Scraping the Barrel

eu uk brexit negotiatiations

A critical overview of some recent claims on the impact of Brexit.

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Recent coverage of UK-EU trade has been mainly negative in the BBC and the Financial Times.  Both have focused on the difficulties faced by smaller exporters, who find it harder to send products to Europe given the red tape the block requires them to comply with.

Yet these headlines are framed in a deceptive way.  The FT frames the story in terms of the drop of “trading relationships” (ie. number of firms’ interactions) – with only the grudging acknowledgement that, in fact, there is no evidence of sustained decline in the broader picture of UK to EU exports, according to a report done by the generally Brexit-sceptical LSE.  The BBC barely acknowledges this lack of impact at all.

This is significant news.  It is particularly interesting that imports have fallen by 25% despite the fact that the government has continually delayed implementing checks.  The difficulties caused by checks therefore seem less likely to be the cause of economic woes than commentators supposed – why otherwise would British exporters, who face more checks from the EU, face fewer challenges than importers, dealing with a lighter-touch UK regime?

The broader EU-UK trade data are puzzling more generally – not least, UK exports by value to the EU jumped after the Brexit vote.  Changes in measuring and reporting methods, too, can have significant impacts on how the data appear.

In any case, the fact that there has been no sustained fall in export values is to be celebrated.  Critics of Brexit will now have to fall back the dubious assumptions of doppelganger modelling employed by the OBR (that we’ve criticised before) in order to find arguments that economic damage has actually occurred.

As we’ve argued before, EU membership did relatively little for the UK’s trade balance with EU countries.  The EU’s share of UK exports has generally fallen since 2006.  In the years since 2016, around 80% of growth in service exports came from outside the EU.  Facts4EU argues that EU trade deals did little in this regard for Britain: though the UK is predominantly a services-based economy the EU’s negotiators mainly struck deals that provided new access for goods exports, primarily benefiting the EU’s manufacturing nations.

By contrast, Britain could see gains from liberalising trade more broadly.  Yet as Australia’s outgoing High Commissioner outlined, British farmers are reluctant to embrace global opportunities, preferring instead the comfortable, protectionist EU mould.  While there is certainly something to be said for the benefits of promoting domestic agriculture as a source of food security, it is naïve to think that a population of nearly 70 million can be fed from such sources alone.  If Australian imports can help ease the pressure on consumer prices and preserve living standards, so much the better.

Thin Gruel

The Guardian recently ran a piece about a report by Thinktank UK in a Changing Europe.  UKICE argues that Brexit has increased the cost of importing food from the EU and that this has materially impacted consumer prices.

This needs to be set in the broader context of relative EU/UK food prices.  As the economist Julian Jessop noted on Twitter, prices as measured since January 2019 have actually increased by more in the EU than in the UK.  Moreover, the data also suggest that food price inflation rates have been lower in the UK for all bar a few months of the last two years.

It is of course possible, as the report’s authors point out, that without Brexit prices would be lower still, though the relative inflation rates suggest that EU membership is hardly an unqualified recipe for low food prices.  Equally, however, the protectionist attitude towards food imports outlined above could be blamed as a significant drag – preventing British consumers enjoying the full benefits of regulatory autonomy.

Vaccine Shortages – but not the ones you think

Lastly, there’s been an attempt to pin shortages of pet vaccines on Brexit.  It’s a slightly bizarre inversion of the usual narrative, considering the UK’s signal vaccination success during Covid.  There’s no particular evidence that Brexit-related “supply chain bottlenecks” have actually affected this sector and it seems far more likely that the re-orientation of the supply chain toward vaccinating humans over the last two years is the real cause.  Similar shortages may moreover be affecting other European countries.  Nonetheless, the evidence may be out there of yet another supposed “Brexit effect”: we’ll leave it to you to spot if you can.

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Briefings For Britain