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Nosemonkey's EUtopia

In search of a European identity

From xkcd.com - Duty Calls

UK trade, the EU, and the Rotterdam Effect

XKCD: Duty CallsAs many of you know, I spend far too much of my (increasingly limited) spare time arguing with eurosceptics on the internet. Some are professional eurosceptics (recent discussions have included ones with Declan Ganley, founder of anti-Lisbon Treaty party Libertas, Nigel Farage of UKIP, and someone from American neocon thinktank the Heritage Foundation), others merely passing concerned citizens.

Most of the time, I can point them to a post on this blog where I’ve already covered their concerns in detail. Sometimes I haven’t covered it yet. In a recent discussion with @ArnieEtc, I asked for suggestions of pro-EU myths. He responded with a classic eurosceptic complaint about a perennial pro-EU claim – one that I frequently make myself, but one which I’ve never explored or justified in any detail:

@ArnieEtc, 3rd Nov 2010: “The favourite [pro-EU myth] of mine is where europhiles insist that 70% of our trade is with the EU, so it’d be suicide to leave. This is a myth for two reasons – firstly, you can have free trade with the EU without being a member (EEA). But more fundamentally, it’s a deliberate manipulation of statistics – a lot of our world wide trade goes via Holland, as you get very good shipping links there. But because that involves goods being moved from the UK, to Holland (even though they only stay there for a few days), some pro-EU commentators use that to bulk up EU trade figures, and make it look like there’s more genuine intra-EU trade than there really is.”

I’ll come back to the EEA in another post, as it’s a far more complicated situation to explain – first, let’s take this claim that official statistics over-inflate the UK’s trade with other EU member states.

Is there any truth in it? Well, as with all the best euromyths, yes. Some.

Manipulation of statistics

First, where did this “deliberate manipulation of statistics to show EU trade as being more important” idea come from? It’s a familiar meme among certain sections of the anti-EU blogosphere, and is increasingly being used by anti-EU campaigners in the real world as well.

It all comes down to a phenomenon known as “the Rotterdam effect” – the existence of which is widely acknowledged (but the meaning and significance of which is equally widely misunderstood).

Oddly, the best explanation I’ve found comes from the Australian Bureau of Statistics:

“exports to the EU are often attributed to the Member State where the port of discharge is located, rather than the Member State of final destination. This particular mismatch is referred to ‘the Rotterdam effect’ because of the importance of Rotterdam as a transit port.”

The argument runs that many UK exports go via Rotterdam (or Antwerp) before heading off to the rest of the world (and vice-versa for imports) – and that as such, the trade for the Netherlands and Belgium are vastly over-inflated, which in turn over-inflates the UK’s trade figures with the EU as a whole.

Does this happen? Yes. But it’s a bit more complicated than that.

The eurosceptic case

So, we’ve established that trade figures are flawed. But *how* flawed?

The usual report used by Eurosceptics keen to use statistics of their own to support their argument against the claim that the EU is vital for British trade was compiled by Eurosceptic thinktank Global Britain (co-founded by former UKIP leader Lord Pearson).

This report (PDF) from Global Britain shows that the the EU accounted for something in the range of 47-52% of all UK trade in the years 1999-2007, yet concludes that, due to the Rotterdam/Antwerp effects,

“the real adjusted proportion is likely to be below 40%”

How does Global Europe come to this “below 40%” conclusion? The report explains in an appendix:

“The official ONS [Office of National Statistics] data significantly overstates the real level of UK exports to the rest of the EU, because of… the Rotterdam-Antwerp Effect… The Rotterdam-Antwerp Effect arises because the ONS and its fellow-bodies, in compiling their geographical registers of exports, record as the destination of the export the country of the first port of discharge of a consignment, even when the consignment is only in transit on its way to a different end-destination country… Even when recorded as exports to the Netherlands and Belgium, British goods may not even touch Dutch or Belgian soil, simply being transhipped in the ports of Rotterdam and Antwerp to container vessels bound for – say – Singapore.”

OK – fair enough. So why the 10% reduction?

Well, their argument for some kind of reduction is simple: The Netherlands accounts for £43bn of UK exports with a population of 16m, and Belgium £21bn with a population of 10.5m, where France only accounts for £47bn with a population of 62m, and Germany only £52bn with a population of 82m:

“Each Dutch or Belgian person apparently consuming three or four times as many British imports as a German or French person… On-the-ground observation suggests that the per-capita propensity of Germans, French, Dutch, Belgians & Luxemburgers to consume British imports is roughly similar.”

What are those “on-the-ground observations”? Where do they come from? Where do they get the 10% figure? No source or explanation is given.

We actually have *no idea* how much Dutch or Belgian trade is inflated by the Rotterdam-Antwerp Effect. The “below 40%” claim is unsubstantiated with any evidence beyond assertion, and appears to be based on little more than a hunch.

Could such small countries really account for so much trade? Well, based on the (unreliable) official figures, the Netherlands accounts for c.7.8% of all UK exports. But Ireland – with an even smaller population (just 4 million compared to the Netherlands’ 16 million) – accounts for 7.5% of all UK exports. And last time I checked, Ireland doesn’t have an equivalent of Rotterdam to allow that vast per-capita consumption to be written off as based on misallocation. (Update: See correction in comments.)

“The US is a more important trade partner for Britain”

It’s not just Global Britain that claims that the importance of EU trade to the UK is overstated. Similar assertions were made in Mark Baimbridge & Philip Whyman’s book Britain, the Euro and beyond, where they also address the argument that the EU accounts for the majority of UK trade:

“a detailed analysis reveals that only 48 per cent of the UK’s current account relates to the EU… Indeed, just as much trade takes place with the USA as France and Germany combined. Thus although the UK is deeply involved in trading to EU member states, it remains a minority of total trade.”

