Gove Boris Brexit conference

One key Brexit claim has always been that Britain will get a good deal out of Brexit negotiations because big countries like Germany won’t want to sacrifice trade with the UK.

The UK is easily Germany’s best export market: it had a $56 billion trade surplus with the UK last year (i.e. the value of exports minus imports). That’s almost a third of Germany’s trade surplus with the EU.

So why would they want to sacrifice that surplus in order to give the UK a bloody nose for leaving the EU – Brexiters argue.

During the Referendum campaign for example, Boris Johnson said it would be “insane” for Germany to put up trade tariffs against the UK.

But the claim is rubbish, as one German economist pointed out on Twitter today.

 

This is what he went on to say

 

Münchau asks: “Do you honestly think #GER would sacrifice a 56bn trade surplus with UK for anything as lofty as a principled position?”

First, a surplus is really not that interesting: car exporter to UK does not care if other parts of the economy do not import as much.

And even in negotiations, it does not matter: the econ goal is not a trade surplus, but to maximise consumption, investment, prod. growth.

If the UK threatens to bloc EU imports, UK consumers will suffer as much/more (ie the main source of growth in UK over last 3 years).

Second, lets have a look at what kind of exports go from Germany to the UK (in % of total GER exports to the UK).

Most is high-end manufacturing, the type that is less price sensitive. So the pain/downside for GER exporters will be manageable.

Don’t take it from me. Take it from the exporters themselves who argued for a tough stance vis-a-vis the UK.

“The UK is important market for GER car ind, but cohesion of EU27 & single market more important for us.” Wissman, chief GER car lobbyist.

Hold on, isn’t GER that geo-economic power that builds econ ties and lets its export interests dictate its foreign policy? Not so fast.

GER does focus on econ of geopolitics if 1) GER is not key to that geopol issue, and/or 2) if it’s not at core of GER geopol interests.

China is good example, where GER does not take the lead, but focuses on its econ interests on the back of/free-riding on US geopol work.

So what is the core of Germany’s core geopolitical interests? That’s right, the EU.

Russia threatened the EU’s security, and Germany pushed for sanctions (despite strong GER commercial interests & domestic resistance).

Brexit in Germany’s view is geopolitical vandalism, and GER core interest is now to strengthen Europe and the EU.

Main partner of #Germany in Europe is France (even more so now than before). So GER will keep French interests at top of its list.

In sum when it comes to Germany’s core geopolitical interests, like the stability of the EU, commercial interests take a back seat.

The full tweet storm is here. Christian Odendahl is chief economist at the Centre for European Reform.

So the Brexiters claim that Britain will do fine during EU trade negotiations is based on an entirely flawed premise.

But that shouldn’t come as a surprise really

  1. Besides which Germany has said clearly enough the UK can only have tariff free trade if they accept freedom of movement. They used the word NO in respect of the UK having full control on migration and free trade, and when Germans say no they mean no!

  2. However, all of these excellent facts and implications will have the same effects on Brexit supporters as all of the reports of Trump’s disgraceful behaviour and dishonesty have had on his support crowd of unthinking trolls – I am extremely sad to note.

  3. Two sort of people have voted brexit. .
    IQ lower than 80 and rich people who speculate against their own country

  4. Didn’t some UK Reps try to persuade German (car) manufacturers to lobby their government in favour of a good deal for the UK?

    From the description the EU official who made this public, I would say it had the opposite effect of what the UK Government wanted. Given the VW emissions scandal, I don’t think car manufacturers are in a strong position to lobby Merkel and co.

  5. Andrew Simpson says:

    TRAMONTI – outrageous comment. Brexiteers wanted their sovereignty back. Frankly, who cares about a bit of trade? Your comment is highly insulting.

  6. “Frankly, who cares about a bit of trade?”

    Yes, if there’s no food on the table you can always eat your blue/black passport.

  7. Andrew Simpson, we have our sovereignty. Now we have Brexiters trying to stop our sovereign Parliament from voting on whether we trigger A50 or not….
    ps If you don;t care about ‘a bit of trade’ then bang goes the AA rating – we used to have AAA+ before the lying Tories gained power. Also bang goes our power to borrow money, forcing interest rates up…

  8. Phil Chamberlain says:

    “Brexiteers wanted their sovereignty back.”

    One has to ask why this desire was SO much stronger among those who failed to reach more than a basic level of education.

  9. Reading the comments on here I realise just what a divided country we live in. This country has been divided for decades but neither side sees it. Neither deals with the issues. I didn’t get to vote due to my living arrangements and I am so glad I didn’t.

  10. Anonymous has a point. This is also class warfare with an economic constitutional law twist. The “get it”s versus the “can’t be bothered trying to understand it”s.

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