Should I stay or should I go: me and the EU Referendum
Sean Fleming
103

This is one of the worst analyses I have read.

The simple matter is that the EU is primarily an import/export duty free zone for members, and usually these arrangements are simple affairs that do not have much in the way of ongoing costs between members, but everybody benefits because of the incentive to trade. The EU on the other hand requires members to pay in 1% of GDP (first in the form of import duties on goods imported from outside the EU) with the balance made up from taxation. The EU then pays out money (after deducting 6% for its own admin costs) in the form of farm subsidies, development grants and other forms of funding.

In the case of the UK, the annual amount received is only around 0.25% of GDP, which is the lowest of all countries. Even Germany gets 0.49% of its GDP. Since the British have always had such a bad deal the EU has granted the UK a rebate of one third of this amount meaning that the UK pays in a net amount of only 0.5% of GDP. Hence the value of the net contribution of around £9 billion a year, or £180 million a week, which is still a lot of money however you try to dress it up considering that this is disappearing for no obvious benefit to the UK.

The reason is it is a bad deal for the UK is that the UK only exports £230 billion to the rest of Europe, and £30 billion of that is to Ireland with whom we have a free trade agreement that predates the EU/EEC, so we only get additional duty-free benefits on £200 billion of exports. Since we joined the EU the world has reached various agreements on trade which mean that the average rate we would pay on on any trade governed by WTO rules would only be 4%, so we are actually paying more in net contribution to the EU than we would lose in import duties if there was no free trade agreement, and at the same time we are agreeing not to impose any import duties ourselves.

Even worse, we agree not to impose any duties on the $340 million we import from the EU.

This is a bit like paying for the membership of a golf club and not playing golf, or the tail wagging the dog. UK-EU trade is currently 43% of UK exports and is expected to fall to 37% by 2030 (PwC forecast), or 34% if we only look at non-Irish trade because Ireland is covered by another free trade agreement. That amounts to about 11% of our total GDP, yet for every £100 of GDP whether that is domestic trade, non EU exports or EU exports, we have to pay £1 to the EU. That is the same cost as a 9% duty, although the incidence is different because the cost falls on the whole nation rather than just the exporter.

Even worse we are tied into import duties to protect French farmers (50% duties on food from Mercosur and Africa), German solar manufacturers (duties up to 111% on Chinese solar panels despite the EU supposedly wanting us to invest in renewable energy, but actually being very happy to take the import duties for itself and rely on member countries using tax breaks to encourage their acquisition despite the import duties), and a host of other measures which make our lives more expensive.

On the other hand I can see why other member states see the EU differently, particularly the longer term members:

Germany, with $750 billion of EU exports, a duty free zone more than pays for their 1% membership fee.

France, not only does France benefit from CAP, but the import tariffs on food prop up its farmer’s incomes, effectively funded by EU consumers.

Belgium and the Netherlands: because of the vast amount of transhipment and re-exportation through Rotterdam and Antwerp, these countries have a high volume of EU exports relative to the sizes of their economies.

Italy and southern EU countries: Development grants.

Accession countries: Cohesion funds and farm payments. In the case of Poland, representing 5.6% of GDP.

Worth also remembering that the EUR12 billion admin budget is spent mostly in Brussels where it adds 2% to Belgian GDP and also in Luxembourg where it adds about EUR 3,000 per capita (c.4% of GDP).

There are no such obvious benefits for the UK.

So there are billions of reasons for Brexit without resorting to mentioning migration, democracy, sovereignty, security or WWIII.

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