RONALD STEWART-BROWN SPEECH AT TRADE POLICY RESEARCH CENTRE RECEPTION AT THE CALEDONIAN CLUB ON 19TH NOVEMBER 2013
Good evening. I am delighted to welcome you all here this evening.
The debate on Europe is heating up. But, I have to say, it remains astonishingly superficial. People talk grandly about how we must leave the European Union. But few ever go beyond ideas like the Norwegian Option or the Swiss Option or the Turkish Option or the WTO “clean break option”.
No one ever seems to show any deep understanding of the relevance of the World Trade Organisation and the rules of the multilateral trading system to the great question of how the UK would trade with the rest of the EU and the rest of the world if we left the EU.
Few show any awareness of the different interests of the higher import tariff trading sectors of the UK economy such as food, cars and chemicals and more open sectors such as machinery and telecoms equipment. Hardly any could give you a clear explanation of what the EU means by its famous mantra of “free movement of services”. I certainly can’t!
Just occasionally, we get someone like the President of Nissan announcing the main reason the Japanese are against the UK leaving the EU is the threat of import tariffs, which is a very fair point. But more often you hear people speaking in the most nebulous terms about the great benefits that the UK’s membership of the Single Market brings. We have some question about these as you will see when I come to discuss some relevant statistics later.
The big problem is that no one knows about trade policy any more. Trade policy is the most important dimension of foreign policy apart from defence, when you think about it. But we ceded control of our trade policy to the EEC 40 years ago. Such expertise and understanding as we have of trade policy in Whitehall is now divided amongst no fewer than four different government departments. The fact is we now lack the official mind-set even to think about this country’s best trade policy interests.
I suppose I should not have been surprised when I learnt from a senior government minister last summer that no one in Whitehall is even thinking about how the UK might leave the European Union. Such thinking is effectively proscribed by the Coalition Agreement.
Let me be clear. I think David Cameron is absolutely right to want to seek to negotiate the best possible terms for the UK to remain in the European Union. I see no reason to concede anything more than just a “trade plus” basis of membership of the EU.
We must try, and we must be seen to try, to negotiate an acceptable basis for continuing membership. But I find it impossible to see how we can hope to negotiate effectively without having a realistic alternative in reserve, a well thought through British option to leave the EU altogether.
The best way forward may be a twin track negotiating approach:
- On the one hand, to be negotiating the best possible basis for staying in the EU
- On the other hand and in parallel, to be negotiating the terms on which we would leave the EU if we cannot agree an acceptable basis for continuing EU membership
- On the basis of informal legal advice I believe these negotiations would best be conducted outside the framework of the Article 50 of The Treaty on European Union which sets out the specific procedure for countries to leave the EU.
We think the key thing British businessmen and foreign investors would want, if the UK leaves the EU, is for the UK to “Stay in Europe for Trade”. That might sound paradoxical.But we see no reason why this aim cannot be achieved by negotiating to stay in customs union with the EU, on a new inter-governmental basis, with continuing free movement of goods. Germany, as the EU’s main paymaster, simply has to keep us in the voting structure of the customs union to avoid the protectionist countries like France, Italy and Spain getting control.
There would be quite a few complex issues to be addressed in negotiating a new trade deal with the EU. But we believe that with determination these could be surmounted. As a result the UK could have much the same trading relationship with the EU as it does at present through the Single Market.
One thing we would not need to worry about is our trade with the rest of the world. It is already booming. Let me wind up with some new insights we have developed from our new UK Trade Statistics Discussion Paper:
* On current trends the rest of the EU will only account for 37 per cent of UK exports of goods and services in 2017.
* Over the last five years UK goods exports to the rest of the world have grown at 9 per cent per annum as compared to just 3 per cent to the rest of the EU.
* Over the last five years UK service exports to the rest of the world have grown at 7 per cent per annum as compared to only 4 per cent to the rest of the EU.
* If you compare the growth rates of UK financial services exports to the rest of the EU and to the rest of the world over the period since 2004 there is no evidence whatsoever of any trade liberalisation benefit resulting from the EU’s Single Market programme. All it has given us has been more and more EU supervision and regulation of the City in ways which the UK would never have chosen.
* When it comes to energy, you will be interested to know that UK exports of coal, gas and electricity to the rest of the EU in 2012 were just £3.8 billion, under 2 per cent of the UK’s total exports to the rest of the EU. Yet we willingly accept the horrendously costly consequences of EU energy regulation in the name of perfecting the Single Market in energy.
* Lastly, we are told the Single Market is vitally important for car manufacturing in the UK. Yet between 2007 and 2012 UK car exports to the rest of the world increased from £6 billion to £13 billion whilst, wait for it, UK car exports to the rest of the EU shrunk from £8½ billion to £8 billion!