Trade with the EU matters a lot, but less than it used to
That share has been declining, because exports to other countries have been increasing at a faster rate.
The European Commission itself says that “over the next ten to 15 years, 90% of world demand will be generated outside Europe”.
It’s sometimes argued that these statistics overstate the proportion of UK exports that go to the EU, because a lot of goods pass through ports like Rotterdam before being shipped to a final destination outside the EU.
Both the Office for National Statistics and the government's review of our EU membership have concluded that it's hard to quantify the extent of this ‘Rotterdam effect’ or establish whether it's a serious problem for the statistics.
That said, the ONS has estimated that it may account for around 2% of all exported goods and services to the EU.
Trade if we leave
If the UK leaves the EU, the future rules on trade would depend on what kind of agreement, if any, the UK reaches with the EU after its departure. Trade in services will be particularly important, because 80% of the UK economy comes from providing services.
The future trade rules on services for a country outside the EU are particularly difficult to predict. We’ve got more on this here.
If the UK votes to leave the EU and no new trade deal is negotiated, we will still continue to trade with the EU but we would have to pay tariffs.
That trade would likely happen under World Trade Organisation “most favoured nation” terms meaning the UK would get the same level of tariffs as the EU’s most favoured trading partner outside of the EU. There are some circumstances by which that might be over-ridden though.
How much is UK-EU trade worth to each party?
There’s lots of different ways to look at how much UK-EU trade is worth to each party, and what that means for who would be most keen to agree on a trade deal between the UK and the EU if the UK votes to leave.
The three main ways that are used are:
- The value of trade to the UK and the rest of the EU—we exported about £220 billion worth of goods and services to the rest of the EU in 2015, according to UK data, while the rest of the EU exported somewhere around £290 billion to us. These figures differ if you use EU data. What this means is that the rest of the EU sells more to us than we sell to it.
- What those exports are as a proportion of all exports—by this measure about 44% of the UK’s exports go to other EU countries, while somewhere between 8-17% of exports from other EU countries go to the UK (depending on how you measure it).
- The value of that trade to the UK and other EU countries’ economies—exports to the rest of the EU are worth about 13% of the UK’s economy, and exports from other EU countries to the UK are worth about 3-4% of the value of those countries’ economies taken as a whole.
Now for the detail…
Other EU countries sell more to us than we sell to them
The rest of the EU sells about £70 billion more to us in goods and services than we sell to it, according to UK data—so the UK runs a “trade deficit” with the rest of the EU.
Those figures differ if you look at EU data, as EU countries collect data about services in different ways. For example, EU data suggests goods and services exported from the rest of the EU to the UK could have valued up to £360 billion in 2014—higher than the £290 billion the UK data shows for 2014 and 2015.
Either way, the rest of the EU as a whole sells more to us than we sell to it, or looked at another way, we buy more from the rest of the EU than it buys from us, and that is the case for the majority of EU countries.
Within that overall picture, there’s a lot of variation in the trade that each individual country does with us. Germany has the biggest trade deficit with us—it sold £27 billion more in goods and services to us in 2014 than we sold to it, according to UK data.
There's also a difference between trade in goods and trade in services. When it comes to services, we sell more to the rest of the EU than it sells to us.
8% of EU exports go to the UK is one possible estimate
Whether the 8% is correct depends on how you treat exports between EU countries. Looked at another way, you can get 17%.
The other way to look at it is to say that what we’re really interested in is how important the UK would be to the EU’s trade with countries outside of the EU only, if it were to leave the EU. Looked at that way, about 17% of the EU’s goods and services exports to non-EU countries went to the UK in 2014, according to EU data.
The UK is the EU’s largest single export market for goods, but only just
It’s also often claimed that the UK is the EU’s largest single export market for goods.
That’s just about the case if you treat the UK as if it were not in the EU and focus on EU goods exports to non-EU countries. The UK is very slightly ahead of the USA, with 16.9% of EU exports going to the UK, compared to 16.5% going to the USA in 2015.
If you’re counting EU countries too then Germany receives the largest amount of goods exports from other EU countries.
It’s more complicated to work this out for services due to the variation between each country’s data.
UK-EU exports are a bigger part of the UK’s economy than the EU’s
Although fewer of our exports are now going to other EU countries, these exports are still just as important to our economy.
The £220 billion exports of goods and services to other EU countries were worth about 12% of the value of the British economy in 2015, and £230 billion or 13% in 2014. It’s stayed at around 13-15% over the past decade.
Exports from the rest of the EU to the UK were worth about 3-4% of the size of the remaining EU’s economy in 2014. The exact number depends on whether you use the £290 billion figure from UK data, or £360 billion from EU data. There aren’t complete figures available in the EU data for 2015.
The sources we’ve used
As we’ve mentioned, the figures for trade vary depending on whether you look at UK data or data from other EU countries. If we used all the variations for every time we used a figure, we’re not convinced anyone would make it to the end of the article.
If you’re unclear which we’ve used when, we have used UK data whenever we have focused only on the UK’s exports or imports, and EU data where we focus only on the EU’s exports or imports. Where we make comparisons, we either use UK data only, or use both UK and EU data.
Isn't it nice to have the whole picture?
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