The truth about the UK trade deals argument from Brexiters

There are many Leave arguments that one could dismantle at ease. One of the most infuriating and damaging for the prospects of the British nation is the statement that Brexit will finally enable the UK to negotiate trade deals with third parties. The Prime Minister is again reminding us this week of the great benefit that UK will derive from this ability to finally negotiate trade deals with other economies. The lunatic asylum that parts of the Conservative party and the whole of UKIP have become are calling for a hard Brexit, and for the UK to start on these trade deals immediately, so that the outlook of British people’s lives can be changed for the better with immediate effect.

This is, at best, disingenuous. It ignores the fact that the UK, as a EU member, already has trade deals with most trading blocks and third party countries in the World. These deals have been negotiated, over long periods of time, by large international teams which include a significant contribution from the UK.

One must therefore surmise from that continuously repeated Leave mantra, one of the following conclusions:

• Leave are just lying, because that is what they do, and because informing the public is of no concern to them, or because they are so scared about what the future will bring after Brexit that their brains have jumped into full defence mode and are making them ignore the impending reality.
• Leave are so arrogant, that they really think that a British team will be able to extract much better deals from third parties than a European team.

So, what are the facts critical to this issue?

The first one is that negotiation outcomes between well prepared, professional teams depend on the negotiation tools each party has. For trade deals, your negotiating position is the strength, health and potential of your economy.

Some facts about the EU, which you can find at http://ec.europa.eu/trade/policy/eu-position-in-world-trade/:

• The EU is the largest economy in the World, exporting and importing more than any other economy, and it is the World’s largest trading block.
• The EU is the top trading partner for 80 countries or trading blocks (compared to the US, who is top trading partner for 20 countries)
• The EU ranks first in inbound and outbound investment
• In nominal GDP terms the EU is the largest global economy, with over $18 trillion annually.
• Demographically, the EU is the 3^rd largest market, with 500 Mn plus consumers, after China and India
• The EU exports are 31% of global exports in 2015, compared to China (11.6%) and US (10.8%) (http://www.imf.org/external/pubs/ft/weo/2016/02/pdf/statapp.pdf)

Now, some facts about the UK economy:

• The UK is the top trading partner for no countries or trading blocks.
• In GDP terms, the UK is the 6^th global economy by size if we exclude trading blocks, with $2.8 trillion annually.
• Demographically, the UK is the 22^nd largest market, with 65 Mn consumers.
• UK exports are 3.7% of global exports.

You can clearly see that the EU enters any negotiation from a position of strength, boasting the largest economy and the largest import, export and investment markets. The UK will enter negotiations with major trading partners (the top 5 global economies, EU, US, China, Japan, India) as the junior trading party, with an economy which is 3-6 times smaller than the other party’s.

So, what exactly will the ability of the UK negotiators to extract better deals than the ones currently available be based on? There are 2 possible answers in light of the facts above, I guess, although I am already really struggling with even trying to work out what Brexiters are thinking on trade deals:

The first answer, if you are to believe Brexiters, must the supreme talent and charm of the British when it comes to negotiating, compared to the idiocy and incompetence of their EU counterparts, and the fact that the British people are globally loved. The Brits will clearly walk into any room and get a better deal, just because they are British. You can choose to believe that. If you really want to think that this is the case, and that the best negotiators in EU civil service are distinctly inferior beings to the best negotiators in UK civil service, inferior enough to waste such a much better negotiating position to extract a worse deal, then you may find the Brexit argument on trade deals believable. But wait. Not even then… It turns out that over 25% of EU trade mission personnel are British, and that 25% of EU Trade Commissioners have been British (Christopher Soames, Peter Mandelson, Leon Brittan, Catherine Ashton). So, you have to believe that the British are not only superior, but that contact with their EU colleagues destroys that superiority and turns them into village idiots, sorry, Europeans.

The second answer would be that the other parties have become less adept at negotiating. Therefore, although EU teams are ok, they had the misfortune of negotiating with other economies at a time when these other economies had tough, strong and professional negotiating teams. These teams have now left countries like China, india and the US, who have gone backwards, and they have been replaced by a bunch of incompetent negotiators who will roll out the red carpet and give the UK what it wants. The fact that the negotiating position of those other economies has improved (China was twice the size of the UK economy 10 years ago, it is now 4 times the size) will be compensated by the brain drain in the other parties negotiating teams.

Frankly, both arguments are so preposterous and clearly false that, if you are going to believe either, you might as well believe both at the same time and feel even happier in the certainty that, if you are British, your future is about to take a distinct turn for the better.

In the light of all the above, things don't look that great. But it is worse. There is one final nail in the coffin. The average duration of the negotiations for major multilateral trade deals over the last 30 years has been a bit over 8 years. For single country deals, if we take the US as an example, the average for their last 20 trade deals, from kick off to implementation, is 63 months.

UK negotiators, therefore, will not only have to get all other parties to roll over and concede on everything the UK wants, but they will have to get them to do so 3-5 times faster than any other negotiating process has taken. It sounds as a tall order. Particularly if you think the UK would be entering these processes from a junior position, as explained above, but also from the position of a party that needs a quick deal to survive, whilst the deal is fairly irrelevant to the other party. The Leave argument, I guess, is that now that UK will be small and desperate it will finally achieve from negotiations what it could not get when it was part of something strong, big and powerful.

So, look at the facts and make your own mind up. But look at the facts. The repetition of unrealistic, clearly false, arguments does not make them true. Reality is based on fact, and real outcomes are based on real situations.

Finally, if you are getting worried, you may be heartened by the noises from Whitehall about the planned visit by Liam Fox to New Zealand. Some positive noises from over there. There may be a deal to be done, and then it will all be OK. The UK will be able to trade with the 54^th economy in the World, 12 times smaller than the British economy, and less than 12,000 miles away! Life is good. 

On discussing this with a Brexiter friend the other day (yes, I do have some of those), he said to me: 'But it seems that the US are keen to negotiate with UK! That surely means they respect us and will be a good trading partner'. You may be thinking the same thing. My answer is obvious, but I will write it anyway: 'Do you think the US would rather negotiate with a united trading block bigger than itself, or with a series of smaller economies desperate to reach a deal? It is obvious why the US and any other third party which have to negotiate trade deals with the EU would encourage the UK, and any other members, to exit. EU scissions are highly beneficial to the negotiating position of any EU counterpart.'