Here it’s necessary to go to HM Revenue & Customs (PDF), which in a 2005 report raised an important point which is often overlooked by eurosceptics who seem to think that the Rotterdam/Antwerp effect is peculiar to EU trade figures:

“The Rotterdam Effect is not confined to trade between EU Member States but can affect trade between any pair of countries where the goods are transported through one or more additional countries… it is not only where the country of transit is an EU Member State that the Rotterdam Effect can come into play and cause asymmetries.”

In other words, this phenomenon is not just confined to Rotterdam and Antwerp, nor just to the EU. Goods that go via *any* third party country before reaching their ultimate destination can be affected by the same phenomenon.

The HM Revenue & Customs report in particular notes a Statistics Canada-Eurostat study from the year 2000, showing that most EU exports to Canada go via the US, which in turn can over-emphasise the importance of the US as an EU (and UK) trade partner:

“For Eastbound trade, the Canadians class the ‘indirect trade’ as exports to the USA, and the ‘transit trade’ as exports to the EU. The EU classes both of these as imports from Canada on a country of origin basis. Similarly for Westbound trade, the EU may record exports to the USA whereas Canada records an import from the EU due to country of origin.”

The report goes on to note a follow-up study by HR Revenue & Customs itself:

“In 2004, HMRC studied asymmetries with the USA and Canada (Terrazzano, 2004). Here it was discovered that crude oil is imported from the UK via Portland, Maine in the USA, and then sent by pipeline to Canada. This is recorded in Canada as in import from the UK, whereas the UK records an export to the USA. The USA do not record either flow, as it is simple transit. Thus the UK records more oil exports to the USA then they record importing, and recorded less oil exports to Canada then they record importing.”

So thanks to the Rotterdam effect, we can’t trust trade figures with non-EU countries either. And, perhaps, particularly not the US, due to the large amount of re-exportation that happens via America’s many major freight hubs.

In other words, the Rotterdam/Antwerp Effect could easily be referred to as the Portland/Baltimore effect (to randomly pick two major east coast US ports). Indeed, considering the importance of the British ports of Liverpool, Dover and Southampton, or the major global air freight hubs of Heathrow and Gatwick, perhaps we could call it the Heathrow/Liverpool Effect? How much does air freight passing through Heathrow boost the UK’s trade statistics with non-European countries?

As far as I can tell, there’s no real way of finding out for certain. Why? Because there’s no international standard for recording trade statistics.

A conspiracy to inflate intra-EU trade figures?

The Rotterdam/Antwerp effect is acknowledged by the EU itself, as well as by the official trade bodies of the various member states (and other countries around the world). The EU’s own official statistical body Eurostat even has a standard disclaimer on pretty much every document dealing with extra-EU trade (e.g. PDF ):

“Dutch imports, and therefore the trade deficit, are over-estimated because of the “Rotterdam effect”, where goods destined for the rest of the EU arrive and are recorded in harmonised EU external trade statistics in Dutch ports. This then has a positive effect on the external trade balances with China of those Member States to which the goods are re-exported, as these shipments would be recorded as intra-EU trade with the Netherlands, rather than extra-EU trade with China. To a lesser extent, Belgian trade figures are similarly over-estimated.”

Is this distorion deliberate? See, for example, that same HM Revenue & Customs report, “Analysis of Asymmetries in intra-community trade statistics with particular regard to the impact of the Rotterdam and Antwerp effects“:

“The aim of this study was to analyse the asymmetries in intra-Community tradestatistics with particular regard to the impact of the Rotterdam/Antwerp effect, and to provide recommendations on improving EU trade statistics and better align them with international definitions.”

In short, if goods are imported or exported to/from the UK via a third, EU country (like the Netherlands or Belgium), they could indeed be attributed to that transitory third-party country rather than their final destination. This could indeed distort the true figures for the UK’s trade, both with the EU and with the rest of the world, potentially over-emphasising the UK’s reliance on her EU partners.

But both the EU and the UK acknowledge this flaw. As that HM Revenue & Customs report shows, the UK has been actively investigating ways to improve the situaiton. So has the EU – see, for example, Decision No 1297/2008/EC on a Programme for the Modernisation of European Enterprise and Trade Statistics (gloriously boring PDF here).

Can we trust *any* trade figures?

To resort to cliche, when you’re asked if it’s a cock-up or a conspiracy, it’s almost always a cock-up. The same applies here.

Are the official statistics for the UK’s trade with other EU member states accurate? No. But then, neither are the official statistics for the UK’s trade with non-EU states – perhaps those relating to the US in particular, thanks to the Portland/Baltimore Effect.

What does this mean for the claim that the EU is vital for UK trade?

Even the lowest percentage for UK-EU trade that I’ve been able to find – Global Britain’s unverified, unsourced 40% figure – is still a much larger proportion than any other trading partner. The next largest, the US, comes in at around 14% of exports and 9% of imports.

Taken as individual countries, EU member states make up 8 of the UK’s top 10 import *and* export partners. Even taking into account the potential distortions caused by the Rotterdam/Amsterdam effect, the UK does a hell of a lot of trade with EU countries. (It would be insane if we didn’t, considering how geographically close and economically affluent they are…)

So even if you deny that the EU accounts for over half the UK’s trade – a claim that is impossible to verify, given the systemic flaws in the available data – it cannot be denied that other EU countries account for a *very* significant proportion of UK trade.

It is, therefore, an eminently sensible move for the UK to try to make trading with those EU countries as easy as possible – because the easier it is to trade with your major trading partners, the lower the costs, and the greater the potential profit margin. That’s just common economic sense.

From the perspective not just of Britain, but of every country in the world, as the EU continues to harmonise its product standards and trading systems via the common market, it becomes increasingly easy to trade with EU member states.

