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EU: UK Balance of Trade

Volume 740: debated on Wednesday 14 November 2012

Question

Asked By

To ask Her Majesty’s Government what is their estimate of the United Kingdom’s balance of trade with the European Union, once shipments in transit through the ports of Antwerp and Rotterdam to non-European Union destinations are excluded.

My Lords, in 2011 the UK’s trade in goods with the EU was in deficit by around £43 billion, while in relation to services UK trade was in surplus by around £16 billion, so the overall deficit was around £28 billion. I am unable to provide data excluding shipments in and out of Antwerp because under international guidelines firms are required only to state the final destinations of the goods they are exporting. Asking businesses to collect the detail of the journeys that goods take en route to their final destinations would significantly increase administrative burdens and hence push up costs.

That Answer confirms the fact that this country runs a trade deficit with the continent of Europe. To that extent, our membership of the European Union is of greater value to it than it is to us. Will that not considerably strengthen our bargaining position when we come to renegotiate the treaty of Rome?

My Lords, I think that there are a number of assumptions in my noble friend’s question. I know that he has devoted many years to this subject, but there is an assumption that trade deficits are in themselves bad. We run trade deficits with some countries and trade surpluses with others. Running trade deficits and trade surpluses is the basis of free markets. I am sure that my noble friend would support that. On negotiations, I would say that there are many benefits to being a member of the European Union, so simply to assess the strength of that relationship on the basis of our trade figures is not the correct way forward.

My Lords, does my noble friend agree that, irrespective of how you interpret the data, which are contested, according to the Office for National Statistics, since the 1980s the UK’s bilateral trade with EU member states has more than trebled, while according to UKTI and the UN, the UK is the number one destination for inward investment? Those are all things that we should be extremely proud of in terms of our relations with EU member states.

My noble friend makes an important point and perhaps I may add to her statistics. Membership of the European Union gives us access to a market of more than 500 million consumers and more than 45% of UK exports are to the European Union. The point made about foreign direct investment is an important one. In 2011 the UK attracted a fifth of all foreign direct investment projects in Europe and half of all the European headquarters of non-EU firms are based in the United Kingdom.

My Lords, I declare an interest as a farmer. Is my noble friend aware that our balance in food trade with the EU in 2011 was a deficit of £13.6 billion?

I was not aware of those specific issues in relation to food trade. However, I go back to the general point. There will be some areas, predominantly in goods, where we run a deficit but there are other areas, in which we are very good, such as services, where we run a surplus.

Does my noble friend agree that although the United Kingdom has a physical trade deficit with most advanced countries in the world, we make up for that in considerable financial services?

I do agree. The basis of the free market is that economies focus on those things that they are best at. It would be unusual for us to produce everything if it was not competitive for us to do so. We produce those goods and services in which we are competitive and for which we have a reputation around the world. We must continue to focus on those.

My Lords, it is a mistake to value or devalue Europe on the grounds of finances alone. Is it not the case that the European Community has the opportunity to have a preponderant voice in international affairs? As the high representative is a Member of this House, would it not be a good thing if occasionally we could hear what positions she takes on behalf of Europe?

The noble Baroness is on a leave of absence, and I think everybody in this House would agree that she does an extremely valuable job. It is true that the relationship extends far beyond just the trade relationship. I am sure my noble friend would agree, as would many noble Lords, that it is a relationship on which we can exert influence, and one that I and many in this House believe needs rebalancing.

My Lords, does the Minister agree that although it is very advantageous for us to be a member of the European Union, it is a positive advantage that we are not a member of the euro. Is it not time the Government acknowledged that Gordon Brown deserves a lot of credit for having kept us out of the euro? Credit where credit is due.

It may well be that the noble Lord’s understanding of history and circumstances is very different from mine. From what I recall—and I am sure many Members of the House would agree—if anybody deserves great credit for fighting the great campaign to keep us out of the euro, it is my current boss, my right honourable friend the Foreign Secretary.

My noble friend told the House that 45% of our exports go to the EU. However, if quite a bit of that 45% is going to Antwerp and Rotterdam for onward shipment to countries outside the EU, would she accept that the 45% figure is not accurate?

There is some writing on this as to whether the statistics are accurate because of the “Antwerp effect” where goods are actually for another destination but show that they are passing to Europe. I asked officials specifically about this matter and they informed me that the information they have from BIS is that the ONS does record the final destination. However, I cannot be specific as to how accurate these figures are.

My Lords, I wonder whether the noble Baroness will reflect on her answer to my noble friend Lord Dubs. Was it the last Labour Government who took the decision in relation to the euro?

Will my noble friend, who has given us a bravura performance, put it on record that the man who deserves most credit for keeping us out of the euro is John Major?