The over-hyped EU Customs Union

Representative or enemy of the People?
Representative or enemy of the People?

June the 24th 2016 was a memorable day.  It was a day we thought would never come in  our lifetimes, but it had happened.  The results of the previous day’s Referendum came through and the country had voted to leave the European Union.  Despite all the Government propaganda, financed whether we liked it or not by us taxpayers, and despite the threats, the economic “forecasts” of financial Armageddon, and almost the entire establishment, especially the BBC, putting its weight behind the Remain campaign, and spinning every story into disaster should we vote to leave, the majority of the population had chosen “Leave”.  After over 40 years of being ruled by the unelected Commission in Brussels and its technocrats, the people had decided they had had enough.  They had voted to leave for a variety of reasons, some social, some cultural, some economic, some political, some environmental.  They had different ideas too on exactly what sort of Britain should emerge when full statehood was regained. But that did not matter.  The common denominator of their opinion was that Britain and its people would be better off outside the EU.  Leaving was the necessary first step in all scenarios.

Leaving the EU meant taking back control of its laws, of its borders, of its budget.  Most people are not well versed in all the institutions of the EU – in fact, the same could be said of many journalists and politicians – but for the people who voted to leave, it did not matter.  Leaving meant no longer being subject to the laws and regulations of a foreign organisation.  The single market, the customs union, the European Court of Justice, these were just other manifestations of the political body which for too long had made our laws.  It did not matter if one did not know the dictionary definition of their powers; it was enough to know that we preferred democracy and to make our own laws.  The prime minister of the time (now forgotten) and his chancellor (George somebody or other) had made it clear that leaving the EU meant leaving all the institutions through which the EU controlled its territories.  And that is what we voted for.

The Establishment was stunned by this turn of events.  How dare the ignorant mob ignore their wise counsel! This majority were clearly xenophobes, racists, stupid and ignorant – not fit to take any decisions.  That incidentally had always been the view of EU officials and leaders of other member states.  They had all advised our PM – their errand boy – against holding a Referendum because the result might not be what they wanted.  The “elite” must make the decisions on behalf of the masses, who could be kept anaesthetised by a diet of mind-numbing televised sport, game shows and other dumbed down material that the TV channels push out (one of the largest of which is the state-owned Establishment channel, the BBC), and kept sweet by a strategic subsidy placed here and there when disaffection threatened (all paid for by us taxpayers,of course).  Initially routed by the result, in complete disarray, the Establishment tried to establish its democratic credentials by saying they accepted the result.  The People had spoken, let it be so.  In fact, that was a refrain which was to recur, even when they had regrouped and decided on their strategy to undermine the result.  Never let it be said they weren’t democrats!

What was their strategy?  So simple.  It was to argue that leaving the customs union and the single market was not on the ballot paper and therefore there was no mandate to leave these institutions.  We could leave the EU, politically, and lose our voice at the table, but we should stay bound economically to Brussels, still paying in £15bn per year and increasing, still restricted in our trading arrangements with the rest of the world, still subject to all the rules and regulations that Brussels decided to impose on us – in short, changing nothing for the better but actually becoming a client state of the Brussels machine.

This has been the theme of the resistance to leaving the EU for the past year.  Those with power and influence have been pushing this line relentlessly.  Conservative MPs like Clarke (he with the big business directorships), Soubry and Greive; the Liberal “Democrats” of course lead by Cable and Cleggy; the entire Civil Service, and the Treasury in particular, it seems, which is still pushing out ridiculous economic forecasts of catastrophe should we dare leave; the Bank of England lead by a Canadian who knows nothing of this country except what he sees from his luxury central London apartment paid for by us, and whose friends and advisors are all from the Establishment who do not want any change in the status quo; the BBC, that home of the mostly mediocre (with some outstanding exceptions) and the politically correct, run by people on enormous salaries and financed by all of us whether we watch or listen to their programmes or not, a state organisation that has a vast assured income which enables it to limit the growth of competitors; the CBI, that sturdy representative of some businesses that think it is the country’s duty to ensure their flow of dividends and bonuses is not disrupted by them having to look beyond their comfortable rut; and now the Labour party.  Notwithstanding that so many of their supporters voted to leave the EU, and that initially the Corbyn leadership supported that view, the difficulties of the Government in commanding a majority in the Commons has encouraged Corbyn to oppose anything and everything the Government proposes with the hope that he can force a general election and be swept to power on a mixture of anti-Conservative and anti-Brexit sentiment.  To that end he supports the UK remaining in an EU customs union (a neat hedge that – the indefinite rather than the definite article), effectively strangling any independent trade policy, and ensuring this country is still tied to the regulatory framework that we voted to leave.

