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"The EU needs the UK" Not true. It is the reverse because the UK runs a gigantic trade deficit: in 2014 they exported 472 billion USD, but imported 663 billion
by mrb 10y ago
"The EU needs the UK"
Not true. It is the reverse because the UK runs a gigantic trade deficit: in 2014 they exported 472 billion USD, but imported 663 billion USD¹. In fact the UK is the second country in the world with the largest trade deficit (behind the US). A huge portions of UK's export go to Europe, therefore the EU has definitely more say when it comes to negotiating trade deals with the UK. I would be very worried for my economic future if I were a UK citizen...
¹ http://atlas.media.mit.edu/en/profile/country/gbr/ http://atlas.media.mit.edu/en/profile/country/gbr/
- x0x0 10y agoThat cuts both ways. Germany has used the EU to run a giant trade surplus, and if that arrangement blows up, so does their economy. http://www.tradingeconomics.com/germany/balance-of-trade http://www.tradingeconomics.com/germany/balance-of-trade
- dharma1 10y agoGermany would have a large trade surplus even without EU. They just make a lot of stuff other countries want
- bontoJR 10y agoTrue, but... other countries around the world are producing the very same things, even cheaper, but they are taxed in the EU. China has no major deal with the EU for this reason. UK leaving would open to that possibility that Switzerland decided to open in 2010, balancing what comes in and what goes out and both countries got a major boost in respective goods. Swiss got access to the manufacturing in China for Swiss high tech companies and China got access to the major luxury good produced here, plus bank services, med techs and collaborations with universities like ETHZ.
- cmdkeen 10y agoSpecifically the Euro (rather than the EU) stops the German currency from appreciating massively and making their exports more expensive. That has been a massive boost to the German economy over the years.
- dharma1 10y agoThey could devalue their currency if they wanted to, if they had their own currency instead of the Euro
- cmdkeen 10y agoWhich is what Greece, Italy etc would be doing if they weren't in the Euro. Germany wouldn't devalue as that involves increasing money supply which would drive inflation, the German post war banking system is built to have a massive fear of inflation.
- PopsiclePete 10y agoNot only has it been a massive boost to the German economy, it has been at the explicit expense of the economies of Greece, Italy, Spain, etc. And how people can see that and be ok with it, I don't understand. The EU under the Euro is the Fourth Reich. Nothing more, nothing less.
- johndoez2 10y agoBut they benefit massively from being in the Euro currency. Imagine how high the Deutschmark would be. The German exporting machine wouldn't be half as effective.
- Gibbon1 10y agoNot really. Germany has a large surplus because of the Euro. The common currency means Germany's currency is weaker than it would be otherwise thus it's exports more attractive. And countries like Greece and Spain have strong currencies than they otherwise would have. Thus their industries and workers compete at a disadvantage.
- dharma1 10y agoI agree that the eurozone economies are very different, and I can't see how that will be resolved without dismantling the Euro or kicking some of the weaker economies out
- Gibbon1 10y agoThe US has a real central bank, automatic stabilizers, and large federal transfer payments to compensate economically weaker states for having to trade in dollars.
- tiatia 10y agoThis is partly true but it is also a question of price. German does not pay her engineers and can just undercut competitors. Also, what do they get in exchange? Lehman certificates and Greek government bonds. Germany has always exported a lot but also imported a lot. The crazy export started just in the 90ies. It has been very unhealthy.
- UK-AL 10y agoUK importing tons of good from EU means that the uk is generating a lot of jobs for EU countries.
- emn13 10y agoHowever, the UK economy is relatively small compared to other EU export markets. Specifically, this means that as a percentage of the total, it's not going to move the needle nearly as much as it will in the UK. It's definitely going to hurt, but it's nothing like the pressure that will be on the UK.
- UK-AL 10y agoI don't understand. If they don't want job losses, they have to trade with us. I'm expecting most EU countries wanting avoid as many job losses as possible. Doesn't really matter who's got the most leverage. The optimum strategy for both is low/no tarrifs
- refulgentis 10y agothe OP's proposition implied that it is the EU's dominant strategy to cut the U.K. a punitive deal that trades off short-term pain for the long-term pain of dissolving by attrition due to other nations leaving.
- intended 10y agoThe optimum strategy would be to create a regional organization with standardized trade rules, tariffs and other co-ordination structures. Since it is clear that the optimal economic outcome is not being selected, the optimal Political outcome will win. EDIT: to elaborate on what I mean. I think that this event has more to do with political points being earned, and poor leadership than it has to do with actual good economic sense. In such an arena, most of what the HN crowd tends to be focused is less applicable. What I expect to happen is that life will continue as normal. Any premium which was built into the Pound due to reduced transaction costs with the EU will be priced in very quickly. What matters is what penalties the EU decides to apply on the UK, in order to set a precedent. I expect the precedent to be onerous - sufficient for the UK to pay with its larger economy, but much harder to cover for any smaller state planning to leave. Unfortunately this is the worst kind of conjecture - guesswork by someone not currently in the market.
