Brexit – For and Against
March 4, 2016
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By: Gemma Hyslop
Last week Ian Robinson wrote about the types of immigration issues that the UK’s EU referendum and Brexit could throw up for immigration policy. In the coming months, Ian and the team will follow up with more postings looking at how policy could change, depending on whether the UK leaves or remains in the EU following the planned referendum, on 23 June 2016.
To support that thinking, in a series of three pieces, I will go back to first principles and examine the UK’s relationship with the EU in the context of three elements. In this piece, we address the economy and trade. In the coming weeks, we shall then consider the presumed democratic deficit in Europe and the vexed topic of immigration.
Whilst these components shall be addressed separately, it is important to acknowledge that each is inherently interlinked; you cannot divorce a discussion on the economy from factors including the EU migrant work force, for example. This inherent interconnectivity typifies the level of complexity involved in any debate on EU membership.
Economy and Trade
The European internal or ‘free’ market allows people and businesses to move and trade freely across the 28-nation group. The cornerstones of the single market are the free movement of people, goods, services and capital. These are collectively known as the ‘four freedoms’, and are enshrined in EU law.
As part of the single market, the EU enables free trade between all its member states, encouraging investment in the UK, with foreign manufacturers and commercial service providers investing here as a bridge to the single market.
For example, the UK’s internally renowned pharmaceutical industry has exports worth £53bn, of which 56% are directed to the EU, due to strong protection of intellectual property and common legislation to facilitate the authorisation of new medicines.
Euro sceptics argue that we have significant trade partners outside the UK and contend that the rise of emerging economies reduces the importance of the UK’s European trade.
The World Trade Organisation recognises that developing economies have increased their participation in international trade over the last two decades. The share of exports to developing economies increased from 26 per cent in 1995 to 39 per cent in 2014 while exports to developed economies dropped from 68 per cent in 1995 to 56 per cent in 2014.
Specifically, China’s economy grew by ten per cent a year between 2002 and 2012, and its trade integration with the rest of the world expanded even faster. Despite recent volatility on the Nikkei and a slow down in economic growth, China remains an attractive trading partner.
However, this argument wanes when we reflect that in 2011, 8.7% of UK exports went to the BRICs (the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa,) compared with 6% to Ireland. These statistics are thrown into sharper contrast when we consider that Ireland has a population of 4.5 million compared to the combined BRIC population of 2.8 billion.
The EU has become a major world power in economic, trade and monetary terms, offering a great many benefits to the UK. We cannot yet know if all that would be lost if the UK were to leave the EU, but if that were the case, it would seem that alternatives overseas could provide some mitigation.
