Cameron says free trade is in the UK's DNA. Is it in his?

If David Cameron really believes that free trade is in our DNA, he should show it and leave the EU

Do you believe it enough to prove it Mr Cameron?
Rory Broomfield
On 13 November 2012 17:00

At his Mansion House speech, the Prime Minister said that free trade is in the UK's DNA. If this is true, he should leave the EU.

The UK has a history of free trade. Ever since the Corn Law debates in the 1800s it has been a policy that UK governments have sought to enact. However, since the UK joined the European Union it has been locked into a customs union that restricts it from trading freely with the world.

This, ironically enough, also includes the UK's trade within the EU. Many pro-EU advocates will invoke the Single Market as a bastion of free trade between the UK and what is now the EU26. It is not.

As the economist Ruth Lea said at a Bruges Group conference last week: “regulations are intrinsically part of the Single Market... [its] costs outweigh the benefits.”

In fact, the British Chamber of Commerce (BCC) seems to agree. Taking its own figures from the Chamber’s “Burden Barometer”, Ruth Lea and Brian Binley MP have calculated that the cumulate cost of EU legislation since 1998 was £60.75 bn – 68.8 percent of the BCC's total cost of regulation to the UK. This is for only 10 percent of GDP trade with the EU.

The natural conclusion is that the Single Market is not a free trade area and is against the historic principles of UK trading relations.  

But what about trade externally with the world (you know – that bit of the planet that is growing at over 5 percent a year)? 

As alluded to earlier, the UK is locked into a customs union that means that, when signing a free trade agreement, it has to have the agreement of the other EU member states.

But is this a problem?

Yes. According to the European Free Trade Association the EU currently has free trade agreements with over 30 countries across the globe; nevertheless, there are significant problems to the UK negotiating as part of this block.

The first is that the UK's economy is different to that of the other 26 nations in the EU. Unlike countries like Estonia, Latvia or Greece, the UK has a huge financial sector that generates £35bn of net exports per year - representing 11-12 percent of tax revenue to the UK. This means that it is in a very different position on what it wants (and from whom) when it comes to negotiating a trade deal.

Another issue is that of timing. You might have read recently about the “end of the banana wars" between the EU and 11 Latin American countries. Well, this trade agreement took 20 years to complete and will take a further eight years to phase in. Furthermore, the EU has been in free trade negotiations with Canada since 2009 and with India since 2007. These are taking their time and illustrate that the EU is, rather than a facilitator of trade, just another road block.

So would we be better off forming trade agreements independently?

Again, yes. These deals could be done quicker, with greater amounts of ease, and be negotiated with the best interests of the UK and the other party at heart if they were done bilaterally rather than as part of the customs union.

To take an example, the European Union now wants to start negotiations with the United States over a free trade deal that has been on the cards for a number of years. A free trade deal with the US could benefit the UK because, unlike its £46 billion annual trading deficit with the EU, it maintains a £20 billion trading surplus with the US.  It means that if the UK were to achieve a free trade deal with the US, it would be in an even better position to sell its goods and services in a market that is a net income generator for the UK.

However, because of the EU, the UK will be negotiating with the US alongside the powerful agricultural lobby in France (that won't like a deal on wine), the dominate car manufacturers in Germany (that won't like one regarding cars) and the influential fashion houses of Italy (who wouldn't like one concerning... you get the idea).

The UK would have to be subject to a deal that helps the powerful lobbies in each respective EU nation – not excluding the US – and would dilute the benefits of any deal that it might be have been reached bilaterally between the UK and US.

It means that inside the EU we aren't able to trade freely and be able to form trading agreements that benefit the UK and that, in short, if David Cameron really believes that free trade is in our DNA, he should show it and leave the EU. 

Rory Broomfield is Deputy Director at The Freedom Association and tweets at @rorybroomfield

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