EXCLUSIVE: “We can and must act now, to protect the UK from the Eurozone”

Part Two of the first readable summary of the EU’s ‘level playing field’ economic hypocrisy

Professor David Blake explains it in everyday language for MPs and ordinary voters

A Brexit Facts4EU.Org two-part special - Part Two
Read yesterday's Part One here

This two-part article is about the euro and how the EU has used it to benefit the 19 Eurozone countries – especially Germany – and to damage the UK. In his second piece below, Professor Blake shows what needs to be done about the 'level playing field'.

Brexit Facts4EU.Org Summary

In Part One of his article yesterday he explained:

How the EU’s Euro currency has been used to dump its goods at artificially-reduced prices onto the UK and world markets for years
How this has increased the massive trade deficit which the UK has with the EU
How Germany has benefited most of all

Today, Professor Blake explains:

The risks of the Euro to the UK and the World
The opportunities for Brexit Britain to counter the threat and deal with it

About the author: David Blake is Professor of Finance at City, University of London, and is a member of Economists for Free Trade. He has been published regularly in the Daily Telegraph, Financial News, City AM, CAPX, and others, and is writing here in a personal capacity.

“We can and must act now, to protect the UK from the Eurozone”

By Professor David Blake, 04 Dec 2020

Reminder from Part One: The European Union is seeking a ‘level playing field’ with the UK after Brexit. One of the key issues concerning the EU is ‘dumping’. It is worried that the UK will become a super-competitive, de-regulated ‘Singapore-on-Thames’, undercutting the prices of products produced in the EU.

In fact the opposite is the case and below are some threats but also some opportunities.

Here is what the UK could do

The UK government has introduced a Trade Bill which will establish a new Trade Remedies Authority (TRA) to prevent countries from dumping cheap goods onto the UK market and potentially putting key domestic industries out of business.

The Bill may have been intended to target China, in particular, but trade remedies can be levied against any World Trade Organisation member, including the EU, whether or not there is a Free Trade Agreement (FTA) in place.

The EU wants its unfair practices to continue, tying the UK into EU law

We are told that the EU 'holds all the cards' in the trade negotiations with the UK. EU Commission President Ursula von der Leyen says the EU is “ready to design a new partnership with zero tariffs, zero quotas, zero dumping” with the UK.

The EU's current treaty-based proposal for avoiding trade dumping would involve the UK applying EU law. This includes (extraordinarily and uniquely in international trade between properly sovereign nations) the application of that law as interpreted by the European Court of Justice.

This would have the effect of permanently advantaging Germany and other Eurozone (EZ) member state beneficiaries and continuing an arrangement that is demonstrably unfair to the UK.

It is quite shocking that the new German president of the European Commission calls for zero dumping, when her own country is one of the world's biggest dumpers of goods onto world markets.

The UK’s massive deficit with the EU, due to the euro

The UK has always run a trade deficit with EU, but the chart below shows that prior to the introduction of the euro in 1999, the size of the deficit was relatively small at around 0.25% of GDP. But since then, the deficit has ballooned to nearly 4% of GDP. The chart shows a strong downward trend and that trend shows no sign of ending. By contrast, we have a trade surplus with non-EU states and that surplus is on a strong upward trend. And most of the trade with with non-EU states is conducted on World Trade Organization (WTO) terms and hence involves tariffs.

This chart conclusively demonstrates that sterling is not overvalued (otherwise the trade surplus with non-EU states would not be increasing year-on-year), but that the euro is significantly undervalued.

A trade deal on the basis of the current structural undervaluation of the euro will only entrench the EU’s structural trade surplus with the UK. The undervalued euro acts as a trade subsidy to firms from within these countries, giving them an advantage over global competitors.

We can and must act now to protect UK interests

This cannot be permitted to continue and the solutions are clear. The trade agreement currently being negotiated with the EU is a trap from which we could never exit if Boris Johnson signs it. We can and must act now, to protect the UK from the Eurozone. The Withdrawal Agreement (WA) must be rescinded and Parliament must pass legislation, such as the Internal Market Bill and the Finance Bill, which reverses the appalling consequences of the WA for the unity of the UK.

