Britain is bound to a Single Market at the expense of freedom to trade

HOW often do we hear politicians claiming that “half our exports” go to the EU? I’m not sure this statistic was ever properly true. The data has been distorted in two ways. First, there is what economists call the “Rotterdam effect”: many British exports destined for non-EU markets are routed through Antwerp and Rotterdam, thus showing up in the raw numbers as exports to the EU. Second, “UK exports to the Republic of Ireland” include goods from overseas that are shipped through Belfast.

Be that as it may, the EU now accounts for a minority of our trade including invisibles. The Treasury Pink Book, the OECD, the European Commission: all now put the figure at below 50 per cent. The latest figures from the Office of National Statistics show the Eurozone accounts for just 47.1 per cent of our exports of goods.

Never mind a percentage point here or there. The trend is unarguable. Every continent is growing except Europe. Our exports of goods to the Eurozone fell by 3.7 per cent in the last three months for which we have data, compared to the same period in the previous year, while our exports to the rest of the world rose by 6.8 per cent.

It’s not just that developing countries grow faster than industrialised ones. The EU has also been comprehensively outperformed by the US and by what we used to call the Old Dominions.

In June 2012, the Commonwealth’s economy overtook the Eurozone’s. According to the International Monetary Fund, the countries within the single currency will grow at an average of 2.7 per cent over the next five years – which strikes me as optimistic – while the Commonwealth will surge ahead at 7.3 per cent.

These figures destroy the premise on which we joined the EU. Our trade has been redirected, by government intervention, away from the markets to which we are connected by language and law, habit and sentiment; markets which, unlike those in the EU, are growing.

It never made sense to join a customs union with similar industrialised economies at the expense of the raw producers of the Commonwealth. The whole point of a market, after all, is to swap on the back of differences. But the latest figures are spelling out quite how wrongheaded our choice was.

I’m not denying that Europe matters: it still makes up a hefty share of our exports. But the EU is becoming one among many of our markets, alongside the countries that make up the North American Free Trade Agreement, Mercosur and so on. No one argues that we need to merge our political institutions with theirs to be able to sell to them.

Consider Switzerland. The Swiss declined to join the EU, instead negotiating a series of sectoral trade accords covering everything from fish farming to lorry noise. As a result, they are fully covered by the four freedoms of the single market – free movement of goods, services, people and capital – but are outside the Common Agricultural Policy and the Common Fisheries Policy, and spared the budget contributions which EU members are required to make to Brussels.

Has their trade to the EU suffered? Hardly. In 2011, their exports to the EU were, in per capita terms, 450 per cent of Britain’s. It’s true that Swiss exporters must meet EU standards when exporting to the EU, just as they must meet Japanese standards when selling to Japan. But, critically, they don’t allow the EU to dictate their trading arrangements with third countries.

Although Switzerland tends to replicate most EU trade accords with third countries, it can and does go further when it feels that the EU has been unduly protectionist. It has signed a free trade agreement with Canada, for example, and is in the middle of negotiating one with China. Britain, by contrast, is dragged into trade disputes in order to protect the interests of some cosseted continental producer.

The Common External Tariff, which the UK must apply to its trade with non-EU states, now averages between 5 and 9 per cent – a higher barrier than we had the 1920s. We have, in other words, bought trade with a dwindling European market at the expense of trade with a growing global market.

People sometimes ask me what kind of renegotiation I’d be happy with. If I had to identify a single test, it would be this. Would the UK be able independently to sign a trade deal with, say, Australia? Grant that, and much follows. Deny it, and we condemn ourselves to decline.

Daniel Hannan is a Conservative MEP for South East England. He blogs at www.hannan.co.uk