For the UK, being part of the EU, it is even easier – as long as the UK abides by EU standards, both for its exports to the EU (as British manufacturers can produce their products to just one uniform standard, rather than 27 different ones) and its demands for imports from the EU (as EU manufacturers don’t have to bother going to the trouble and expense of producing their goods to a different set of standards just for the British market).

(As an aside, how much money would electronics manufacturers save if they didn’t have to produce special 3-pin, 240 volt plugs for the UK market, or car manufacturers save if they didn’t have to bother with us driving on the left rather than the right?)

The Devil’s Kitchen argument

Finally, we have the ultimate fall-back – something I always think of as the Devil’s Kitchen argument, because British anti-EU blogger Devil’s Kitchen was the first I heard expound it:

“Britain’s trade is overwhelmingly internal, actually. The split is roughly this: 79% internal, 10% EU, 11% the rest of the world.”

Ignore the percentages, which were not intended to be overly accurate – this complaint does have some validity. It can’t be denied that the vast majority of business transactions that UK companies and producers deal with are with other UK-based companies and producers, not with foreign partners.

Why then, runs this eurosceptic train of thought, should *all* UK businesses be bound by EU rules designed to harmonise external trade when they don’t trade externally?

There are multiple answers to this question:

1) They aren’t. There are numerous specific opt-outs for small producers trading locally, where EU regulations don’t apply.

2) Having one set of regulations for both internal and external trade is a lot more cost effective, plus ensures a more efficient market by preventing the creation of barriers to trade (both deliberate and accidental).

3) It is in the interest of the economy as a whole that all businesses should have the ability to reach their full potential – and that full potential includes trading with foreign partners. Anything that makes this more difficult should be removed, anything that makes it easier (such as harmonisation of regulations across a broad geographic area) encouraged.

4) The reason most trade is internal is partly geographical (it’s easier to trade with people near to you, plus Britain is an island, making it logistically harder for a small British business to trade with a neighbouring country than, say, a small Belgian one), but primarily historical: the UK still has its own currency, making trading with other countries a lot more complex than trading with other British towns or villages, which puts off a lot of smaller businesses from even trying. If Britain joined the Eurozone, I’d expect trade with other Eurozone countries to increase dramatically.

(Note: On point 4, see the European Central Bank’s Working Paper No 594, “The Euro’s Trade Effects” (PDF), which concludes that by 2006, intra-euro area trade had been boosted by 5-10%. Though in the interests of fairness, see also ECB working paper No. 941 – “The euro’s influence upon trade: Rose Effect versus Border Effect” (PDF) – which notes that the situation may be a bit more complicated than that.)

The EFTA/EEA argument

When you get this far into a discussion about the importance of EU trade, it’s traditional for Eurosceptics to respond with the “but we could still trade with the EU from outside, like Norway, Switzerland, or the other EFTA countries that are part of the EEA but not the EU” line – as, indeed, @ArnieEtc did way back at the start of this post.

This is also a flawed argument, but one that I’ll have to return to later, as it’s also rather complicated – and at 2,800 words this post is already far, far too long.

54 Comments

  1. Having read your post I took a quick look at the research available on this topic, and it is really surprising that there seems to nothing comprehensive beyond Baimbridge & Whyman.

  2. Pingback: Tweets that mention UK trade, the EU, and the Rotterdam Effect | Nosemonkey's EUtopia -- Topsy.com

  3. Excellent post. One point worth emphasizing is surely that goods landed in Rotterdam or Antwerp may well be shipped on to Germany and France; so if the Dutch and Belgian figures are too high, the German and French figures are also too low.

  4. But Ireland – with an even smaller population (just 4 million compared to the Netherlands’ 16 million) – accounts for 7.5% of all UK exports. And last time I checked, Ireland doesn’t have an equivalent of Rotterdam to allow that vast per-capita consumption to be written off as based on misallocation.

    Great post overall. But the paragraph above is a bit sophistical – there are very obvious reasons why trade with Ireland is greater than trade with elsewhere, historical (i.e. British brands sell better in Ireland than overseas – check any Irish high street for examples), geographical (Northern Irish high streets look as much like ROI high streets as they do English high streets, and Tayto crisps are made in the north…), and because *we’re* the Rotterdam in that equation (i.e. many international companies have common supply chains for the UK and Ireland, and apart from container freight, sea-freight into Ireland goes via the UK).

  5. Ron – yeah, I was amazed at how little there seems to be. Considering so many people (especially in the UK) are convinced that the EU should primarily be an economic/trading partnership, you’d think there’d have been rather more substantial research into the implications.

    Nicholas – true, but there’s currently no real way of telling. Trade figures seem to be largely guesswork – though it would make logical sense that you trade more with richer, nearer countries.

    John – you’re entirely right, of course. That’s what I get for drinking and writing at the same time. Logical fail. Will update with a correction.

  6. The Rotterdam effect teaches us a lesson in relativity. There is nothing new, nor is it uncommon, to use and abuse figures, and these import and export figures lend themselves for the job particularly well.

    The interesting question seems unequivocally to be whether EEA and strong trade links are enough to fulfilll the economic demands of the U.K. or that they would profit from broader integration. Personally, I am inclined to say they need to get on board, including having the Euro as the currency (though I am of course aware that this is not going to happen anytime soon).

    Another interesting related question might be how much countries profit from actual EU membership. The old debate about EU contributions – which we see again now in its budget rise of 2,9% – makes you feel desperate. Describing the differences between EU (and Eurozone) member states in comparison to EEA members could be useful if coupled to the other broad questions.

    Thanks for writing this article. It’s an ironic lesson they already taught me as secondary school, but it still seems to hold.

