Richard Newby: Britain will lose out on a world of trade if leaves EU
THE heart of the economic argument about EU membership or not lies in our long-term trading prospects. The trading picture of the UK has changed significantly since we joined the EU in 1975.
Then, trading was largely in goods; now, we are the leading services exporter as a proportion of output in the G7. Some 40 per cent of our exports globally, and to the EU, are in services. The EU is now by far our biggest export destination as a whole, with some 44 per cent of British exports going to Europe.
It is acknowledged that the increase we have seen with trade in the EU is directly linked to our membership of it. The Centre for European Reform says that it has raised trade by 55 per cent, while the Government argue that it has done so by between 68 and 85 per cent. Whatever the exact figure, it is hard to deny that it is a substantial amount.
We also know that the EU is well down the track of negotiating – and completing negotiation – on trade deals with some of the largest economies in the world, including the US, Japan and India. When those trade deals are completed, as they will be, we will get benefits from them by virtue of our membership of the EU.
We can see very tangibly what some of the benefits will be in terms of trade if we stay in. If we come out, however, we do not even know what the preferred trading relationship of those who advocate coming out is. Nigel Farage suggested that he preferred a relationship that was, as he put it, like that of either Switzerland or Norway. There is quite a big difference between Switzerland and Norway; it would be useful if he could narrow that down a bit. Boris Johnson said that we should have a deal like Canada’s and then, under criticism, said that we should have a deal like the WTO’s. Michael Gove surprised everybody by saying that we should have a deal that mirrored that of Iceland or Albania.
Whatever the relationship with the EU is likely to be, it will not be on the same terms as now. Even in the closest feasible relationship, such as that with Norway, we will have to accept the rules and costs of membership with no say over them. This will have a negative effect on trade, particularly in services. In financial services, failure to retain the right of companies to passport their services from the UK to the rest of the EU, if we form an agreement on those lines, would undoubtedly lead to significant job losses in the City – some estimate as many as 100,000 – to the benefit of Frankfurt, Paris and Dublin. Whatever the post-Brexit relationship, our position re trade with the EU will be less favourable than it is now.
The second myth is that we would get better trade deals on our own if we were not held back by the EU. This myth has been romantically advanced by Ian Botham in respect of the English-speaking, cricket-playing members of the Commonwealth.
The World Trade Organisation’s rules are, in many ways, the worst option. Why are we having all these trade negotiations with countries around the world when we already have the WTO rules? The reason is that they are not good enough – otherwise we would not be spending years trying to get better deals.
Indeed, all the Commonwealth countries that play cricket, as far as I am aware, have said that they wish us to remain in the EU. Indeed, the reason we have had difficulties in exporting to India is because of the protectionist policies of the Indian government.
It has ranged from difficulties in exporting Scotch whisky through to extreme difficulties for British lawyers and accountants doing business and setting up businesses in India.
The third myth is that there is an army of companies champing at the bit to do business in far-flung parts of the world rather than in the EU. However, the surveys undertaken by the Federation of Small Businesses when I was a Minister pointed out that the vast bulk – well over two-thirds – of small businesses thinking of exporting for the first time looked to do so to the EU.
It seems to me that all the arguments in respect of trade are absolutely compelling and need to be deployed as effectively as possible. They are set out comprehensively in the Treasury’s analysis of the long-term economic impact of EU membership and the alternatives. However, the document, despite a perfectly good summary, is not easily accessible to the lay person.
Therefore my question is this: what is the Treasury going to do to promulgate the headline arguments in a clearer and more readily understandable way? It is in all our interests that we get it right.
Lord Newby of Rothwell is a Lib Dem peer and former minister who spoke in a House of Lords debate on Europe. This is an edited version.