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Are the Government’s facts on EU trade correct?


Please note: This post has been updated to reflect that what’s in question is not the Government’s calculations – rather their definition of what an “EU export” is in the context of the UK’s bargaining power post-Brexit. See update section at the bottom of the post for more details.


 

We’ve been doing a bit of our own fact-checking on the leaflet that the Government has sent to 27 million households in the UK.

The Government says that striking a good deal with the EU could be hard because less than 8% of EU exports come to the UK, while 44% of UK exports go to the EU.

ONS statistics confirm that 44% of UK exports do go to the EU (the other 27 EU countries combined). No problem there.

But…

Is it fair to say less than 8% of EU exports come to the UK?

We’re struggling to re-create this calculation using the Government’s referenced data sources. We are not saying they are wrong – indeed we hope they are not – since they’ve just printed and distributed 27 million leaflets. This is just a presentation of our findings.

Our Calculations

These calculations are based on the EU’s own export figures – directly from the European Commission itself – and they suggest that 14.6% of EU exports come to the UK.*

These are our workings:

Key assumptions:
1) The Government is referring to trade between the EU and the UK, so they are considering the EU to be a single trading entity. The EU’s exports therefore have to be the combined total of all EU countries’ exports to non-EU countries (i.e. “extra-EU28” export trade).

2) The UK can’t export to itself, so the UK’s contribution to the total EU exports figure should be deducted. UK exports to non-EU countries are £281 bn (€370 bn).

  • The European Commission tells us that the EU’s total exports (goods & services) to countries outside the EU were €2,468 bn in 2014. (Goods: €1,702 bn, Services €765 bn)
  • Deduct the UK’s contribution to this figure – €370 bn (corresponding to the ONS’s £281 bn)
  • Add the UK’s imports from the EU back in to the EU export total, and the EU’s total exports to countries outside the EU including the UK were €2,445 bn.
  • We know that the UK’s imports from the EU are £288 bn (€356 bn), so it suggests that 14.6% of EU exports come to the UK.*

 

The Government’s Calculations

The Government says its calculations are based on EU export data they have retrieved from the UNCOM Trade Database (for trade in goods) and the OECD’s trade database (for trade in services).

Why the Government has opted to use figures from two separate non-EU data sources seems odd when the EU’s own statistics are readily available – in one place for both goods and services.

The exact figure the Government gives is “7.8% of EU exports come to the UK” (2014).

  • We know that the UK’s imports from the EU are £288 bn (2014), so working backwards they have calculated that the EU’s total exports to non-EU countries (excluding the UK’s share presumably) is £3,692 bn. (€4,558 bn). £288 bn would then be 7.8% of the EU’s exports.

 

Are the EU’s exports to non-EU countries €4,558 bn?

The European Commission’s statistics says the EU’s total export trade was €2,468 bn in 2014. So how does the Government find it to be €4,558 bn?

Goods: They’ve reference the UNCOM Trade Database for trade in goods. We’ve had a look and it has an EU-28 exports of goods figure for 2014 is $2,339 bn (€1,764 bn). This is very similar to the European Commission’s value that it put on total EU export trade – €1,702 bn (within the 2014 exchange rate variation).

Services: They’ve referenced the OECD’s trade database for trade in services. The OECD give a figure of €1,685 bn for the EU28’s exports of services to the world. It also gives a figure of €920 bn for the EU28’s exports of services to itself. Deduct one from the other and you get €765 bn for the EU’s exports to non-EU countries. And this is exactly the same figure the European Commission puts on EU28 exports to non-EU countries.

So the UNCOM Trade Database confirms the EU’s exports in goods are €1,702 bn, and the OECD confirms the EU’s exports in services are €765 bn. Grand total: €2,468 bn.

 

Are they including intra-EU28 trade?

The EU (EC / Eurostat) states that it’s intra-EU trade in goods was €2,932 bn in 2014. (Eurostat). Add this to the extra-EU trade in goods (€1,702 bn) and the total is €4,634 bn.

The EU (EC / Eurostat) states that it’s intra-EU trade in services was €920 bn in 2014. (Eurostat & OECD). Add this to the extra-EU trade in services (€765 bn) and the total is €1,685 bn.

Add these together and you get a figure of €6,319 bn for the EU’s total intra-EU and extra-EU exports.

Deduct the UK’s Exports (intra-EU & ex-EU) and you get €5,692 bn.  Add back in the now exited UK’s imports from the EU, and the UK would be the recipient of about 6% of these.