  7. Ouch, stupid reasoning by the euroskeptics there with the whole Netherlands and Belgium take more than France and Germany thing.
    Did they not consider maybe, perhaps, that France and Germany have more of their needs fulfilled by native industries or countries other than Britain than happens in Benelux?
    From on the ground observation in the Netherlands I can tell you they most certainly do seem to have far more British products than France.

  8. “(As an aside, how much money would electronics manufacturers save if they didn’t have to produce special 3-pin, 240 volt plugs for the UK market, or car manufacturers save if they didn’t have to bother with us driving on the left rather than the right?)”

    Hum, take care of what you say, I can see tomorrow’s Daily Mail article.

    “EU campaign to make us drive on the right

    In a shocking move, an EU campaigner has launched an offensive for Britain to ditch its traditional left-hand traffic regulation for the Continental “drive on the right” one. British 3 pin plugs would also be under threat in favour of Continental 2 pin plugs presenting lower safety levels.

    UKIP leader blasted the proposal saying “this is another example of the threat EU bureaucrats represent to our very British way of life”. It is not clear whether the Cameron’s pledge of a referendum would hold if the EU was to make a move on this issue.”

  9. NM,

    Wow! A whole argument to myself?—I’m flattered (I think).

    Still, a good post but slightly skewed, I think. Let me explain…

    The EU-sceptic position is really two-fold:

    1) that trade with the EU is not nearly as dominant as some claim, and

    2) and that, therefore, the cost (of trade and, certainly political union)/benefit (of increased trade and harmonisation) balance is not as clear-cut as claimed.

    To imply, as you do, that the Rotterdam effect is partially negated because some sceptics claim that the US is a bigger market is not really relevant (though, I’ll admit, interesting). I, for one, have always split it between “the EU” and “the rest of the world”.

    Anyway, I’ve just driven down from Edinburgh, done a rehearsal and am doing some work for a meeting tomorrow, so I’m not my usual eloquent self ;-) . I shall try to comment at The Knife over the next few days…

    DK

  10. DK – I think you’ve misunderstood me. I’m not arguing that the Rotterdam Effect is negated. I’m claiming that the Rotterdam Effect is far, far more important than most eurosceptics seem to realise, and affects ALL trade figures, not just those relating to the EU.

    The way the eurosceptics tell it, the Rotterdam effect massively boosts the figures for EU trade to the detriment of that with the rest of the world. This *may* be the case – but there’s precisely no evidence of the extent. Plus, as noted by John above, the UK’s own rest of the world trade may be boosted by Irish trade going via the UK.

    The “majority of trade” idea is a MacGuffin – it doesn’t matter if the EU is responsible for a *majority* of UK trade in the slightest – just that it’s responsible for *a lot*. The fact remains that due to the Common Market the EU can (almost always, with some exceptions) be considered as one single entity for trading purposes – a single entity which even the lowest figures offered by eurosceptic groups still makes up c.40% of our total external trade – and it may be much higher (we don’t know).

    Is 40% a majority? No, but it’s still more than two and a half times the size of our next largest trading partner (assuming that the US figure isn’t hugely overblown by the “Portland/Baltimore Effect”).

    A market of 450 million people cannot be ignored – especially if it’s right on your doorstep and the majority of those 450 million people are fairly affluent. If you can negotiate with *all* of them at one go (and gain more favourable trading conditions) by partnering up with them rather than trying to do a unilateral deal from the outside, why wouldn’t you?

    My ultimate point is that the UK, with a market of just 60-65 million, hasn’t got the bargaining power to get as good a deal on the outside as it does on the inside. Not just with the rest of the EU, but with the rest of the world – because a market of half a billion people has rather more barganining power than one that’s a little over a fifth of that size. (This is something I’ll have to get on to in more detail in the EEA/EFTA follow-up, if/when I get around to writing it.)

    For now, though, the point remains that the precise level of trade with the EU doesn’t matter as long as it is significantly more than that with any other entity.

  11. What is surely important here is to ensure that UK plc engages well with all trading parners (EU included), and uses its historical trading nous to broker deals that will best benefit its citizens.

    There is a valid eurosceptic argument here as to whether it is better to focus the UK’s resources bilaterally — on cash-rich economies in the middle-east, and fast-gentrifying economies such as China/Brasil, in addition to the ‘traditional’ partners, the US and Commonwealth — rather than on trade with maturer economies closer to home. Looking at UK ‘brand champions’ — Tesco, Top Shop — the attitude seems to be one of limited EU engagement rather than ubiquity (compare to e.g. Carrefour, Zara, H+M, IKEA, Auchan, Lidl, Aldi).

    The whole ‘who we do most business with’ question is to wider questions about the extent ot the UK’s ‘reciprocal embeddedness’ with the EU (why does that sound like eurospeak?). On this point, while economic data is one basic measure, a lot could be said about looking at other benchmarks. The ‘Brits Abroad’ project’s data is interesting: 1.7 million Brits in Australia, 600,000 in both the US and Canada… but there are revealing statistics about the EU (nearly a million Brits full- or part-time in Spain!). Then there are, of course, the stats about EU nationals resident in the UK: a common focus of eurosceptic bile, but also illustrating the extent of day-to-day ties there are to the continent.

    The Rotterdam/Antwerp effect is well known. A point to be made here is that, around five years from now, a number of EU initiatives on transport monitoring will be delivering strong data for detailed monitoring of cross-border trade volumes. These initiatives are: Eurovignette-linked info for road freight, SafeSeaNet for maritime transport, RIS services for inland waterway monitoring, the Single European Sky for air transport, and Galileo-based road/rail/ applications. For trade statisticians, such data will make visiblea ll sorts of ‘mini Rotterdam effects’, based on regional hubs and spokes. Still, TEU-container-counting is perhaps old-fashioned given overall evolution to service-based economies, and the predominance of third countries in producing consumer/industrial goods these days. Perhaps monitoring cross-border payments flows would be a better measure of trade: value, not volumes.

