Eurosceptics say that Britain would find it easier to trade with the rest of the world if it was no longer part of the EU. They argue that there would be rich pickings in America, fast-growing countries such as China and Commonwealth nations such as Australia. We certainly should grab every trade opportunity that we can. But we also need to appreciate that, by a simple fact of geography, we are more closely tied in economic terms to the EU than to any of these other countries. We do more than three and a half times as much trade with the EU as we do with America, nine times as much as we do with China and 42 times as much as we do with Australia.
It is true that if we were no longer part of the EU we would no longer be bound by its trade policy and we might be nimbler as a result. But we would also lose clout. At the moment, when we negotiate with America, China or Japan, we are doing so as part of the world’s largest trade bloc, which accounts for nearly 24% of world GDP. Washington, Beijing and Tokyo have to take Brussels seriously as a trade partner.
In 2013, the EU completed negotiations on a free trade deal with Canada and launched talks with America. David Cameron deserves much of the credit for the latter. An ambitious deal could boost our GDP by up to 0.35% of GDP. It would be ironic if, after doing so much to get these talks off the ground, the UK quit the EU and wasn’t in a position to benefit from the results.
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There is also an important free trade deal in the works with Japan, which could eventually boost EU GDP by 0.6-0.8% according to the EU. Assuming we’d benefit to the same extent as the EU average, the American and Japanese trade deals could increase GDP by 1.15%. Meanwhile, Cameron has called for a free trade deal between the EU and China. This could also be valuable, provided we negotiate a balanced agreement rather than let Beijing exploit our intellectual property while giving little in return.
If we were on our own, the balance of power would be quite different. The US economy is six times as big as ours, the Chinese is four times as big, and Japan’s is one and a half times our size.
If we left the EU, we’d often find ourselves opening up our markets more to the world’s big economies than they would open theirs to us. We’d typically have to play by their rules – whereas, at the moment, we influence the EU’s product regulations, which then have a chance of becoming global standards. Eurosceptics say we’d still be able to cut free trade deals with places such as the US. While that’s true, we might find we were bullied to do things we don’t want such as get the NHS to pay more for drugs made by American companies.
We’d also have to negotiate with the EU, whose economy would be five times our size after we quit. Far better to stay in the EU and use its influence to open up markets elsewhere. For more on the single market, see our briefing here.
This is an excerpt from “The In/Out Question: Why Britain should stay in the EU and fight to make it better” by Hugo Dixon.
Factchecking by Sam Ashworth-Hayes