Especially important is the Trade Bill and the introduction of the Trade Remedies Authority (TRA) which will allow the UK to conduct its own dumping and subsidies investigations. The TRA’s first task should be to take a very close look at the structurally undervalued euro. This potentially violates two areas of international law: dumping and subsidies.

First, Article VI of the General Agreement on Tariffs and Trade (GATT) points out that multiple currency practices can 'constitute a form of dumping by means of a partial depreciation of a country's currency', thereby benefitting EZ exporters unfairly. The anti-dumping remedy in this case is the imposition by the importing state of an additional duty on the dumped goods.

Second, artificially low currencies could amount to an export subsidy and therefore breach the WTO’s Agreement on Subsidies and Countervailing Measures (SCM).

Had the euro been correctly valued, then EZ exports to the UK in 2018 would have been lower by between £67.2bn and £88.4bn. The UK would therefore be entitled to impose an annual anti-dumping duty on the EZ in that range. We should note that China just imposed anti-dumping duties of between 107%-212% on Australian wine.

Trading on WTO terms

Finally, we should not be afraid of trading with the EU on WTO terms. Although this would involve tariffs, the average tariff is low, at around 3%. The benefit is that we would escape the myriad traps that the EU has set for us.

And trading with the rest of the world on WTO terms has done us no harm at all. In addition, we will be able to negotiate FTAs with these other countries and this will remove tariffs with them altogether.

Part Two of a two-part article by Professor David Blake

Don’t miss Part One which we ran in yesterday's edition of Facts4EU.Org.

Note: This two-part series is the result of a collaboration between Facts4EU.Org and Professor Blake with the aim of publishing a short and accessible version of his much longer academic paper. The full version of Professor Blake's 23-page paper can be found here or here.

Observations

The EU’s unreasonable demands and behaviour

The trade talks were paused yesterday, having become deadlocked after the EU suddenly increased its demands on Thursday. The details of these demands have not been officially released by either side, although there have been various off-the-record hints by diplomats and government spokesmen.

Whatever the details, one thing is clear. The EU is a very long way from treating the UK like a free, independent, and sovereign country. Against this background, the precise percentages of fish that will continue to be taken from UK waters are – forgive us – a red herring. The reality is much simpler. There never has been a level playing field for the UK, and the EU now wish to entrench this in a treaty. It also demands that the UK obeys its diktats, making the idea of the UK becoming a sovereign nation again a non-starter.

The EU’s uneven playing field

In his two-part article, Professor Blake has demonstrated how the EU has used its structurally undervalued Euro currency to dominate trade between the bloc and the UK. In doing so he has shown the shocking scale of the EU’s duplicity in demanding a ‘level playing field’, tying the UK into EU laws and regulations.

The playing field has always been uneven, in part because of because of the reasons Professor Blake has outlined above, and also because of the fact that the EU has almost always acted in the interests of its continental members and has sidelined the UK’s national interests.

With the exception of the UK’s first year of membership the UK has only ever subsidised the EU. This is clear from the official declarations of the UK’s net annual contributions to Brussels, but Professor Blake has explained how the true costs started ballooning when the EU created its artificial currency, the euro.

We hope you found this two-part series has helped to illuminate a misunderstood and ignored aspect to the EU’s treatment of the United Kingdom. If the UK does in fact leave the EU as a sovereign country in 26 days’ time, it will be able to start the long process of redress. If Mr Johnson fudges a ‘deal’ and fails to rescind the Withdrawal Agreement, then it will be more or less ‘business as usual with Treasure Island’ for the European Union.

And that would be truly unforgiveable, Prime Minister.

Professor Blake and other senior economists have been working to get this message out to MPs and voters for a long time, but articles about economics have never been a easy sell. We would like to thank Professor Blake for shedding some light on this important subject for ordinary voters and MPs for the first time.

Finally, as ever we must appeal for your help to keep going. Covid and its impacts have hit the level of donations we receive. If you can, (and especially if you have never donated to us in the last five years), please make a donation today, no matter how small. We rely 100% on the generosity of people like you. Quick, secure, and confidential donation links are below. Thank you so much.