- craigyk 10y agoI'm not sure this is a strong counterargument.
- paloaltokid 10y agoWhen talking about trade deficits, I always like to remember what one of my econ professors said about treating them as scorecards, which is usually misleading. Exports are things we sell, imports are things we get to keep.
- philhartmanonic 10y agoFor real. Any time I hear popular macroeconomic metrics, I become deeply skeptical of whether there's gonna be anything worth listening to. It's like taking your temperature. Sure, it could mean you're going to die. Could also mean you've got a healthy immune system fighting off a disease. Could mean it's time to stop wanking in the sauna.
- mrb 10y ago"imports are things we get to keep." This is not true at all. Food is eaten. Energy gets used up. Electronics depreciate (very) quickly. Most physical goods wear out. Etc. The only imports you get to "keep" long term are a few things like gold, cement, etc.
- Neeek 10y agoI thought the sentiment was that export =/= loss, less the idea that you can keep imports forever.
- lottin 10y agoAnother way to view it is as the difference between a country's production and consumption. A trade deficit implies that the country consumes more than it produces, while a trade surplus is the other way round.
- ZenoArrow 10y agoI don't know how you come to that conclusion. The UK has a trade deficit with the EU, which means we buy more from the EU than we sell to it. From the EU perspective, the UK is a good customer. Like it or not that counts for something.
- bayesian_horse 10y agoWhere are they going to get their stuff then? And with what currency? Apparently the pound just fell to a century-wide low...
- ZenoArrow 10y ago> "Where are they going to get their stuff then?" Wherever the UK citizens choose to, just like it's up to EU citizens whether they want to buy from the UK. We have a global market, (for the most part) anyone can buy anything from anyone else. The UK is likely to experience price rises for EU goods, and the EU is likely to experience price rises for UK goods, but if customers still want a particular product and can afford it even with the price rise then they'll continue to buy it. > "Apparently the pound just fell to a century-wide low..." That's just the markets reacting to uncertainty. The future is indeed more uncertain, so it's to be expected, but uncertainty does not necessarily mean a downturn in the long run.
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- tn13 10y agoI find the whole argument X needs Y foolish. It is so much similar to Donald Trump's China hatred. Members of EU benefit every-time they export something to a large market such as UK (e.g. Cars). Members of EU benefit each time they willingly import something from UK (e.g. Tea). Either ways if EU wants to protect interests of its members it makes sense to trade with UK just the way it did in past. Any "revenge" is likely to hurt EU members whether or not it hurts UK. UK survived before EU and will continue to survive beyond EU too. In fact I think with better immigration policies and freedom from red tape of EU, UK will be better off economically. The very presence of EU in my opinion is against principles of democracy. People of England basically accepted restrictions coming from Brussels who were not voted for by them. >In exchange for access to the common market, Britain had to accept an external tariff and, over time, a deluge of regulations from power-hungry Brussels. The former makes imports more expensive in Britain, while the latter makes British exports less competitive globally. > Jean-Claude Juncker, the current president of the EU Commission, summed up the decision-making behind the introduction of the single currency thusly: "We decide on something, leave it lying around and wait and see what happens. If no one kicks up a fuss, because most people don't understand what has been decided, we continue step by step until there is no turning back." [1] [1] http://humanprogress.org/blog/britains-democracy-is-a-sham http://humanprogress.org/blog/britains-democracy-is-a-sham
- anonymousDan 10y agoHow is that in my way different to how laws are drawn up in any other country? If I, as a Londoner, voted for a labour mp but am then forced to accept laws imposed by a majority Tory government, then what's the difference?
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- sleeping_pills 10y agoWhy do most Brits still assume the UK is a large market compared to the rest of the EU? The UK is no longer the empire it used to be, it is weak on it's own. The UK GDP is about ~$2.5 trillion, the EU GDP (sans UK) is ~$12 trillion. The UK economy is puny compared to the mainland Europe. I very much agree that a good trade deal would be beneficial for both sides, at this point the EU is under strong pressure to make an example out of the UK secessionist tendencies and the power is squarely on the European side.
- Shivetya 10y agoI am quite certain the exports will still go there, but to say its not true ignores the true financial impact which is other countries will consider leaving. That is the big bugaboo and cannot be under estimated. The ideals of the union certainly haven't been held up with what has actually occurred. The fear factor being put out about doom and gloom for UK people's is mostly engineered by those who profit off the union and don't see the same margins with a separate UK or worse other drop outs. With a union marginal countries can be propped up to great profit for the financial groups but without one, who knows.
- MustardTiger 10y agoYou just confirmed what the person you replied to was saying. Having a trade deficit is why the EU needs them. They buy all of the EUs goods.