Stronger In campaign: UK risks £250bn in trade if Brexit vote wins
A war of words has erupted between those who want out of the European Union and those who want to stay – this time about the possible £250bn of lost trade if a Brexit occurred.
Former chancellor Alistair Darling is fronting new research using Treasury data that found the UK benefits by being part of EU trade deals with other countries to the tune of a quarter of a trillion pounds per year.
The pro-EU membership group Britain: Stronger In Europe found the UK’s trade to EU free trade agreement (FTA) nations, taken together with trade with the EU and EEA, accounts for 60 per cent of the UK’s total trade –or £637bn.
Darling said this morning: “Those wanting to leave the EU want to pull Britain out of the single market, which would mean introducing tariffs and barriers to our trade and putting billions of vital trade at risk.”
Stronger In said the losses would occur if a Brexit resulted in UK exports to countries such as Chile, Mexico and Israel being relegated to using World Trade Organisation benchmarks for tariffs and quotas until a fresh FTA was renegotiated with the EU and each of the countries the single market has an FTA with – a process even the pro-Brexit Vote Leave group conceded late last month would need to happen.
The pro-EU campaign group pointed to HM treasury analysis which found a so-called EU effect on UK trade: “UK trade with the EU is 76 per cent higher than it would have been in the absence of EU membership and we had traded without an agreement; is 44 per cent higher with the EEA than it would have been; and 17 per cent higher with countries the UK has a free trade agreement with thanks to the EU.”
Pointing to the most recent data from 2014, this EU effect amounted to £247bn more than it otherwise would be, with the bulk – unsurprisingly – coming from UK-EU trade, which came to a £224bn boost, with £9bn coming from EEA trade and £14bn coming from trade benefits from the UK using EU trade deals with other countries.
Vote Leave hit back at the near-£250bn figure, claiming that Stronger In Europe’s “methodology and sources are unclear.”
The Vote Leave campaign said of the calculations: “BSE [Britain Stronger In Europe] states that in 2014, trade with EU was £520bn. They claim that ‘UK trade with the EU is 76 per cent higher than it would have been in the absence of EU membership and we had traded without an agreement’. Nonetheless, BSE’s figures do not show a 76 per cent fall in trade.”
“A 76 per cent fall in trade with the EU would result in trade falling to £124.8bn, a reduction of £395.2bn. Yet BSE claims that trade with the EU would fall by £224bn.”
The head of Vote Leave Matthew Elliott said: “After we Vote Leave we will take back control of the powers we’ve surrendered to EU bureaucrats and stop sending Brussels £350m a week. That would boost our economy”.
Jonathan Portes, an economist at National Institute of Economic and Social Research tried to clear the air on the clash of the calculations – by correcting the mathematicians at Vote Leave.
“Stronger In do not claim that trade with the EU would be reduced by 76 per cent, but rather by 43 per cent (a 43 per cent decrease is the inverse of a 76 per cent increase). Their calculations, like the Treasury’s, apply to all trade (imports and exports) not just exports. Vote Leave appear to have misunderstood both of these points.”
So, that’s 1-0 to Team Remain then.
However, Portes said both the duelling sides could be correct in their speculation of the relationship with the EU post-vote.
“The Stronger In calculation appears to be a fair reflection of the Treasury analysis, which reflects the consensus amongst economists that EU membership has indeed led to a substantial increase in the overall volume of UK trade compared to what would have happened had we not joined.
“However, it is important to note that looking at the historical impact of joining the EU does not necessarily tell us what would happen if we left.”
But the economist, who is not aligned to either the Leave or Remain camps added: “The Leave campaign is well within its rights to argue that – depending on the nature of the post-Brexit UK-EU relationship, and our negotiations with third countries – the negative consequences for trade predicted by these calculations would not necessarily materialise in practice.
Make the final score 1-1.