  12. I personally see some evidence of the ‘Rotterdam effect’ in my own life. Working for a major US company all goods received from HQ into the European subsidiaries (of which the UK is largest) is routed into Amsterdam for customs cleareance, and then dispatched on to the final destination wherever that may be in EMEA. This delays things, but saves money and reduces chances of a random local customs official charging incorrect duty on intra-company shipments.

  13. The more important issue is that it does not matter whether UK trade with the EU26 counts for 40% or 60%. The key point is that the implication behind Nosemonkey’s argument – that this implies we should be part of a European political union – does not hold water.

    74% of Canada’s exports go to one country (the USA) with only 2.8% going to its second largest export market (the UK). This is a far higher trade dependence on 1 country than the UK has with 26 EU countries, but nobody ever suggests that this implies Canada must be subsumed into a political union with the USA. Instead Canada is seeking to follow the Mexican model of being a member of NAFTA while seeking a Free Trade Agreement with the EU/EEA/EFTA, i.e. of having twice the free trade that membership of the EU customs union permits while remaining free of the undemocratic EU political union.

  14. Freeborn John – There is *no* implication that the UK should be part of a European political union. At all. Seriously – how did you get that impression from what I’ve written?

    Also, if you think Canada gets “twice the free trade” that EU membership brings, you evidently have either forgotten or are unaware of the vast number of trade agreements that the UK has managed to gain via EU membership.

    Still, thanks for another handy illustration of a classic eurosceptic argument technique: “Yeah, you may be right, but look over there! Something unrelated!”

  15. Nosemonkey: Free trade between the EU and the likes of Togo in no way compares to the Free Trade that Mexico (and soon Canada) enjoy with the 1 billion richest consumers in the world throughout North America and Europe.
    Mexico is currently negotiating a 3rd free trade agreement with South America countries too.

    Such real-world examples show that it is possible to have much more Free Trade than is possible within the EU, without any of the undemocratic political union. I assume Nosemonkey that you agree free trade with 3 Continents is better than free trade with Europe alone?

    And if so, you reacknowledge that while you can be party to multiple free trade agreements you can only be in one customs union at a time, such that the benefits that Mexico has negotiated are only possible outside the EU customs union?

    And since i believe you will not be able to deny that, i assume you acknowledge that the British interest is best served by being leaving the EU and seeking Mexico-style trade arrangements with Europe, North America and others. And before you even attempt to argue that the UK could not achieve this, let me remind you that the UK imports more from European countries than Mexico, Canada, South Korea do combined so by your own leverage argument we should be able to negotiate at least as good a deal as them.

  16. Come on Nosemonkey; your time is up. So far it would appear that the lighter than air argument of an EU supporter has evaporated on first contact, leaving behind someone naked of all coherent thought, sporting only a nose long enough to embarass Pinnochio.

  17. Freeborn John – “Such real-world examples show that it is possible to have much more Free Trade than is possible within the EU”

    No – it shows that it is possible to have *some* free trade outside the EU. Not that it is possible to have *more* outside the EU.

    Of course I acknowledge that it’s better to have free trade with more than just one continent. That’s why I linked to that list of trade agreements that the EU had managed to negotiate with non-EU countries. Many of which amount to free trade agreements.

    Look – here’s a handy list of free trade agreements involving the EU, including ones with Canada, Mexico, India, Chile, South Korea, Ukraine, ASEAN (Burma – Myanmar, Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam), the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), and more.

    I make that FOUR continents – and that’s not including the various Economic Partnership Agreements we’ve got with a bunch of other African, Carribean and Pacific states via the EU.

    I also don’t accept your customs union point – for the very reason that there are already numerous overlapping free trade agreements in existence all over the world.

    As for your Britain negotiating a good deal outside the EU point – yes, it would be an important market, for sure. And yes, the UK would be able to negotiate terms.

    But at the same time we’d instantly have lost all of the agreements noted above that the EU has managed to negotiate, and have to renegotiate them all on our own. Our bargaining position for *those* deals would be far weaker outside the EU – strength in numbers is my primary reason for being loosely supportive of the EU in the first place.

  18. Oh, and dearest – re: your comment @15 – if you expect everyone to get back to you instantly, I suggest you explore the concept of employment. I can’t spend all day arguing on the internet with people, as much as I may love to.

  19. P.S. You do realise that I don’t actually look like a proboscis monkey, right?

  20. Pinnochio (16): Do you understand what a customs union is? And why the common external tariff means that you can only be part of one customs union at a time and therefore lose your ability to negotiate additional free trade agreements with other countries even when they are ready and willing to conclude such a free trade agreement with you. The US Senate more or less offered the UK free trade in 2000 but we were unable to accept it while part of the EU customs union. That single deal with the USA would cover 10% of our trade.

    It often strikes me that those who support the EU the most, have the least understanding of what the EU is or membership of it entails. Your latest comment, which strongly suggests you do not understand that being a member of one customs union limits our ability to agree free trade with our principle non-European trading partners, is one such example. When we cannot negotiate free trade with the USA, or Japan or China i wonder why you resort to pretending that a free trade deal with that covers Burma or Laos is one with ‘Asia’? Or one with Mexico or Canada that excludes the far larger US market is one with North America?

    The simple fact is that countries outside the EU are able to achieve a far higher proportion of theie exports that are free from tarrifs, than the UK currently is while remaining a member of the EU. Mexico’s two existing free trade agreements with NAFTA and the EU/EEA cover over 90% of their exports. Compare that to the 60% that is all the UK can achieve while remaining part of the EU customs union. If Mexico is successful in negotiating an additional FTA with South American countries she will have secured tariff free access for close to 100% of her export markets. That is what we could have too, but only outside the EU.

