As the UK marches towards a referendum on its EU membership, the nation's
statisticians have taken a closer look at the bloc's importance to
trade.
The Office for National Statistics (ONS) has released a bulletin on UK-EU trade, in the same
month as trade figures show that British reliance on trade with the EU has fallen to
an all-time low.
But what does this mean for the importance of our trade links with the
EU?
1. The EU is the world's biggest economy, but its share of global GDP is falling
The EU was formed in 1993, and since then has become the world's largest
individual economy, if you combine the GDP of its
members.
It became bigger than the US in 2003.
But while the EU may occupy the top spot, its share of the global economy
has been declining. In the two decades after its formation, its share of global
GDP has dropped from 30pc to 24pc in 2013.
The ONS said: "This is because growth in non-EU economies has outpaced
growth of EU economies, mainly driven by strong growth in the BRIC (Brazil,
Russia, India and China) economies."
And if you don't treat the EU as one economy, then the US is still
bigger.
But China is on track to become number one in nominal GDP
terms, andmay be there already on a purchasing power parity
basis.
2. British dependency on EU trade is at a record low
The proportion of goods and services we're trading with the EU is
falling.
The ONS said that exports from the UK to the EU grew on average by 3.6pc
from 1999 to 2014, below the 6.5pc rise in exports to non-EU
countries.
As a result, the proportion of UK exports destined for the EU has dropped
from 54.8pc in 1999 to 44.6pc in 2014.
The latest monthly figures showed that in April goods exports to the EU
fell to a record low. Just 45.1pc of the goods that the UK exported that month
went to the EU, down from 52pc in the previous year.
Martin Beck, an economist at Oxford Economics, said: "The latest trade
data showed a further decline in the EU's importance as a market for UK
exports.
"The EU remains by far the UK's single most important export market,"
said Mr Beck. However, he added that "a consistent drop in the importance of the
continental market should embolden David Cameron's hand in renegotiating the
UK's membership".
3. The EU's importance as a trade destination is likely to keep declining
Elizabeth Martins, an economist at HSBC, warned that the jump in goods
exports in April largely came from growth in non-EU markets. She said this was
"a move which could be vulnerable to reversal in coming
months".
But that doesn't mean that the long-term trend won't be a steady one.
Less developed economies are catching up, and are sure to represent a larger
share of UK trade in future.
Mr Beck said: "While exit from the EU continues to look an unlikely
prospect, were it to happen, an ongoing shift in the destination of UK exports
should at least make the cost in terms of lost overseas sales less onerous over
time."
Trade figures showing high exports to the EU may also be inflated by the
'Rotterdam effect'.
This refers to the theory that exports to the Netherlands are high
because they are shipped to Rotterdam, before continuing on around the world to
a non-EU destination.
The ONS has addressed the Rotterdam effect in a separate
bulletin, and said that "it is not possible to
estimate, with any certainty, the impact that the Rotterdam effect has on UK
trade with the Netherlands and its subsequent impact on UK trade with EU and
non-EU countries".
It said: "The port of Rotterdam is not unique in acting as a ‘gateway’
for other countries; it is accurate to say that this form of trading can occur
in almost any place. For example, goods arriving in France from China could,
after clearing customs, be distributed to other EU member states and potentially
be recorded as imports from France.
"The main difference is that the port of Rotterdam is one of the largest
in the world and the sheer quantity and value of goods being traded separates
the Rotterdam effect from other, similar, cases and therefore attracts more
attention," it added. Peter Spence.
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