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Trading under WTO rules “a far better option” – our EU relationship was “an expensive failure”

A fundamental issue at the heart of the Brexit trade talks has been the comparison of merits of trade as an EU member and those under WTO rules.

In this report, Michael Burrage and Phil Radford compare UK trade as conducted within these two trade relationships, in both goods and services, over the two decades from 1999 to 2018. They argue, it is emphatically trade with the WTO14 that has created jobs in the UK over these two decades, not trade with the EU.

They find that trading under WTO rules has been “a far better option” – our EU relationship was “an expensive failure”.

By comparing UK trade with the 14 other EU members in 1999 in relation to that of the UK’s 14 major export markets under WTO rules – a trade of an approximately similar value – the researchers find:

  • “UK goods exports to the UK’s top 14 WTO trade partners have grown more than six times faster than exports to UK’s original 14 EU partners from 1999.”
  • “Hence trade with WTO partners has created more new jobs in the UK over these two decades.”
  • “The striking contrast in export performance under these two trade relationships suggests that the advantages of frictionless trade with the EU and/or the disadvantages of distant partners incurring tariffs and non-tariff barriers, have been greatly exaggerated in UK debate.”
  • “Services exports to 14 other EU members have grown much faster than goods exports, but at almost exactly the same rate as those to 14 WTO partners over these two decades. This similarity throws doubt on the benefits of membership of the Single Market in services, and even on its existence.”
  • “There is no evidence that the 70 trade agreements in goods negotiated by the EU have been of any benefit to UK goods exporters over the past two decades. UK goods exports to the 88 countries and jurisdictions covered by them have grown at a slightly lower rate than exports to 117 countries with which the UK trades under WTO rules.”
  • “There is therefore no evidence to show that the supposed negotiating ‘clout’ of the EU has ever been used to the benefit of UK goods or services exports over these decades, though individual agreements may of course have deviated from the norm.”
  • “Trade under WTO14 terms earned a surplus of £552.7 billion, while trading with the EU14 was a double failure of near-stagnant growth and a deficit of £463.3 billion.”

On individual EU agreements, aggregate trade data shows the real growth rate of UK goods exports to the 88 countries and jurisdictions covered by 70 such agreements was slightly below the real growth of exports to the remaining 117 countries of the world with which the UK trades under WTO rules.

Further data for 2010-2018 shows services imports to the EU from the United States and numerous other countries trading with the EU under WTO rules have grown faster than those of the UK, throwing doubt on the idea that UK services exports have benefited from EU membership.

Michael Burrage and Phil Radford conclude that:

“…UK’s future trade policy should on no account be based on negotiating an agreement with the EU that tries to maintain a relationship resembling membership by a commitment to maintain a level playing field or some other means. Such an agreement would only make further decades of sub- and near-zero growth of UK goods exports to fellow EU members more likely, and the accumulation of another trillion-pound deficit.”

This report suggests that future UK trade policy should be built on the proven success of trade under WTO rules, and wherever possible negotiating well-targeted agreements to improve trade with existing WTO partners.

Read the Summary.


WTO vs the EU

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