    You started out by pretending to be in favour of an expansion of free trade but now that you realise you can have more free trade outside the EU than within it, you do not say “OK – we should emulate Mexico”. You abandon your starting position of ostensibly seeking more free trade, and instead rush to defend the EU in any case! And you do so using the most obviously deceitful of arguments pretending that free trade with Burma or Loas is somehow a substitute for free trade with our largest actual export markets in the developed world! “Never mind the trade volume, count the free trade agreements” might describe your latest indefensible position.

    It is clear that the only thing you really care about is a half-baked defence of the EU. This entire site is a monument to lightweight pro-EU arguments that could be blown away by a breeze.

  21. No, I’m saying that I firmly believe that the UK has a better chance of securing beneficial trade agreements as part of a trade block of 500 million people than as a single country of 60 million.

    Plus I’m saying that thanks to our membership of the EU, we *already* have trade agreements with numerous non-EU countries – all of which would need to be renegotiated if we pulled out of the EU.

    I’m also saying that your customs union argument is an irrelevancy if you join a customs union that in turn does free trade deals with numerous other markets around the globe.

  22. p.s. You are wrong that the UK would lose any free trade agreement negotiated already with non-EU countires. We have signed all such international agreements as a sovereign state and they would continue to apply. All we would gain is the ability to negotiate new deals with countries that the more protectionist EU members currently block at EU level (the negotiation of such trade deals currently being an exclusive competence of the EU). In return for this gain, we would have to negotiate a free trade deal with the EU or join an organisation like EFTA that already has one.

  23. Erm… No. Those countries signed an agreement with the EU, of which the UK is a part. Not with the UK. Any agreement between those countries and the UK (as a non-EU state) would have to be negotiated separately.

    That’s the whole point of joining an international organisation like the EU, UN, NATO, etc. – collective bargaining. You can’t join, sign up to all the agreements, then pull out and expect all those agreements to still stand – they stand only because of membership. Otherwise such organisations wouldn’t exist.

    Your EFTA point is also mistaken. As I say, I’m hoping to deal with it in a follow-up post, because it’s extremely complicated. Rest assured, it’s really not as simple as you seem to think.

  24. Pinocchio: The EU (and UN, NATO, etc) is not a state and cannot sign international agreeements. It can negotiate on a member-state’s behalf, but ratification requires sovereign states. Read the Mexico EU agreeemnt for yourself.

    http://untreaty.un.org/unts/144078_158780/13/4/5247.pdf

    There are only two explanations for the torrent of inaccuracies coming from you. Either you are (i) genuinely ignorant of the issues, or (ii) you are twisting in the wind. If you were genuinely ignorant then it might be expected that around 50% of the inaccurate points you are making would be supportive of the EU and about 50% unsupportive. But by a strange coincidence 100% of the half-baked assertions you make support continued UK participation in the EU super-state construction project. Therefore one has to conclude you are twisting in the wind, desperately trying to defend the indefensible, with an argument that is breaking up behind you like a spaceship on re-entry without a heat shield.

  25. Yes, treaties with the EU require the unanimous consent of all member states. But they remain treaties with the EU, negotiated by the EU.

    The clue’s in the title of that document you link to:

    “ECONOMIC PARTNERSHIP, POLITICAL COORDINATION AND COOPERATION AGREEMENT BETWEEN THE EUROPEAN COMMUNITY AND ITS MEMBER STATES, OF THE ONE PART, AND THE UNITED MEXICAN STATES, OF THE OTHER PART”

    “Between the European Community and its member states”

    Yes, you can argue that they *amount to* treaties with each of the EU member states as individual entities. But only for as long as those member states remain part of the EU.

  26. Pinnochio: The inability to distinguish between a state and an international organisation is a common ailment afflicting the EU supporter, but only states can sign international treaties and deposit them at the UN and the EU is not, no matter how much it might wish otherwise, a state.

    Your careful selection of text should not disguise who are the contracting parties to the EU Mexico Free Trade Agreement. If the UK were to leave the EU and attempt to apply tarrifs on Mexican goods in contravention of this treaty it would find itself up before the International Court for breaking a commitment that it had entered into itself. And the same would apply in reverse were Mexico to attempt to apply tarrifs on goods from a post-EU UK.

    —-
    The plenipotentiaries of:
    THE KINGDOM OF BELGIUM,
    THE KINGDOM OF DENMARK,
    THE FEDERAL REPUBLIC OF GERMANY,
    THE HELLENIC REPUBLIC,
    THE KINGDOM OF SPAIN,
    THE FRENCH REPUBLIC,
    IRELAND,
    THE ITALIAN REPUBLIC,
    THE GRAND DUCHY OF LUXEMBOURG,
    THE KINGDOM OF THE NETHERLANDS,
    THE REPUBLIC OF AUSTRIA,
    THE PORTUGUESE REPUBLIC,
    THE REPUBLIC OF FINLAND,
    THE KINGDOM OF SWEDEN,
    THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND,
    Contracting Parties to the Treaty establishing the EUROPEAN COMMUNITY, hereinafter referred to as the ‘Member States`, and THE EUROPEAN COMMUNITY, hereinafter referred to as ‘the Community`, of the one part, and
    the plenipotentiaries of the UNITED MEXICAN STATES,
    hereinafter referred to as ‘Mexico`…

  27. Then why, pray tell, does that treaty specifically distinguish between *bilateral* relations (i.e. between the EU/Curopean Community and Mexico) and *multilateral relations* (i.e. between the individual EU member states, as individual entities, and Mexico)?

    For the purposes of that treaty, the member states of the EU are acting as a single entity. The fact that the various member states are listed there is a sign that they have consented to the EU to act on their behalf in this matter.

