This week in Brexitland, December 15th, 2022

The government’s “£800 billion in new global post-Brexit trade” claim debunked - and why it’s so important to lay it out as a falsehood

When I started this Substack, I did worry a little that I might run out of things to say about Brexit. That the news about it would dry out and I’d get stuck. As it happens, this has never come close to being the case - there is in fact so much Brexit related material to talk about, the problem every week is what to put in and what to leave out. For instance, in this edition I could mention James Cleverly’s plan of finding any friends we can in a post-Brexit landscape, looking past human rights abuse along the way. I could review Richard Darch’s “Welcome to Brexit Island” photographs, demonstrating the light it shines of how little Brexit has done for people in poorer parts of Britain beyond a bit of chat and some broken election promises. I could talk about Jeremy Hunt’s proposed reforms to the way the City functions based on my prior work on EU regulation.

Yet I couldn’t resist looking in depth at the government’s claim of 71 new trade deals signed post-Brexit, with the added claim that they add up to £800 billion of “new global trade”. Full Fact, amongst others have written up a good debunking of these figures. However, I still think there is more to be said here and going beyond simply tearing down what a falsehood these numbers represent, getting deeper into what this means for Brexit’s future as a project.

First off, the basics. When the UK was an EU member, we didn’t have trade deals of our own. The EU negotiated and signed all trade deals on our behalf. One of the great claims made by Brexiters before the referendum and indeed, unlike most of their other pre-2016 claims, one they are sticking to still, is that we could have much better trade deals if we negotiated them ourselves. The logic being, the trade deals done by the EU have to be created and agreed with 27 countries in mind, whereas if the UK government did them with only Great Britain and Northern Ireland to worry about, surely that would result in more tailor-made results.

This carries with it some intuitive logic. Yet the theory behind it is brought down by two massive problems. One is that the EU is large and the UK much, much smaller. Size matters a lot in trade deals. The US is able to sign trade agreements that are heavily slanted toward themselves because everyone wants to do a deal with them, as they are the largest free trading economy on Earth. The EU is smaller than the US in economic terms, but still of a relative size. For instance, the US claims almost a quarter of the world’s entire GDP, with China making up about 18% and the EU about 15% (this varies year on year, obviously). By comparison, the UK makes up between 2 and 3% of the world’s GDP. If you’re bigger, you get to demand more because people want access to that larger slice of the world economy on the most favourable terms possible.

The other massive problem is that it turns out the UK is, at least so far, really, really lousy at negotiating trade deals. To be fair, there have been several things going against the UK, all of them changeable over time. For a start, the UK hadn’t negotiated a trade deal of its own for many decades. There was an inevitable rustiness present. You can see it in things like “The Royal Yacht” plot - this notion that trade deals are done round a table with three or four diplomats over port and cheese, as if it were 1823.

It hasn’t helped that the UK government has had a tendency to put some fairly dense people in charge of the Department for International Trade. I mean, Liz Truss held the position for over two years, signing some truly bad deals along the way. If we’d put more competent individuals in charge of the department early on, perhaps we could have got a little further.

But only a little further. The problem of relative size is a colossal one to overcome, as we’ve witnessed time and again already. It isn’t surmountable since we can’t make the UK any larger than it actually is.

71 deals, £800 billion

The claim that the UK has signed 71 trade deals is technically true in one sense. There are four brand new trade deals. Japan, New Zealand, Australia and the new FTA with the EU. The other 67 are “rollovers” - this means that the nations in question agreed to continue trading with the UK on exactly the same terms as it did when the UK was an EU member. However, the £800 billion in “new global trade” figure has absolutely no validity to it whatsoever, as I will now demonstrate.

Let’s start with the rollovers. Because they are exactly the same as the deals we had when we were an EU member, by definition, there can be no Brexit upside or downside involved in these deals. Again, they are the exact same terms. So, we can eliminate them from any “new global trade” surplus straight off for that reason.

That leaves the four new ones. The Australian free trade deal hasn’t fully come into effect yet, but will do soon. Therefore, given it hasn’t been in place, we can’t give it any credit for having boosted trade in 2021. Next is New Zealand. Again, this one isn’t in force even now. So, again, we’re still at £0 in “new global trade” forged from post-Brexit trade deals in 2021.

Next we come to Japan. And the good thing here is, this one has already come into force. We can witness in reality the good work of the government in signing this deal! Except, it’s been a very poor showing so far. Trade with Japan has actually gone backwards since the trade deal was signed. As I’m trying to be as fair as possible to the government here, I will leave this one evens, as a favour to them, as opposed to going into negative integers. So, for the count, we’re still on £0 of “new global trade” in 2021 from post-Brexit trade deals signed.

This leaves us with only one trade deal left. Ah, but now we’ve hit the big one - the UK-EU trade deal. This is where most of the trade happens (that this is the case should have told them all something about Brexit in the first place, but never mind). What did this one produce in 2021?

