So what of those 27 trade deals?

Time for a little light relief.

Much is made of the 27 countries queuing up to make trade deals with the UK, but as ever the devil is in the detail.  The first observation is that two or three of the countries concerned are not in a position to enter into bilaterals with the United Kingdom, as this would conflict with Germany and Ireland’s membership of the EU and possibly (although I can’t quite be sure) Switzerland’s bilateral treaties with the EU.

All the vaunting of the 24 countries outside the EEA and EU Customs Area had me wondering: how many countries want trade deals in order to get British goods cheaper, and how many just want to sell more of their goods to the UK?

So I had a nosey at HMRC’s Overseas Trade statistics.  Of the 27, only ten are in the top 25 exporters or importers (value imported to the UK over £3.052billion (Vietnam) and exported from the UK over £2.152 billion (Russia) in the year to date (up to October)).

The figures are in millions of pounds, and the ten countries in the top 25 exporters and importers are marked in bold. Note that the remaining top 25 importers, Denmark, Czech Republic, South Africa and Vietnam, are all net importers to the UK, in the first case probably because of Lego, and the remaining top 25 export markets, Saudi Arabia, Singapore and the United Arab Emirates are all net importers from the UK.

Country Exports Imports Net exports Import/export ratio
AUSTRALIA 3,127 4,929 -1,802 158%
BELGIUM 9,688 18,927 -9,239 195%
CANADA 3,723 9,100 -5,377 244%
CHINA 11,088 31,859 -20,771 287%
FRANCE 15,692 20,254 -4,562 129%
GERMANY 26,560 52,904 -26,344 199%
HONG KONG 5,458 8,469 -3,011 155%
INDIA 2,693 5,142 -2,449 191%
IRISH REPUBLIC 13,662 10,451 3,211 76%
ITALY 7,999 14,032 -6,032 175%
JAPAN 3,862 8,234 -4,372 213%
NETHERLANDS 15,723 28,174 -12,450 179%
NORWAY 2,624 10,274 -7,650 392%
POLAND 3,446 7,438 -3,992 216%
RUSSIA 2,153 3,344 -1,192 155%
SOUTH KOREA 3,318 3,829 -511 115%
SPAIN 7,618 13,411 -5,793 176%
SWEDEN 3,791 5,054 -1,263 133%
SWITZERLAND 7,819 21,173 -13,354 271%
TURKEY 3,327 7,952 -4,625 239%
UNITED STATES 37,067 33,037 4,030 89%

As can be seen from the table, of the ten only two are net importers of British goods – the United States and Ireland.  Only with the United States and South Korea would we negotiate as equals, as our exports and imports are within 15% of each other (and even then, the USA is a very big country with a lot more clout than us!)

With Ireland we must face the EU, who know exactly how much we want European goods (the answer is… a lot), and where a significant trade surplus with one country is set against significant trade deficits with other EU countries and strong underlying demand for quality and premium European brands with perceived inadequate alternatives.  Perhaps including Norway Spruce.

With countries such as China, where imports are nearly three times as much as exports, the other country will have by far the upper hand, because they are selling so many goods to us and can walk away without damage if they don’t get what they want.  It is hard to imagine their wishing to have a trade deal to increase the amount of British goods sold in their countries (and note my previous comments about the cost of transporting goods across the globe potentially making our exports less competitive than regional producers without free trade deals) rather than to flood the United Kingdom with goods at prices set to compete producers in the UK out of business – Tata all over again, pretty much.

I will see if I can obtain end of year figures for all 27 relevant countries and all EU/EEA countries, but I doubt they will be available until at least late February.

,

  • Angry Mob

    Only Ireland and Germany can’t make the deals as you point out as they are members of the EU namely the common commercial policy. Switzerland not being subject to it can make FTA with whomsoever it desires.

  • NMS

    A high proportion of UK exports to Ireland are re-exports from entrepôt activity. Net discrepancy is much smaller. The Irish market is tagged on to the UK market because it is possible to do so with both countries in the EU, free movement of goods, single point of entry for customs purposes etc. UK exports to Ireland are exaggerated by the activity.