** Update **

Following some friendly dialogue on Twitter, it appears the Government’s calculations do include intra-EU trade (and may not be using the most recent data).

In other words, an intra-EU trade between France to Germany is also counted as an “EU export”.  That very same transaction therefore is also an “EU import”.

This type of “EU export” doesn’t actually leave the EU at all, so would most people consider it fair to describe it as an EU export?

The EU itself doesn’t include intra-EU exports when it describes and values its position in world trade and nor does Wikipedia.  As our commenter Andrew below also highlighted  – the EU is quite specific saying it calls intra-EU flows “dispatches” and “arrivals”, rather than exports and imports.

This is one of those points that could be debated endlessly without adequate resolution – the EU is both a single market “trade bloc” and a collection of 28 individual countries.

To provide a voter a balanced perspective it would be best to present both figures, and help them to understand the difference – particularly when they are being used to argue how important or unimportant the UK is to the EU.


Jonathan Portes of NIESR was good enough provide his view on the matter – saying that both are valid calculations providing you make it clear how you are making the calculations.  He added that “the government leaflet should have made absolutely clear what it was doing given that this is a complex area and it didn’t. But it’s not flat wrong.”  He goes on to say he prefers the use of exports as a share of GDP as an indication of relative bargaining power. In which case its 3% for the EU and 13% for the UK.

*Earlier calculation updated to correct an error brought to our attention by Jack Schickler.


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9 Comments on "Are the Government’s facts on EU trade correct?"

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[…] 8% figure is incorrect and should be around 14%, see http://www.pollstation.uk/eu-referendum/are-the-governments-facts-on-eu-trade-correct/.  Refer also to point 7 […]

Andrew
Member
5 years 6 days ago

Luke, it seems to me that you if we want to find {EU-27 exports to UK} ÷ {total EU-27 external exports}, then we need to add {EU-27 exports to UK} to {total EU-27 exports outside the 28}.

You have done 365 ÷ 2098 = 17.4%, but I think you should do 365 ÷ (2098 + 365) = 14.8%.

Correct me if I am wrong,

Andrew

Luke
Member
5 years 6 days ago

No, you’re spot on. It was pointed out so we corrected it today if you refresh the page.

Andrew
Member
5 years 6 days ago

Thanks Luke, I have made use of your work here at http://doortofreedom.uk/response-to-government-leaflet-part-3-8-of-eu-exports, giving you most of the credit.

Andrew

Luke
Member
5 years 6 days ago

Thanks for the credit Andrew. I feel it’s been a valuable exercise and shone a light on something that most skipped past. The Government’s could have used the 14.8% and made the same point with respect to comparative bargaining power.

Andrew
Member
5 years 6 days ago

I just found this also at http://trade.ec.europa.eu/doclib/docs/2013/may/tradoc_151348.pdf (which you reference above): “Outward flows from a Member State to a non-member country (extra-EU) are called ‘exports’; outward flows from one Member State to another (intra-EU) are called ‘dispatches’. Inward flows into a Member State from a non-member country are called ‘imports’. Inward flows into a Member State from another Member State are called ‘arrivals’.”

So the EU doesn’t even refer to intra-EU trade as exports and imports at all, apparently.

Andrew

Luke
Member
5 years 6 days ago

Well spotted Andrew. Clearly the EU thinks describing intra-EU trade flows as “EU exports” and “EU imports” is stretching things.

Andrew
Member
5 years 6 days ago
Going by Eurostat’s practice (http://ec.europa.eu/eurostat/documents/2995521/7224419/6-31032016-BP-EN.pdf/b82ea736-1c73-487f-8fb5-4954774bb63a and the footnotes on both tables) the EU itself defines ‘EU exports’ and ‘EU imports’ as extra-EU exports and imports. This seems much more natural; personally, I did a double take when I read that our government was including intra-EU trade. So this EU practice adds to the feeling that the government should have made it clear if they were defining ‘EU exports’ differently. I agree with Jonathan Portes that the more relevant denominator, with regard to bargaining power in a post-Brexit negotiation, is GDP. This gives a measure of how much it matters to… Read more »
Peter Frost
Guest
Peter Frost
5 years 5 days ago

The Government’s figures re imports/exports are misleading. UK exports to the EU are listed as around £200 Billion (commentators have stated that UK World-wide exports that pass through Amsterdam/Rotterdam are claimed to be exports to the EU and a 10% reduction should be applied). So, the UK’s exports to the EU are around £180 Billion. Imports to the UK from the EU are £288 Billion. Whatever slant is placed on the numbers, they need us more than we need them.

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