This is where the government should be in some luck. 2020 was obviously a terrible year for trade because of the pandemic. Which means that even if it was all Covid rebound, 2021 should be better. Right? I mean, you do have the UK-EU FTA taking effect, but the government is saying that was great, so now problem there, surely.

I’ve got total trade, exports and imports with the EU in 2020 as £558 billion and in 2021 as…..£559 billion. That’s £1 billion in extra trade, not £800 billion. The government were only off by a factor of 800 in their calculations. Basically, the combination of upside from the rebound from Covid and the downsides of leaving the single market pretty much cancelled each other out.

Wait, but what about 2022?

An often cited thing online by Brexiters is that in raw numbers, exports from the UK to the EU have in fact gone up this year, not only compared to 2020 or even 2021, but also in comparison with 2019, the last year we were in the EU and Covid-free. What they never talk about is why this has happened, which is interesting.

After the FTA took effect, British exports to the continent nosedived. This was clearly a result of the change in trading conditions. But they quickly recovered - again, in raw numbers. This summer saw record export numbers from the UK to the EU, for instance. This doesn’t seem to immediately square with other data, though. Like how the number of different products that are being exported from the UK to the EU have massively diminished. This means that for whole sectors, things are much, much worse in terms of EU trade. Which begs the question: what is making up the difference? How and why have exports to the EU from the UK gone up in raw terms?

The upside comes entirely from what we’re doing with natural gas at the moment. In fact, if you take gas exports out, then exports from the UK to the EU are significantly down on what we’d expect if we were still in the single market. Exports of gas to the continent increased significantly in 2022, after Russia invaded Ukraine. For instance, we were seeing figures of £500 million in extra gas exported to the EU in a single month throughout the year.

The reason for this is that the UK has ways to import gas around the world and then feed it through a pipeline to the continent via Belgium. Given we’re having a gas shortage ourselves, why not store it, I hear you ask? Because the UK lacks the infrastructure to do so. We simply aren’t built to have to store a lot of gas and this is down to a lot of poor decisions by UK governments over the last decade or so. We are all set up to get what gas we can domestically, import it as well when the market is right and then sell it on when there is a shortage. Thus, why the trade figures look relatively healthy - we are selling the EU a hell of a lot of gas right now because they desperately need it from somewhere that isn’t Russia. We’re hoping in return we can buy some of it back off them at a decent price when the time is right.

Why all of this matters so much

The £800 billion figure quoted by the government is for 2021, not this year. And as I’ve demonstrated, there is no truth to it whatsoever. It’s simply the figure for total trade across all the rollover deals and the four new ones, the bulk of it (the £559 billion figure) coming from the EU. In fact, the one thing it demonstrates more than anything else is how much of our trade is still with the European Union as opposed to the rest of the world.

This matters for several reasons. One is that the government has to outright misrepresent trade numbers in order to try and make Brexit not sound apocalyptically bad. This should matter to everyone in Britain, whether you are a Leaver or a Remainer. If you’re a Remainer, you should be furious that they are trying to cover up for the failings of both their project and themselves by making stuff up. As a Leaver, you should be angry that they are failing to give the best account of the project, really see out its potential, by doing this poor a job of seeking international trade and then making up the numbers afterward to cover up their failure.

Whatever story they want to sell now, Brexiters have said repeatedly, both pre-2016 and since, that Brexit would substantially improve trade for the UK. The idea was always that we’d get a similar looking deal to the one we already had with the EU (except without having to pay into the budget any longer) and then we’d get great free trade deals with Australia, New Zealand, Canada, and of course, the USA. Except, that hasn’t happened. We’ve either got bad deals (Aus & NZ), a rollover (Canada), or nothing (the US).

If you want to say that Brexit wasn’t about trade, fine, make that argument. Just don’t turn around and try and distort things to make out like Brexit has been good for trade when in fact it’s been a disaster for it. I suspect they do this because they are running out of things for Brexit to really be about that are in any way achievable or positive. Follow the logic chain: Brexit’s not about trade, it’s not about immigration (which has gone up post-Brexit), it’s not about deregulation, since all of that is bunk. It’s not about saving money since we’ve lost more money than we would have paid into the budget if we were still a member. What are you left with after all that gets discarded? “Sovereignty”. Which, of course, is no good to you if you can’t use it to increase trade, improve your laws or make your economy better, none of which Brexit seems to have allowed us to do.

Lies like the £800 billion in “new global trade” are so important to highlight and dismantle because this is what Brexit clings to - misrepresentation of the facts. The project has delivered less than nothing so far and looks set to provide no benefits in the coming years. All those who support the project can do is tell a story of things going well by distorting reality. It’s the job of all of us to call it out whenever we see it.

Thanks for reading. If you haven’t subscribed, please do, and I’ll be back next week with the worst of Brexit.