Does the EU need us more than we need them?

Dover Ferry Terminal Image copyright Getty Images

“They need us more than we need them,” has been a recurrent theme in the Brexit debate.

After the referendum, the idea has been used to suggest the government could have taken a tougher line in the negotiations over the terms of the UK’s departure from the European Union.

Before the vote, it was used to suggest that the UK would have no difficulty retaining full access to the EU market, because it was in the EU’s interests to allow it.

German carmakers were often invoked as likely allies in achieving that goal.

In early 2016, David Davis, then a Conservative backbench MP who was later the Cabinet Minister for Brexit, said: “Within minutes of a vote for Brexit the chief executives of Mercedes, BMW, VW and Audi will be knocking down Chancellor Merkel’s door demanding that there be no barriers to German access to the British market.”

What is the balance of trade between the UK and EU?

One central element (though not the only one) in the argument is the fact that the UK has a deficit in its trade with 27 EU member countries.

That is: they export more to the UK than the other way round.

So if there were new barriers to trade, the 27 have more sales of goods and services at risk than the UK does.

New barriers could arise as a result of a no-deal Brexit in the near term, or in a negotiated future relationship that gives less market access than currently prevails.

Even the much vaunted “Canada deal” with additions would involve some new hurdles for exporters to jump.

Depending on exactly what deal, if any, is achieved those barriers would include some combination of tariffs (taxes that are applied only to goods traded across borders), customs procedures and regulatory barriers, such as product standards and authorisation to provide services.

The basic facts of the trade balance are that yes, the UK does certainly does buy more from the 27 than the other way round.

The UK had a bilateral trade deficit to the tune of £67bn in 2017. That breaks down to a larger deficit of £95bn for goods, but a surplus of £28bn for services.

So in total, the amount of exports potentially at risk from new trade barriers is greater for the 27 than for the UK.

But that is a rather crude measure of how much each side has to lose.

Let’s take another example to illustrate the point.

What does Andorra have to do with Brexit?

The EU – with a population of more than half a billion and an annual economic activity or GDP of around £15 trillion –

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