    I will, however, concede this much – it would be an entirely unprecedented situation for a country to leave an organisation like the EU and expect such treaties signed while a member to still apply.

    This is, no doubt, precisely the sort of thing that the withdrawal procedure introduced by the Lisbon Treaty was intended to address.

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  29. The trade treaty referred to decribes the European Community and Mexico as parties, it just also lists the member states of the EU. The European Community had the legal personality and authority to enter into the agreement, and the method of ratification includes unanimous agreement by the member states. Certainly as a matter of European law, the treaty is between the Community (now Union, following the Lisbon Treaty), and Mexico, as the European legal order is a sovereign legal order, with only the EU empowered to act in this area. (Which I thought was Freeborn John’s original complaint).

    Under international law the legal situation may be slightly more complicated, however – as it’s never been tested before by a withdrawal of an entire member state, there isn’t a precedent for the withdrawing states (essentially non-successor states in EU law; I’m sure the EU without the UK would succeed the EU with the UK if that was ever an issue) remaining party to those treaties.

    As the treaty is binding on the Community (and therefore the member states) and Mexico, rather than between each member state on its own as Mexico, and the fact that withdrawal is essentially disavowing all EU Treaty obligations (and thus the obligations and agreements contained within the EU legal system), my feeling is that the UK would not be considered a party if it were no longer a member state.

    Nevertheless, even if the UK remained a party to these trade treaties following withdrawal, does that really address the argument that either of you (Freeborn John & Nosemonkey) are making? Surely the argument is would the UK be better off making trade deals with the rest of the world bilaterally or as part of the EU – if the UK sticks to the trade treaties the EU has already drawn up, wouldn’t that be admitting that the EU has done a good job? Would the UK be capable of getting a better deal or deals is the question, and I don’t see how it could.

    [Also, as a side point (to #23), it should be noted that the Special Court for Sierra Leone is, in international legal terms, based on a legal agreement between the country and the UN (rather than a UNSC Security Resolution, in the cases of the ICTY or ICTR, though an UNSC was the basis of the UN being able to enter into the agreement as a body).]

  30. Pinnochio: The withdrawal procedures of the Lisbon treaty would concentrate on defining the UK-eu26 relationship. They obviously cannot redefine relations with 3rd countries not present at such talks that are already defined by international treaty signed by sovereign states and binding on them.

    Btw – your theory that such FTAs can only be agreed within the EU is total junk like pretty much everything you write on this site. EFTA has exactly the same type of trade deals (including with countries like Canada which the Eu is still working on).

    http://www.efta.int/~/media/Documents/legal-texts/free-trade-relations/mexico/Free%20trade%20agreement%20Mexico.ashx

  31. Eurocentric: the benefit of being outside the Eu is not to inherit existing trade agreements (which we would by default) but to increase the percentage of trade that is tariff-free by negotiating and ratifying new Fta’s between the UK and major partners like the USA and Australia which the protectionists within the EU currently block. The US senate already in 2000 offered the uk free trade so we clearly can do better outside the EU.

    http://www.telegraph.co.uk/news/worldnews/europe/1346773/We-back-Britain-joining-Nafta-says-US-senator.html

    The Eu has not used its negotiating power in trade matters to maximise free trade with other parts of the world because if free trade becomes universal there will be no remaining benefit to staying within the EU customs union. At that point the Eu would stand (or rather fall) on the merits of the undemocratic political union alone.

  32. Try reading what I’ve *actually* written rather than what you assume I’ve written, dearest.

    Until you start doing that, I’m not sure I can be bothered to try and explain anything more to you. We’ve already started going round in circles.

    Meanwhile, if you can find me a single example of a time I’ve said it’s impossible to negotiate free trade agreements outside the EU, I’ll eat the internet.

  33. Eurocentric: The European states mentioned in the Eu-Mexico FTA are not merely listed as member states of the EU but as the plenipotentiary powers (as is Mexico) signing the international agreement. 

    EU law is not the sane thing as international law and would be quite useless for concluding an agreement with a state that is not an EU member. This treaty therefore applies in international law independent of whether Mexico or the UK is in the EU.

    ——
    plen·i·po·ten·ti·ar·y: Invested with or conferring full powers: a plenipotentiary deputy. A diplomatic agent, such as an ambassador, fully authorized to represent his or her government.

  34. Pinnochio: In post 22 you said “That’s the whole point of joining an international organisation like the EU … collective bargaining.” However since Mexico and even little EFTA have achieved more in their free trade negotiations than the EU it would appear that the EU collective bargaining is somehow counter-productive in practice. If that is ‘whole point of membership’ then i assume you acknowledge that by your own argument the results achieved indicate there is no point in membership?

  35. Dearest John, until you bother to look up the extent of the trade agreements that the EU has already secured, don’t make claims about other countries/organisations having more. (Clue: The EU will win this fight – because it’s not just about free trade, as much as we might like it to be. The world’s a little more complex than that, and requires innumerable shades of grey in these things.)

    And in any case, you’re *still* missing the point. Which is that a market of 500 million is more attractive than a market of 60 million.

    Of course I’m not going to deny that collective bargaining can sometimes bring its own problems – that’s obvious – but the advantages seem to outweigh the disadvantages as far as I’m concerned. The lack of market profile that the UK would have working on its own would, I am convinced, lead to us getting bad deals with the most important markets out there.

    Can I prove this? Obviously not – we’re talking hyptheticals (and as this post argues, we haven’t even got reliable data for the current situation, let alone some kind of counterfactual future).

    But one thing I do know is that trying to use Mexico (or Norway or Switzerland) as a comparison is even more ridiculous – the size and nature of their respective economies are so utterly different that you may as well be comparing mars with the moon.

