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EU: UK Trading Deficit

Volume 745: debated on Tuesday 21 May 2013


Asked By

To ask Her Majesty’s Government what steps they are taking to reduce, and raise public awareness of, the United Kingdom’s £46 billion annual trading deficit with the European Union, as set out in the Treasury Pink Book.

My Lords, the UK’s current trade balance with the rest of the EU reflects a range of factors. The recent rise in the deficit reflects the shrinking EU market, not a loss of UK market share. The UK is pursuing a range of policies—supporting measures to stabilise and revitalise the EU as well as encouraging firms to internationalise—which will boost UK trade with the EU.

I thank the Minister for his very considered reply. Indeed, we must all try harder to export. Does he agree that our relationship with the EU is changing and that the strength of our trading position would be a key factor in any future negotiations? Should it not be widely known that while 3 million of our jobs are reciprocal with our trade with the EU, the continuing £46 billion a year trade imbalance means that overall 4 million of its jobs rely on us? We are indeed its biggest customer. Is this not likely to lead to sensible bilateral trading arrangements similar to those that we have with the rest of the world, as it needs us rather more than we need it?

My Lords, our trade with the European Union, and the deficit of £46 billion, is counterbalanced by our surplus on invisible trade. Our membership of the EU is still in the best interests of the UK. It provides tariff-free access to a market that is worth around £11 trillion and has half a billion customers, and its trade with the UK enables 3.6 million employers in this country.

My Lords, the EU trade deficit is all very well, but do the Government agree that to tackle our overall trade deficit we should be encouraging exports to countries such as India? I despair to this day that when I ask businesses in this country if they export to India, only a handful of hands go up in an audience of 300. Will the Government consider rolling out the GREAT Britain campaign, which is doing an excellent job in promoting Britain abroad, here in the UK to give our businesses confidence to export to countries such as India?

My Lords, for the long-term economic health of the UK we need to develop further our economic relations with fast-growing, emerging markets, including India, which the noble Lord mentioned. This is why the Prime Minister has been leading trade missions to these countries. We are doing everything possible to support our trade with emerging markets, including India, but we are also supporting a large number of UK companies, through UKTI, to help them to internationalise and to do more trade with those emerging markets.

My Lords, are we not missing the main point in this Question? Europe largely has the euro, which has devalued by 30% against the pound sterling since it was created. Why, with that level of devaluation, have we not had the competitive advantage in our trade relationships with Europe? Should not the answer to this Question really be a critique of British industry and British commerce for not taking advantage of the competitive devaluation?

My Lords, part of the reason for the devaluation of the euro is the crisis the euro is going through. This Government are committed to creating a competitive economy that is fit for purpose in the 21st century.

My Lords, I am sure the Minister will agree that the argument the noble Lord, Lord Vinson, has made is the one that people from his Benches make who advocate us coming out of the European Union. I am sure he would accept, and perhaps he can confirm, that one of the answers to the noble Lord, Lord Vinson, ought to be to think what would happen to our exports to the European Union were we to come out of it, let alone what would happen to our inward investment.

My Lords, just under half our exporting is to the European Union. We are working to continue our trade relations with the European Union, and we really need to ensure that we reform it to make it more competitive and accountable. It is crucial that we continue to trade with it and that we increase our trade with it: hence, we have 27 UKTI offices in those countries.

My Lords, these answers hardly fill one with confidence, do they? UK Export Finance was set up specifically to help all businesses to export more, but let us look at the results. Over one year—2011-12—the number of small and medium-sized companies receiving help from UKEF has been the magnificent total of 21. Cannot we do better than that?

My Lords, this time last year I asked for an ad-hoc cross-party committee, chaired by my noble friend Lord Cope, to be set up. We had a report in the early part of this year, and received a response from business this week on what we can do to help our SMEs to export more, including how the UK Export Finance scheme can work more effectively for those who export in those countries.

My Lords, can my noble friend tell me whether there is any other trading bloc in the world with which we have a similar sized trading deficit, and which on top of that charges us money for the privilege of being part of it?

My Lords, I expected that question from my noble friend. There is no other country in the world with which we have such a huge trade deficit. We have it with the European Union, but we have a large number of benefits as well. The £7 billion contribution that we pay to it gives us the benefit of free trade and a free market to other parts of the world. However, some of the huge deficit that we are talking about is offset by the invisible trade that we do with it. Most importantly, 20% of the goods that we import from Europe become part of the raw material that we export elsewhere.

My Lords, what prospect do we have of securing a successful EU/USA trade deal in the future if we are to absent ourselves from the negotiations with our EU partners? Has the Minister yet made contact with the successor to Pascal Lamy of the World Trade Organisation, Mr Azevedo, to secure the UK’s position in the WTO?

My Lords, in fact, we are working with the European Union to negotiate a reformed European Union. We have moved on because in a global race we need to ensure that Europe is more competitive with respect to trade.