    With the UK outside of the EU, not intending to remain inside the Customs Union, such activity is highly unlikely to continue. Any business which currently uses say London Heathrow as its initial point of entry into the EU, sorting out all of its customs from there and then moving goods without having to account for VAT, will not be able to do so anymore. Alternatives such as Schiphol or Charles de Gaullle will be laughing.

    The problem in relation to Germany is that many of the products manufactured there are not made to the same quality anywhere else. Time to reform British Leyland and replace Audis with Morris Oxfords?

  • wild turkey

    Andy,

    An astute, fact based analysis. They are increasingly rare. So thanks for this post.

    you do neglect the, ah, elephant in the room

    when it comes to arrogance based fuck-ups, the British ruling establishment ( and their associated zipper lickers). have led the world for centuries.

    consider this. It is generally agreed that between 1763 and 1776 the British effectively squander, abused, and lost, the loyalty of many citizens of the 13 colonies/states. the rest is history

    question: in that 13 year time frame, how many ministers, or even their lackeys, bothered to visit North America? i think you know the answer.

    Zero

    and that mindset has been served up and honored ever since.

  • Fear Éireannach

    Andy, does this data refer to both goods and services?

    One of the “truths” put forward is that the EU “must” do a deal with the UK because they export more to the UK than they import. But this gap seems to be narrowing as sterling declines, which would suggest that both sides have about the same incentive to deal.

    http://www.uktradeinfo.com/Statistics/OverseasTradeStatistics/PublishingImages/Oct16_Trade.gif

  • Utterly pointless…

  • “I will see if I can obtain end of year figures for all 27 relevant countries and all EU/EEA countries, but I doubt they will be available until at least late February.”

    Don’t bother…

  • billodrees

    Brexit is nTimes more critical to Ulster than RHI.
    RHI can be survived.
    NI Assembly Election 2017 can be survived.
    London’s disillusion leaders are heading for a cliff and think they can fly…..like Jonathan Seagull…..
    Brexit means Scotland will be out of the UK very soon (and remaining in the EU- Customs Posts at Stranraer, Berwick and Gretna Green).
    Brexit means the RoI will have significant economic and political turmoil.
    Brexit means massive economic turmoil and political meltdown in England/wales.
    Brexit means neither London nor Dublin will have political capital or cash to support NI (and it’s well heated farmers) in the manner of past years.
    Brexit means NI (pop 1.8m) will be an unwanted off-shore entity of England/wales (pop 56m) in a country called the United Kingdom of England and Northern Ireland (pop 58m).

    Scotland is the only area in the current UK that knows where it is going and has a plan.
    Ulster politicians should be listening to Nicola Sturgeon.
    Quickly.

  • Anthony O’Shea

    Alans simple stats help others learn economics.

  • J D

    how metaphysical of you.

  • AndyB

    Goods only I think. The problem with the “must do a deal” crowd is that the impact on the EU of failing to reach a deal (other than on Ireland) will be far less than on the UK – proportionately we sell far more of our GDP to the rest of the EU than they sell of their GDP to us.

    It’s a pretty serious issue, and it’s hard to see how the potential trading partners (apart from Ireland, the USA, South Korea and Australia) are seeking a free trade deal in order to get British goods rather than in order to secure and increase their sales in the UK. It just doesn’t add up.

  • AndyB

    Some things can be taken for granted – Brian Walker and I, together with several other members of the team, have been making the effort for months to highlight the lack of reality in the Wail/Express/UKIP/etc “We are British” entitlement mentality.

    The real problem is that those with the fixed ideas are just going to see that this article exists, decide that I’m an idiot (or worse – one of the “experts”), and move on to something that agrees with their world view.

  • Mirrorballman

    Such arrogance. Ever been a member of the DUP Pete?

  • AndyB

    Thanks. I wasn’t sure whether Switzerland’s bilaterals would have included that restriction.

  • AndyB

    On your last paragraph, exactly, although I’m not sure that Morris Marinas haven’t displaced Morris Oxfords as the typical BL product 🙂 Or, similarly, what about new world wine? Most people I know love new world wine, but when they want Champagne, Cava or Prosecco, they buy the European brands. I also agree about the European airports – Dublin (and Shannon) should also benefit.

    Irish exports to the UK are also exaggerated by those companies which choose Irish bases, I think, however don’t underestimate the impact of milk products being exported by NI to the EU through Ireland. That’s another of the elephants in the room.

