image for the EU, but naturally would as they are generally right wing. I will avoid becoming Russell Brand and make one more point on this issue.

There are many good laws from the EU and should we leave, one of the scrapped laws could be the working time directive. This would be a shame as it is fantastic for safeguarding workers. It allows for your 4 weeks holiday and caps the working week at 48 hours.

I could carry on with this issue however I did vow to myself to limit each blog post to up to 1000 words to make it accessible and informative. Let me know your opinions in the comments and I hope that this post will have made you think a little bit more as to whether we should leave the European Union

SwiftEconomist

 

 

Source 1

Source 2

Other sources

Source A

Source B

 

Advertisements

2 thoughts on “The EU and I: Trade with the EU

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