[ Sources: Professor David Blake ] Politicians and journalists can contact us for details, as ever.

Brexit Facts4EU.Org, Sat 05 Dec 2020

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Reader Comments 12

1. Sydney Ashurst , Saturday, December 05, 2020, 09:20:

I liken the level playing field and governance clauses the EU are seeking to impose as the spiders web. Specifically designed to prevent competition to the SM by a newly external United Kingdom.
We should be worried. "The trade agreement currently being negotiated with the EU is a trap from which we could never exit if Boris Johnson signs it."
Roll on WTO.

2. Donna / Berks , Saturday, December 05, 2020, 09:53:

Fascinating two articles. Facts4EU and the professor have done a great job explaining something I knew little about. Thanks to all concerned.

3. Terence, Derbyshire , Saturday, December 05, 2020, 10:20:

You took the words out of my mouth Donna. I'm no economist but I know a rotten deal when I see one. Good job people.

4. Sydney Ashurst , Saturday, December 05, 2020, 10:29:

Talks are on the rocks. Why? 10 years of unfettered access to Britain's fishing waters has been demanded by the EU as the price of a deal.
The EU (Macron) are being greedy, it would require a major climbdown , which they cannot be seen to make, to arrive at an agreement. Taking such an extreme position has screwed any deal.
WTO on 1st January 2021.

5. One eyed king , Saturday, December 05, 2020, 10:52:

Trust in the political system being at an all time low, is in direct correlation to the political system being at an all time low. Apathy brought us here and a complete failure of education for the masses regarding economics. The hobbling deal is a vehicle for the continuing oppression of British industrial complex and must be shunned. To my brothers and sisters across the isles, do you ever think that so many divisions created in our common history are perpetuated to simply stop us standing together against our common problems? politicians. The only time we stand together is on the battlefield, and then the world watches. it's time to stand for western values and our common values and interests to be protected not stripped as we are marched towards common purpose. Our strength maybe forgotten, but it is not lost. We need reform, and should be encouraging debate on any other system than the two cheeks same arse that we have now. Boris you cant negotiate zealots and you need to consider your advisors

6. Rejoin 2030 , Saturday, December 05, 2020, 11:35:

Mmm, interesting. I think you have made the case well for joining the Euro when we are eventually back in the EU!

7. John Mason , Saturday, December 05, 2020, 16:29:

Not sure how free trade requires a membership fee of over £1 billion a month irrespective of how much trade you actually do with your fellow members, or what the trading surplus or deficit with them is ? Seems more like you pay excessive tariffs up front to me .

8. Mike S , Saturday, December 05, 2020, 19:16:

6-Rejoin 2030. All going well,the EU itself won't be in existence by then.(2030) The euro as a currency is a failed experiment of a currency. Ask all of the EU countries already near bankrupt because of it. You seriously want that imposed on the UK??? The EU is not likely to last too much longer when other countries see the error of their ways & revert back to when they were once proud of their own national identity,of which IS happening! Sovereign states fair trading with each other is a far,far more an attractive incentive in global trading than any corrupt bloc that THINKS & ACT'S like it was a superstate! Sorry mate, but,that's the reality!

9. Steven , Saturday, December 05, 2020, 22:02:

The maintenance of a strong, self-assured and cohesive national identity is far more likely to happen when a country has a government willing to take strong measures to restrict immigration. Even leaving the EU won’t automatically deliver this especially when a county has a government composed of libertarian, open borders supporting globalists like this present sick joke of a ‘government’. Priti Patel hardly ever deports illegal migrants ie the invasion by blatantly fraudulent ‘asylum seekers’ and other economic migrants in small boats from France and her points make prizes immigration plans are worthless rubbish without a strict, annual, low limit on NUMBERS. Under her the numbers are not going DOWN as they should be.🤬😡

10. Steven , Saturday, December 05, 2020, 22:08:

Being in the EU has not made Germans feel any less German, nor Frenchmen less French. To be frank, it shouldn’t really have made us feel less British either.
If the people of Iceland were to join (not that this is likely since the fishing industry there is more important than it was and is for us) I doubt they would feel less Icelandic.

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