  • Roger

    Why is Ireland dubbed ‘Irish Republic’ in the Table?

    I doubt very much it would sign off any trade deal with the ‘British Kingdom’ using that name.

  • Roger

    Finally some good ideas for Donegal.

  • Roger

    Under its existing arrangements with EU can Switzerland apply different customs duties to post Brexit/2019 UK products/services from those to be applied by EU 27?

  • AndyB

    Ask HMRC – it’s a copy and paste…

  • Anthony O’Shea

    Why not

  • Roger

    I’m not that surprised. Old habits die hard.

  • Lex.Butler

    It’s still called the Free State in many quarters… Progress.

  • Roger

    More like regression. Irish Republic was 1916 terminology. Free State was later, 1921…

  • Sir Rantsalot

    “because they are selling so many goods to us and can walk away without damage if they don’t get what they want.”
    This is the main error in your argument. You are portraying trade arrangements as a game, with politicians having a battle against each other in making an arrangement. If they don’t like the result they can walk away in a huff with no responsibilities. The reality is that politicians are under pressure from industry and the working population to keep the economy going and protect jobs. If they enter into a process to make an agreement, it will have to be reasonable to all countries involved.

    Regarding China, just look at what Trump does in taxing imports from cheap countries for products sold into the US. Even before taking office he has brought 1000s of jobs back to the US !! That is how to keep jobs in the US (or UK) and protect the livelihood of the local population. No need for trade deals.

  • Fear Éireannach

    There are also significant issues with the nature of the products traded and their price elasticity and so forth. If you had a price inelastic product and were trading with someone with a price elastic product, then the trade deal might have quite a different effect in each direction. People in the UK might continue buying Mercs, despite a price increase owing to duty, as one of the attractions of a Merc is that it is a bit more expensive and not everyone has one. People in the EU might not buy Nissans, if they became more expensive, as there are several other middle of the road competing car brands basically competing on price.

  • lizmcneill

    Some of the dairies even have cross-border ownership. That’ll be a bit of a mess to unravel.

  • AndyB

    That has been exactly my argument – not a popular one, of course.

    I’ve also argued that free trade deals with the far east, for example, rely on being able to transport goods from the UK for less than a manufacturer with an existing base in the region. It’s a long and expensive way to China via Suez, and any region with low manufacturing costs will have a price advantage on us.

    However, see Wrightbus and their ability to successfully sell buses to Hong Kong despite transport costs – that sort of counter example of a manufacturer who wins contracts on quality is something we could use an awful lot more of!

  • Reader

    Roger: Why is Ireland dubbed ‘Irish Republic’ in the Table?
    I expect it was to avoid confusion. Some people are aware that part of Ireland is in the UK.

  • Angry Mob

    Short answer would be yes as it’s not a party to the EU common external tariff it can set its own customs tariffs for third countries.

    It all depends on the outcome of the negotiations however and the above assumes the UK goes for the devastating WTO option.The other possibility is that the *UK goes for FTA option in which it could make a separate agreement with Switzerland but the UK would most likely have enough on its plate to contend with.

    In my opinion the best option is where the UK remains in the EEA and regains membership of the EFTA which Switzerland is party to (for an interim period of time). Article 3 of the EFTA agreement forbids custom duties between those states so in this case neither country could apply tariffs.

  • NMS

    Liz, Majority of milk from UKNI is processed in Ireland. See Table 1 http://www.cso.ie/en/releasesandpublications/er/ms/milkstatisticsoctober2016/. Raw milk imported from outside the EU is liable to a Customs Duty 3% I think. It may also have to be tested.

  • NMS

    I remember a teacher from school had a big old Oxford! He was also a farmer, it smelt of a farmyard.

    If the UK opts for standard WTO/WCO rules, then it will treat all non English wines equally. All will have lots of paperwork!

    Irish airports might possibly pick up something, but so many small valuable goods move through Heathrow, I would think it will be the two I mentioned, which will gain the most.

    On Irish exports, the main pricing issue with the UK is probably not that great. Irish native exports make up a much larger proportion than to other countries. Services are a different issue.

    Most UKNI milk is processed in Ireland, see Table 1 http://www.cso.ie/en/releasesandpublications/er/ms/milkstatisticsoctober2016/ Customs duties will apply.

