In deciding whether they want to be part of the EU, British people should ask themselves whether it is advantageous to the UK to be part of that trading bloc. A trading bloc is advantageous if it enables Britain to access a larger free market for its goods and services. Economic theory from Adam Smith to David Ricardo shows that our prosperity is enhanced when Britain is able to focus on those goods and services that it is best at, and trade them with others who have different skills.
How is that going with the UK’s EU partners? Not very well judging by last year’s Office for National Statistics figures. The UK have a negative balance of trade of ￡55.7 billion (US$83 billion) with its EU partners: They sold Britain far more than Britain sold them. And it is clear from their actions in terms of regulation that they would like to snaffle and/or stifle Britain’s biggest industry— financial services — as the proposed curbs on bankers’ bonuses demonstrates. For all its faults, this is the UK’s biggest sector for employment, exports and tax revenues, and the suggested curbs will place the country at a disadvantage when competing with US and Asian financial institutions.
If the UK is part of a trading bloc, should not it want to be part of a thriving trading bloc? The EU is hardly thriving. Leaving aside the anecdotal evidence, the fact is the EU is the least competitive trading bloc in the world. If you look at the World Economic Forum’s global competitiveness report for 2012-2013 for labor market efficiency you see the following rankings out of 144 countries surveyed: UK, fifth; Netherlands, 17th; Germany, 53rd; France, 66th; Spain, 108th; Italy, 127th; Greece, 133rd.
You get similar results for other measures, such as pay and productivity, in which the UK is ranked 13th; Germany 41st; Italy 128th; and so on.
The impact of the EU’s dire performance shows in the fact that in 1980 it represented 31 percent of world GDP, but last year it was down to 19 percent and by 2017 it is forecast to fall to 17 percent.
Binding the UK to the EU is like trying to run a race with a ball and chain as the UK is forced to import the labor practices and business regulations of countries that are the losers in global competitiveness.
Given the choice, you would surely ally yourself to countries that are doing better, such as Singapore, which is second in the table of labor market efficiency; or the US, which is sixth. Do not be fooled into thinking that this is impossible, or that Britain has to be in a trading bloc with Europe because of its geographical proximity to it.
Britain had successful trading relationships that spanned the globe over a century ago, when distance was a real obstacle to doing business. In a world increasingly dominated by the Internet, digital business and near universal access to jet travel, distance is irrelevant.
You will of course hear from the pro-EU lobby that Britain cannot separate from the EU as it will then cease to trade with it on favorable terms. Remember that our EU partners sell the UK ￡56 billion more than the UK sells them. Will they risk losing this?
The prominent members of this lobby, such as lawmakers Ken Clarke and Peter Mandelson and businessman Richard Branson, are the same cast who campaigned for the UK to join the euro and who forecast disaster for the UK and the the City (London’s financial district) if it did not.