Eurosceptic Justice Minister Dominic Raab argues in a recent blog that in global trade the EU’s size is no advantage – either in the number of deals it is able to strike or in their quality and benefit to the UK.
An agile “mid-sized economic dolphin like Britain” could navigate global trade deals better than the “cumbersome EU whale”, he says.
Captain Raab’s assertions are easily harpooned: smaller economic powers rarely cut better deals, and it is doubtful an independent UK would fare any better.
Quality counts
Citing a Civitas report by sociologist Michael Burrage, Raab suggests smaller countries outside the EU cut better quality deals than the UK currently enjoys as a member of the EU.
Take services, which account for 78% of Britain’s GDP. Switzerland, South Korea and Chile, Raab quotes, included services in 90% of their foreign trade agreements, while the EU could only manage 68%.
The UK, of course, already has far-reaching arrangements to trade in services with the 27 other EU countries. The Civitas report excludes them, but Brexit could put them in jeopardy. Count them, and the UK has services covered by over 90% of its international trade agreements (p.45).
David and Goliath deals
Raab takes another stab at measuring trade deals’ quality, looking at export growth before and after they come into force. He quotes a Civitas finding that after 10 out of 15 EU free trade deals took effect, UK export growth to those countries actually slowed; whereas for Switzerland, Korea or Singapore, exports mostly accelerated after new agreements came into force.
Civitas’ sample is selective – it looks at just 15 relatively minor EU trading partners, such as Mexico and Egypt, and none of the UK’s top 20 trading partners is on its list (see p.159).
Moreover, not all trade agreements are made equal. It must be little consolation to Singapore that its exports to Peru accelerated when its exports to China slowed (p.158), but the Civitas analysis counts both Singaporean trade pacts as equally important.
Indeed, for every trade deal Civitas looked at that involves giants India, China and the US, the junior partner saw worse export growth after the deal took effect.
That suggests minnows find it hard to strike good bargains with big beasts.
The Civitas analysis also doesn’t do justice to Britain’s trading position today. Including the countries of the EU and the European Economic Area, those in the European customs union, and those with an EU trade deal, the UK currently has favourable trade terms covered by broad, substantial agreements with over 85 nations, including 8 of our top 10 trade partners.
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Doing it fast vs doing it well
It is a fact that countries like Switzerland have been swift to conclude deals with behemoths like China, while EU trade or investment negotiations have been underway with China, Japan, India and the US, in some cases for years.
But, as the CBI puts it,“the quality and deep coverage of [free trade agreements] matter more than the speed.” Neither the Civitas study, nor our own experience from the 1960s, suggest that a post-Brexit UK would get better deals than it does now.
Dominic Raab did not respond to our request for comment. Michael Burrage told InFacts that he saw himself as a journalist laying out facts – “ I just don’t like to see people being hoodwinked or kept in the dark as the British people have been over many years”.
Edited by Geert Linnebank
What did Switzerland want from her free trade agreement with China which she did not get, and which she would have got had she been a member of the EU?