    You might be interested in this essay too. http://www.drb.ie/essays/making-the-jump

  • Roger

    Thanks

  • Roger

    Oh yes, obviously a lone island could get listed in there amongst a table of jurisdictions… Very plausible indeed. Clearly the concern was about confusion and had nothing to do with the legacy of a former diplomatic dispute where British Kingdom refused to use it’s neighbour’s name for over 60 years.

  • lizmcneill

    Indeed, a mess. If any #Unionist dairy farmers voted to leave they’ll be in for a rude awakening.

  • NMS

    Yes, unless a local infrastructure could be put in place very quickly, which I doubt. Not retaining membership of the Customs Union will be painful. Also there will be restrictions on Irish people returning to the EU after a day’s shopping or visiting outside of the EU, which will involve completion of Customs declarations, etc. I await the deployment of the new European Border Force, trigger happy Poles to stop refugees & smugglers invading the European Union.

    Happy days!

  • scepticacademic

    Wait til the Chinese respond and see what a trade war does to both economies.

  • Fear Éireannach

    The double decker bus, the icon of the British Empire in Asia!
    In general UK companies with quality products can export to faraway lands, but the question is the extent to which these companies have EU based suppliers, so that at least part of their process is combining a number of EU intermediate products into the finished good. Perhaps the coachwork comes in Ballymena, but the Chassis, engine and gearbox from elsewhere in the EU!

  • lizmcneill

    That’s going to be fun for people who commute across the border. Opportunities for smuggling and other criminal activities are going to flourish.

  • NMS

    Éilís, You might be interested in this piece from the excellent Lisa O’Carroll in today’s Guardian https://www.theguardian.com/politics/2017/jan/11/brexit-barriers-would-ruin-northern-ireland-dairy-farms-mps-told.

    Residents & workers living close to the border & who commute regularly from Ukraine to Poland get special visas.

    The EBF will be in place by 2019, ready to shoot those who don’t stop. It will be an EU external border, no different than Ceuta & Melilla, those little bits of Africa, which are Spanish & in the EU, except Northerners will be the Africans on the wrong side of the fence.

  • Sir Rantsalot

    Yes, we will need to see how things develop. But the US and the rest of the world have an advantage over China in that China needs to export massively more than it needs to import from the rest of the world.
    We’re living through a historic time when people are waking up to the controlled puppet politicians that are servants of the big corporations and elites pushing globalism as unavoidable. The US have a non puppet president for the first time in decades. Europe is also going that way with ‘populist’ politicians. This is more of a MSM term as it is really about nationalism (of a good kind). More countries will decide to leave the EU this year.

  • Fear Éireannach

    Sammy Wilson tells Russian TV how it is
    http://www.belfasttelegraph.co.uk/video-news/video-dups-sammy-wilson-on-brexit-uk-can-only-do-trade-outside-custom-union-and-single-market-35362109.html

    no need for customs union or any of that palaver, but of course none of this affects movement across the Irish border in any way!!

    you couldn’t make it up. This wilful pretence that Brexit has no particular effect in NI is one of the biggest problems with the present breakdown of government, as it is even less honest than anything to do with boilers.

  • Fear Éireannach

    Trump is on to something, everyone has a job in North Korea.

  • Reader

    NMS: Raw milk imported from outside the EU is liable to a Customs Duty 3% I think.
    Keep your fingers crossed that UK doesn’t put a Duty on processed dairy imports then.

  • Reader

    roger: …British Kingdom refused to use it’s neighbour’s name for over 60 years.
    Difficult to keep up when both the formal name and description keep on changing. The actual and implied territorial claim was probably rather offputting too.

  • Roger

    Again agreed, a change in name as recent as 79 years ago and none since really is asking a lot to remember. Doubtless they are having difficulties keeping up. That’s clearly the most plausible explanation. That and the risk of islands creeping into lists of jurisdictions issue you identified earlier.

    It’s clearly all about avoiding confusion as you said in your original response. I had interpreted that as avoiding confusion on the part of the reader in line with your explanation. You’ve spotted the confusion may also rest with HMRC too with difficulties keeping up with first half twentieth century changes. That’s again insightful on your part.