According to these people, moving away from the friendly embrace of the single market and the customs union would mean exposing us to the cold winds of a competitive global market. But what is the evidence that these policy frameworks have been better for us than living in a global market?  Yes, the CBI can point to the flood of cheap labour which flowed in and made their businesses more competitive and increased their profitability. But since when have the profits of a company equated to the social welfare of a country?  They exist to make money for the owners and top executives.  Any well-paid employment they generate is an incidental benefit to the country, but not one which is their goal. Companies have a very narrow outlook and what is good for them is not necessarily good for society. They argue that they need access to skilled labour via the single market, but the single market precludes them from tapping into the skilled labour from 90 per cent of the world.  And what we get is mostly unskilled labour driving down wages for the unskilled and deskilled UK worker.

Academics argue that they will no longer be able to collaborate with their colleagues on the continent – an amazing argument when one considers that the exchange of information via the internet has never been easier and is not subject to any restrictions.  No, what these academics are going to miss are the subsidised jollies and the specious collaboration between European universities which is not driven by research needs but by EU grants and subsidies (paid for by us, of course).  There is a whole world out there in N America, Asia, Australasia where ground-breaking research is being undertaken not to mention the lessons that can be learned from some universities in S America and S. Africa.  The whole world should be their oyster, rather than limiting themselves to the politically chosen few in Europe.

Politicians of course have narrow self interest at heart.  Those that want to lock this country into the Brussels hegemony see career opportunities for themselves or fall-back positions when they fail at home (look at the Kinnocks, Patton and Mandelson).   It is also an easy life for them if all decisions are made behind closed doors.  Either that or they are cowed by the idea of standing up and taking responsibility.  And that is true for the civil service too. Anything for an easy life, even if the people of this country have to bear the cost in terms of lower income, lower opportunity, ever increasing regulation, and rapid cultural change.

“Lower opportunity? “some will ask incredulously. “We have the right to live and work in other EU countries, a privilege we will lose if we leave the EU or the single market.”  That is half right and half wrong.  They are right that they are in a privileged position by their educational and language skills, a position that 95 per cent of the UK’s population does not have.  THESE must cope with a cultural influx which threatens their way of life and their jobs.  But the spoiled, selfish minority are wrong in thinking that the EU will be closed to them after Brexit.  If they have the skills, they will get the jobs (there is no bar to non-EU citizens working in the EU – yet), and further they will have far more opportunities in the big wide world where the other 95 per cent of the world’s population live, with far more cultural variety, if that is what they really want (as many claim).

Underlying all the resistance to Brexit and a complete break with all EU institutions is fear of change bred by laziness, selfishness (“I’m all right, Jack”) and a lack of confidence in themselves.  Remainers want the security of a large and all-embracing bloc, where everything, everywhere will tend towards the same centrist blandness, and policy is determined by those at the centre (a self-styled “elite”) with wisdom. It’s a vision where decision-making is handed over lock, stock and barrel to a minority, and the only call on the individual is to turn out once every 4 or 5 years to cast a vote for the toothless national parliament or the Commission’s tame talking shop, the European Parliament just to give the illusion of democracy.  This is probably why our ex-PMs like Major (the hypocritical grey man) and Blair (who deceived and defied the entire country with his war in Iraq) like it so much.

