UK's trade deficit with the EU hits highest level in history

[BritBrit]

The UK's trade deficit with the EU hits its highest ever level in history. From January-March 2016 the trade deficit was £24 billion in the EU's favour (£2 billion a week, same as £96 billion a year). The EU depend on UK trade & the UK market, we have the economic power & leverage to create an EU free trade after Brexit

Comments?

This isn't an obvious argument in favour of brexit, which even leave supporters mostly concede will be economically disruptive in the short term.

The trade deficit is actually rather worrying, if viewed as a broad economic indicator, and suggests that the British economy is really not in great shape. This has been a services led recovery that never really turned into a manufacturing recovery. Today's figures suggest that things are getting worse, not better. And you're proposing to make life harder for UK manufacturers and exporters.

As for the EU "relying" on exports to the UK - the UK is indeed an important destination for EU goods, and this is why most EU countries would prefer the UK to remain in. But EU trade with the UK is a small percentage of the EU total. And it works both ways - the UK's reliance on goods from the EU makes UK consumers vulnerable to price hikes and shortages, if tariffs and non-tariff barriers result in the cost of imports increasing.

The EU depend on UK trade & the UK market, we have the economic power & leverage

Proportionally more of our exports go to the EU than their exports come to us. Also the UK has more incoming foreign direct investment from the EU than any other country, currently worth about £496n. So if anything the EU has more leverage than us.

Devils advocate - is the trade because we are in the EU and its free from tarrifs etc.

Surely they will just source things from the rest of Europe?

The UK has a more flexible employment market i.e worse employer protection so probably have lower costs than Europe.

Once out would we have tariffs applied?

I cannot see any free trade deal with Europe not including free movement of labour it wont be on the table. And of course we will be panicking to sign something.

breakingdad there will be no comprehensive free trade agreement with the EU without free movement. I'm a forecaster used to couching predictions in "likely" and "expected" etc, but I'm prepared to make that forecast with no quibbles!

In the absence of a trade agreement, you'd be in a WTO scenario (as per the Treasury's worst case scenario). The issue isn't simply tariffs, which aren't necessarily onerous, but also non-tariff barriers, which can have significant cost implications. Filing customs papers, employing customs agents, waiting for goods to be cleared etc. It's a big administrative burden, it adds risk and it has implications for your working capital (someone has to fund goods while they are held in a customs area) - and it's why a lot of manufacturers prefer to locate their manufacturing plants inside the markets that they serve. That's why my Toyota car was produced in Derby and not in Japan.

Re costs and why manufacturers make things in the UK, it's not that simple - it's not true for example to say that the UK necessarily has lower costs (it's almost certainly untrue versus, say, parts of Eastern Europe) and in any case, the cost of manufacturing in the UK for export to Europe depends very largely on the euro-sterling exchange rate. Usually if you're a manufacturer looking at investing in a country you'd look at a range of factors including geographical access to your main markets, the existence of any trade barriers, local corporation taxes, local employment practices and laws, local availability of skills and other inputs (eg raw materials).

I agree mistigri which then blows a massive whole in the Brexits we can go it alone spiel.

Hang on- a trade deficit is a good thing? Ok, it shows that we buy a lot of their stuff so they need us as a consumer but what if they suddenly call in their debts post-brexit?! Am struggling to see how such a big deficit can be a positive really. Am no economist though so do tell me if I am wrong!

Brexitential our friends in the leave camp will attempt to spin most economic news in favour of brexit, but they are struggling with this one, as the small number of replies and complete absense of the usual suspects testifies.

Once out would we have tariffs applied?
That's what remain would ike you to think. The truth is that every country in Europe (and Turkey) trades tariff-free with the EU. Only Belarus is charged a very small tariff.
We would also trade tariff-free when we have left the EU

The truth is that every country in Europe (and Turkey) trades tariff-free with the EU. Only Belarus is charged a very small tariff.

Because they have specific trade agreements, eg

• they are EEA members (or have signed up to EFTA in the case of Switzerland). All these countries are signed up to free movement.