  36. Pinnochio: Why compare the size and composition of the uk and Mexican domestic markets in any discussion about multilateral trade? Only an EU supporter could be small-minded enough to talk of 60 million domestic British consumers in a vain bid to deflect attention from the market of billions.

    Mexico is a reference because they have negotiated tariff free market access to 1 billion consumers in North
    America and Europe who consume 90% of their exports and they will soon extend this to South America too. This is far far better than the UK is able to achieve with access to only 440 million in the Eu26 consuming 60% of British exports. We should aspire to what they have achieved.

    Furthermore Mexico paid no price in lost democracy to achieve this market access comparible to the steady disenfranchisement of electorates that has accompanied European political union. Nor is Mexico any isolated example as Canada, South Korea and others are achieving similar good deals.

    The UK-Eu deal is a very poor one by any comparison and your diversionary
    Tactics in bringing up Norway or 60 million British consumers cannot hide that obvious fact. Basically you are the typical EU supporters who trots out old arguments in favour of the EU without being able to think through yourself if they still make sense in today’s world.

    The world should move to a global free trade area and democratic nation-states that co-operate using the classical inter-governmental methods used so successfully everywhere else in the world. There is no room for supranationalism in that future, which has proved itself an enormous danger to democracy. The supranational EU institutions (eu commission, so-called parliament and ecj) have each demonstrated themselves incapable of representing any interest other than their own beurocratic interest in self-aggrandizement and should therefore all be closed down.

  37. OK – as you’re so obsessed by free trade (whereas I was attempting to discuss trade in a more general sense):

    How is the Mexico-US agreement a free market if there isn’t free movement of labour?

    It’s not a free trade area if there are internal border controls.

  38. Does the Rotterdam effect matter? It seems far from obvious to me that Rotterdam wouldn’t still be the dominant load-centre port in the North Sea if we weren’t in the EU. Geography, infrastructure, and scale effects are stronger than we are. This is actually an argument for staying in the EU. Being outside the tariff barrier and still needing to ship through Rotterdam and Antwerp: not good.

  39. Alex – you’re forgetting the Utopia that is EFTA… The ultimate panacea for all the UK’s woes.

    I really must write that EFTA/EEA post sooner rather than later, it seems.

  40. Pinnochio (35): Earlier in this thread (16) it became clear you do not know what a customs union is. In post 35 it also becomes clear you do not know what a free trade area is either.

    That is a pretty astonishing level of ignorance for someone writing a piece about trade issues. Maybe you need to do a little remedial study before embarassing yourself further?

  41. Right back at you, John.

    How is a free trade area a free trade area if there are government-imposed restrictions on the free movement of labour? How is the Mexico-US arrangement a free trade area when the Mexico-US border is patrolled by armed guards and they’re building a giant fence to keep people from crossing it?

    That’s not free trade. Not even close.

    WAnd in any case, as I’ve repeatedly said, the free trade issue is a sidetrack. I’m talking about trade (and trade agreements) in general.

    This is getting very tedious.

  42. Pinnochio (39): I know you EU supporters live in a bygone era, but in case you have not been keeping up with events, slavery has been abolished. Human beings are not traded internationally like industrial goods, either with or without tariffs being applied upon them at their port of entry. Therefore they obviously have nothing to do with a Free Trade Area.

    What you are talking about is ‘freedom of movement’ of workers, i.e. an automatic right of residence in another country for the purposes of working there, without having to fill in paperwork for a visa. It is true that this exists within the EU but how relevant is this in practice? There are more Britons working in North America than the EU26 so having to apply for an immigration visa seems no serious barrier to migration of workers in practice. And there are more Britons living in Australia than even North America.

    http://news.bbc.co.uk/1/shared/spl/hi/in_depth/brits_abroad/html/

    EU ‘freedom of movement’ is in practice overwhelmingly a one-way street into the UK, which we would do well to replace by bilateral ‘right of residence’ treaties with those countries in the world that Britons actually do prefer to migrate to in practice. Replacing EU freedom of movement with bilateral treaties with the more popular destinations would lead both to more balanced migration, and something of more practical use to Britons than freedom of movement to EU countries. The UK could actually negotiate such treaties even before leaving the EU thanks to the Schengan opt-out.

  43. Thanks for confirming my suspicions that you don’t know what you’re talking about, John.

    I suggest picking up a copy of Labour Economics by Stephen W Smith.

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  45. Freeborn John: I won’t bother rebuffing your comments since Nosemonkey seems to have pretty much covered all the bases.

    However, do you think you could refrain from constantly referring to him as “Pinnochio”? To the casual reader, it does rather make you look like something of a misanthropic prat, although I daresay that’s quite possibly an accurate description.

    If you’re going to enter into a debate with someone, it’s best if you leave name-calling and insults at the door, else you’ll very likely instantly discredit yourself with most casual readers.

  46. Couldn’t you look to see who the Netherlands main tradiging partners are? Wouldn’t that be usefull?
    Anyone who knows anything about the Netherlands and its recent history would be well aware that Rotterdam is an important transhipment point for trade with Germany, not only does stuff get offloaded in Rotterdam and loaded on to barges that get sent up the Rhine, but a few years back a dedicated high-capacity frieght rail link from Rotterdam to the Rhur was completed. Unsuprisingly Germany is the Netherlands biggest trading partner accounting for 25% or exports and around 18% of imports. Trade has long been an important part of the Dutch economy (acounts for over half of the national GDP), its a high-import/high-export economy.

    That said my understanding is that the UK isn’t so much a leading exporter of stuff, as it is an exporter of services.

    Can’t help but feel that this Rotterdam effect is a bit of a cop-out, you could just as well argue that it masks the importance of trade with Germany.

  47. Will you please do a blog post on the EFTA/EEA? It’s the most common argument I come across that could do with a non-political explanation.

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