One cannot quell the fears of the irrational or the naturally fearful, but one can provide them with some evidence that they have misread the picture.  Let’s take the benefits of the single market & customs union which according to Remainers we could not afford to lose:  out of the customs union we apparently could not sell to other EU countries.  Well, in 1972, the year before we joined the Common Market as we called it then, when UK exporters faced extremely high EU tariffs as well as non-tariff barriers like regulatory differences and plain discrimination, 40 per cent of our exports went to the 6 countries of the European Economic Community (EEC).  At the same time, 41 per cent of our imports came from those countries.  We were an important trading partner of the bloc even though we were outside it.

The UK then embarked on a six-year transitional arrangement on its way to full alignment with the EEC in 1979.  Our tariffs were increased in stages against imports from the rest of the world (RoW) to align with EEC tariffs, and at the same time our tariffs against EEC products were reduced in stages to zero.  Here was a huge change in the incentive structure for exporters and importers in favour of the EEC.  The outcome was predictable – an increase in UK-EEC trade and a reduction in UK- ROW trade.  By 1979, our share of trade with the EEC had increased to 50 per cent for exports, and 51 per cent for imports, so it was as important as non-EEC trade.

That rate of increase in EU (EEC)-UK trade in the transition period proved to be the fastest in our 45 year relationship with the EU.  Over the next 20 years, EU trade as a percent of all trade hovered between 47 and 58 per cent but averaged 53 per cent.  Considering all the supposed advantages to trade that the EU represented (physical proximity, no tariffs, no regulatory or political discrimination) it was barely able to keep ahead of trade with the rest of the world which was many times more distant and discriminated against with tariffs and non-tariff barriers.  This would surprise people like Cleggy who thinks that one trades most with one’s neighbours (yes, he said that) when in fact one trades most with people who have something you cannot produce yourself or something you want, at a competitive price.  What really puts these figures into context is that during this period the EU had added another 6 countries (Greece, Spain, Portugal, Sweden, Finland and Austria) so the EU market was 45 per cent larger in population terms than in 1975.  But the relative importance of the EU market, apparently so highly advantageous to us, was virtually unchanged.

Now what happened after the EU introduced their political flagship project, the Euro, in 1999?   At that time, the EU accounted for 53 per cent of our exports and 54 per cent of our imports.  Sixteen years later, in 2015[1] the EU had expanded from 15 to 28 countries and its population had increased by another 35 per cent[2] so there was this huge market accessible by the UK on the most favourable terms imaginable.  And what was its importance to us in terms of exports?  It had fallen to 44 per cent.  Exports to the rest of the world have increased at a much faster rate.  Import trade had managed to maintain its 1980s share of 53 per cent, but measured against the large increase in the size of this so-called favourable market, it was actually in relative decline.  The single market and the customs union are of declining importance to us, tradewise, and have been for 30 years.  However, because the EU is a political project, its adherents try to stress its economic importance even though any analysis shows that year by year it is becoming less and less relevant for our capacity to trade.

I know too many numbers can confuse people, so here at the end I summarise in tabular form the annual growth of exports and imports with the EU and the rest of the world (RoW) since 1999.  The numbers speak for themselves and must be seen against an EU population increasing at a faster rate than world population, a frightening prospect in itself, and all the favourable trading terms that exist between EU member states.   Exports first (and apologies for the fuzziness of the tables below and the text boxes above but that is the price of this free WordPress software):

UK exports to the rest of the world are increasing at a much faster rate than to the EU, AND the percent we export to the EU is virtually the same as it was in 1973 when we joined.  But on this the Remainers are naturally silent.

And on imports the picture is almost the same, though not marked.  It’s funny how such facts elude the Remainers and they prefer to concentrate on abuse of Leavers and scaremongering, anything in fact which they believe will weaken the belief of Leavers in their own country.

If the UK can expand its trade faster with the rest of the world while an EU member, how much faster can it expand when we are freed from the controls of the EU Customs Union.  Anyone who denies this is a recidivist of the first order, a die-hard against change, and frankly the pathetic sort of person that relies on Big Brother (whether the UK Establishment or the Brussels machine) to keep things cosy for them as long as they toe Big Brother’s line.  We are worth more than that.

[1] Latest available data for this trade series.  All data from UK’s Office for National Statistics.

[2] The EU market in terms of population had doubled since 1975 when the UK was “transitioning”.