• they have specific arrangements with the EU that are reserved for countries wishing to accede to the EU eg Bosnia and Herzegovina

• they are part of a customs union which allows tariff free movements of goods but does not cover agriculture and services. (The UK has a trade surplus in services.)

Which of those will apply to the UK?

(PS Russia is part of Europe. )

Do watch Brexit - The Movie. There is a lot in it regarding trade tariffs/agreements etc.

Information on trade and tariffs is freely available on the internet; you don't need to watch political propaganda featuring Farage and funded by a hedge fund manager in order to get information that you can easily obtain from public domain sources that don't have an agenda.

Nothing that I wrote above couldn't be confirmed as fact by someone with 5 minute to spend on googling, and a small amount of political and economic knowledge.

The trade argument is a terrible one. You can have a debate about brexit on grounds of sovereignty or immigration, but to argue for it on the grounds of trade is just bonkers. Even the leave campaign seem to acknowledge this, with recent statements about economic pain and disruption being a price worth paying.

I second what redhotfir123 says - spend an hour so watching Brexit the Movie and you will start to understand the EU confidence trick and start to realise there is an alternative - which is to LEAVE.

Springing is there any chance of an on-topic response to my post earlier?

European countries trading tariff-free with the EU do so under ETFA, SAAs (transitionary agreements for countries working towards EU membership), or customs union arrangements which do not include agriculture and services. Under which of these arrangements will Britain trade with the EU, bearing in mind the trade surplus in services?

You do not need a trade deal to trade.

We have membership of the WTO. It allows us to trade.

We don't have trade deals with America, Japan, Australia, China - yet we trade.

And we will continue to trade when we have left the EU.

And saying that we would not be able to do so is fear-mongering.

And saying we would be hit by tariffs is scare-mongering.

If we have 'stuff' worth buying countries will trade with us.

If we want to buy 'stuff' from other countries - we will trade with them.

Without the expensive wrapper of the EU charging us to do so.

This is going round in circles, because you know nothing about trade and you won't engage on specifics.

You can trade with any country you like (except where embargoes apply) but where one country benefits from a trade agreement and the second doesn't, the latter will be at an economic and practical disadvantage.

This is going round in circles, because you know nothing about trade and you won't engage on specifics.

Oh I do engage on specifics Mistigri. I just hold a very different view to you.

You can trade with any country you like (except where embargoes apply) but where one country benefits from a trade agreement and the second doesn't, the latter will be at an economic and practical disadvantage

That is completely untrue. It depends on what each country has to sell.

You need to understand that it's not countries that trade with countries or even trading blocs trading with trading blocs.

It is individual customers, manufacturers and suppliers and they will force their Governments to comply - because if their Governments refuse to permit trade or make trade uncompetitive those Governments will not get the tax revenue and will have one huge unemployment bill to service.

So let-s hear no more about these stupid 'punishments (which are in themselves illegal) and start getting real.

We will trade successfully outside the EU.

We will look back at the REMAIN fear-mongering and wonder what all the fuss was about.

Y2K anybody?

Umm, we avoided Y2K becoming a problem because it was widely publicised and the IT industry spent a decade identifying and upgrading affected systems. There was a degree of over caution, perhaps, but given the potential consequences was probably for the best.

If something is widely identified as a problem - like leaving the trade bloc which makes up the majority of our trade and walking into a future where we have few trade agreements in place - then we are taking the complete opposite approach to Y2K, ignoring the warnings, making no preparations for failure, crossing our fingers and hoping it will be ok, despite all the warning signs suggesting it won't be.

You are completely wrong on trade. It's just basic maths. If a German company currently buys widgets from a British firm, it currently does so with no trade tariffs. If we leave the EU there will be no trade agreement in place, so tarrifs will ever chargeable and there will be much additional admin. The German firm could instead just buy their widgets from Poland instead without any if the additional cost and hassle.

The only exceptions to this is where a good is so unique it isn't sold by anyone else. There are extremely few of these, and even where they exist, given the greater opportunities for trade in Europe than here such businesses are likely to relocate some or all of their production to Europe to avoid tarrifs, losing jobs here in the UK.