The latest Brexit position paper has a lot of sense in it. UKGOV is asking for a long transition deal to allow goods to continue to be bought and sold immediately after Brexit – it’s a ramp down the cliff-edge. They even sing the praises of the EU’s harmonised regulations and directives! If they’d left it at that, it could have been wonderful: an island of sanity in a sea of chaos. They couldn’t let it lie though.
They open the paper with a shedload of the old ‘they need us more than we need them‘ shtick. We see this so often and they are so blatant in this position paper that we wanted to address it on its own.
“The EU is the UK’s largest market for goods, and in 2016 other EU Member States, taken as a whole, exported more goods to the UK than any third country.”
Here we have the lead-in to the whole premise. The EU sells the UK a lot of stuff. This is true and the EU has always wanted a prosperous relationship with the UK, but the focus on the EU’s sales ledger is myopic at best and deliberately misleading at worst.
By focusing only on the sales ledger of the EU, the Brexit leaders ignore that British businesses and British households rely on importing those products!
The UK is already facing a household debt crisis that rivals the 2007 global financial crash, wages are falling ever further behind rising inflation, and consumer spending (the main thing to keep the UK afloat after the referendum result) is falling as households feel the pinch. A reduction in EU imports (or increased tariffs on them) would be disastrous to UK business and households and the EU (and most economists) know it.
As we will see, the paper talks about the EU’s reliance on UK imports later on, so it seems like the Brexit government knows this too, but is unwilling to inform the public about it.
“In 2016, the EU exported €127.9 billion of consumer goods to the UK and imported €62.3 billion of UK consumer goods.”
The idea that the EU ‘sells us more things’ needs to be considered with the inclusion of ‘denominators.’ Let’s look at these claims as a shared risk – in basic terms, for the 27 EU states, that’s €127.9 billion spread amongst 440 million people or €288 per person. For the UK, it’s €62.3billion spread amongst 65 million people or €958 per person.
In reality, the EU members don’t have equal share of this risk but you can see that, in general, the risk for UK citizens and businesses is higher, because we’re smaller (denominators matter!) We have never heard a Brexit leader admit this basic fact, but how often do you hear this export deficit hailed as a reason for having a strong hand in Brexit negotiations?
Another way to look at this is that only 8% of exports from EU members come to the UK, but 40% of exports from the UK go to an EU member. There is more to this stat, click here to find out.
UKGOV continues this misrepresentation of the facts by talking about the UK’s integration with EU supply chains in the most negligent, one-sided way:
“The UK is an important contributor to many European value chains, and in 2011 the UK content accounted for 1.9 per cent of the total value of other EU member state exports, and 6.4 per cent of all foreign value added in other EU member state exports”
The problem here is that the position paper’s authors completely fail to mention how much of UK exports rely on imported EU goods. Not a word, it’s completely one-sided. The reason for this is because the UK is massively reliant on imports from the EU to produce our exports. The cards are heavily stacked against the UK on this issue.
This is stated quite clearly in a blog on the LSE website:
“The data shows very clearly that the UK’s value chain integration is mainly with the EU. Nearly half of the UK’s intermediate imports and exports are with other EU countries. The EU supply chain also relies on the UK but to a much lesser extent: 10 percent of both EU intermediate exports and EU imports are traded with the UK.
“This actually compares quite unfavourably with the relative size of the UK economy (about 17 percent of the EU). The asymmetric exposure of the UK’s production chain to the EU points to a larger negative impact from Brexit on the UK’s production chains, compared to those of other EU countries.”
It is clear that the UK suffers more from damage to this relationship but the Brexit government doesn’t mention the UK’s reliance at all.
Overall, there is a pattern in this introduction to the Brexit position paper that represents the Brexit argument in microcosm. The Brexit leaders focus on any one side of any situation, so long as it makes Britain sound strong.
They do this in two ways. The first is by failing to expand on a statistic, as with the argument that the EU exports more to the UK than then UK exports to the EU. By failing to consider the denominator (the 27 states of the remaining EU vs splendidly isolated Britain), they wilfully deceive the public. If it is not deception then it is gross incompetence.
The other way is simply by not talking about Britain’s part in the statistic at all, as with when they declare the EU’s reliance on British imports but completely omit any mention of the UK’s much larger reliance on EU imports.
In either case, the aim is to deceive the British public into thinking that Britain has the best hand at the Brexit negotiation table. Democracy run by deceit is not democracy at all, it’s just a form of crowd control.