“The rest of the world is using WTO rules. What is so special about the European Union? Particularly as its economy is shrinking and we are actually trading far more with the rest of the world and that is increasing every year”
That’s what Brexit-backing Labour MP Kate Hoey told the Express at a Labour Leave event last week.
But two out of three of her claims are wrong.
“The rest of the world is using WTO rules”
Many prominent Brexiteers – including Wetherspoons boss Tim Martin – have said that leaving the EU without a deal would not be a problem because, they say, we’d be able to fall back on World Trade Organisation (WTO) rules.
It’s true that 164 countries, including the UK, are members of the WTO and are therefore subject to its rules.
But if she means that the rest of the world is trading solely on the basis of WTO rules – i.e. without any international trade deals – Ms Hoey is wrong. In fact, there’s not a single WTO member operating on this basis.
Until recently, Mauritania was the only country without any international free trade agreements. But it’s now in talks with Brussels to gain access to EU markets alongside the Economic Community of West African States.
Perhaps Ms Hoey meant to say that the rest of the world trades with the EU on WTO rules. Even if that’s the case, we’re still not convinced. Here’s why.
In terms of tariffs, there are currently 24 countries that trade with the EU on WTO rules.
But crucially, many of those countries – including China, Russia, Japan, India and the United States – also have non-tariff agreements with the EU that are outside the remit of the WTO. These bilateral arrangements cover everything from the language used on wine bottles to plane safety.
The Institute for Government (IfG) points out that such agreements “go well beyond the terms of WTO trade” and that “if the UK left the EU with no agreements of any kind, then technically its relationship with the EU would be weaker than any of the EU’s main trading partners”.
And if there’s no deal with the EU, there’s no guarantee that we’d even be able to fall back on WTO rules. The Organisation’s director-general, Roberto Azevedo, warned in August that it is “very unlikely” that Britain will have secured the agreement it needs from all 164 WTO members by March 2019.
Kate Hoey said that “the rest of the world is using WTO rules”.
If she means that the rest of the world is trading solely on the basis of WTO rules, she’s wrong. There are no WTO members that do not also have at least one free trade agreement with another country or countries.
On a generous interpretation, Ms Hoey might have been talking about countries trading with the EU on WTO rules, of which there are currently 24.
But while these nations do not have a free trade deal with the EU, they do have a number of other bilateral deals that cover non-tariff policies like safety and quality standards. If this is what she had in mind, her claim is misleading without further context – and not relevant in a discussion about no-deal Brexit.
The EU’s “economy is shrinking”
This is wrong.
Early figures estimate that the EU’s economy grew by 0.3 per cent in the third quarter of 2018 compared to the previous three months. The same figures show an annual growth rate of 1.9 per cent compared to the same to the same quarter of last year.
And in case you’re wondering whether the EU is relying on the UK to boost its overall growth figures… it’s not.
In fact, between April and September 2018 (the latest quarter for which we have finalised like-for-like estimates), UK GDP growth was exactly the same as the EU average: 0.4 per cent. That’s lower than Germany, Portugal, Spain, Austria, Lithuania and Poland, to name a few.
Kate Hoey is wrong to say the EU’s economy is shrinking. Latest figures suggest an annual GDP growth rate of 1.9 per cent.
The UK is “actually trading far more with the rest of the world and that is increasing every year”
According to the latest figures from the Office for National Statistics the EU accounted for 42.6 per cent of UK exports by value in 2017. That leaves over 57 per cent of UK export values coming from the rest of the world.
On that basis, Ms Hoey is right that the UK trades more with the rest of the world than it does with the EU.
The cash value of UK exports to non-EU countries rose from £402.6 billion in 2016 to £464.1 billion in 2017.
And as a proportion of all UK exports by value, non-EU trade rose slightly from 57.3 per cent in 2016 to 57.4 per cent in 2017.
Kate Hoey is right to say that we trade more with non-EU countries than we do with other EU member states. We also think it’s fair to say that non-EU trade is “increasing every year”.