Does the EU Really Need the UK? #Brexit

There are many Brexiters who believe that the EU needs the UK more than the UK needs the EU. Superficially this might seem like a petty question that tends to insult the democratic soverignty of the British Public. "Leave" means "Leave" they would say. And mind you, I voted to remain in the EU but after thinking about it by studying the News and reasearching for my own personal convictions, I am in full favour of leaving the EU. There are politicians who say that a second referendum would spell out that "remain" voters will still choose to remain and "leave" voters will repent and choose to remain. But this is not going to easily happen without insulting democracy. I, on the other hand, I am a repentant remainer and would be choosing to leave due to my personal conviction. But this is not as easy as what it seems. I would be choosing to leave the EU in a 2nd referendum for 2 reasons

1. Because I have faith in British Work Ethic
2. Because a 2nd referendum is an insult on democracy and I would like to annoy the elites for choosing to insult democracy - you just do not insult democracy and go without any consequences

But the above investigation would tell us the mindset the EU and UK are coming together with when they negotiate. If the EU really needs the UK more, then all of the hardball tactics the EU has been showing us is just posturing, like a roaring lion that has no bite nor claws. On the other hand, if the UK really needs the EU more, then the EU would be satisfied with "No Deal" because they can exist just fine without an annoying relationship with a petty country.

According to a YouGov Poll

• 33% of Britons thinks the EU needs te UK more
• 17% of Britons thinks the UK needs the EU more

Well, who is right? It depends on what objective lens you are going to look at this from. As earlier stated, I have looked at this from rationally acceptable lens and still came down to a decision based on faith in the British Work Ethic and choose to side with the likes of Nigel Farrage, Borris Johnson and Jacob Rees Mogg, that the UK will remain better outside the EU than inside the EU. Here are a few objective lens we can arguably believe to be credible:

1. Trade Economics
2. Money Contribution
3. Defence Intelligence

1. TRADE ECONOMICS

For the basis of this article, I will be doing a very basic economic analysis. If you want to discuss more indepth the economic analysis of my reasearch, feel free to put a comment below. Also, if you're not happy with the figures I'm using; HMRC, ONS and the European Commission all tend to give slightly different figures. So I will try to be as consistent as possible and use te HMRC figures as much as possible.

The UK is the 2nd wealthiest country in the EU at about ￡2.2 trillion GDP after Germany which has an economy at about ￡3.1 trillion GDP. When you combine all of the economic power of all of the member -nations, the EU as a whole has an economy worth ￡14.6 trillion. The EU is obviously far wealtier than the UK most likely because it has more people. However, this does not necessarily mean that the UK needs the EU more than the EU needs the UK. I could be a poor scientist in a country, but it does not necessarily mean that I need my country more than my country needs me. In fact, the millitary seems to continue to cry out, "Your Country Needs You" more than the individual who may not need the country. So, economic-might does not necessarily spell out "true need" but remember we are trying to look for an objective lens to measure what "need" may really mean. A more liable indicator in this objective lens could be on how much each side relies on the other for trade. Does the UK rely more on the EU for economic goods and service or is the the reverse?

In 2007, 53% of UK imports worth ￡257 billion came from the EU and 44% of the UK's exports worth ￡162 billion went to the EU. That's a lot of the UK's trade. Howbeit, just like the US, the UK operates on a Trade Deficit with the EU, we are loosing more money buying from the EU than we are gaining by selling to them. This does not necessaily mean that we are at a loss, we are covering that loss by Trading with other non-EU countries but, so far, on economic terms, this is not profiting us. It could also mean that we are more satisfied materially because we can buy things that we think benefit us but on economic terms, the EU seems to be making us poorer (for those of you who take balance sheets and economics seriously or as an objective lens, even though yes, money is not everything, but it can be a powerful indication of something).

You may have heard that the UK is relying less on the EU for trade as they used to and this is sort of true. Yes, the UK is creating other deals and exporting to the rest of the world however, we are simulataneous increasing the amount we export to the EU according to HMRC. In 2011, the EU was 51% of UK imports. In 2017, it was 53% of UK imports and it might still be rising. Now, this may be because of the fear-factor surrounding the Brexit Saga so that UK companies get as much from the EU while the getting is good but on the other hand, it could be creating a culture/ habit of a buying relationship from the EU - this could change after Brexit. But we are covering ourselves by increasing our trades with other non-EU countries. The above numbers do not even include countries like Norway or Switzerland who are not part of the EU but are within the EU regulatory framework. About 4% of the UK's exports worth ￡14.5 billion and about 5% of the UK's imports worth ￡22 billion are with this countries. There is a lot of ways to permutate these numbers but relying on some of the ONS figures where Norway and Switzerland are included with EU they make up 60% of the UK's import trade and 55% of our export trade. To put this in perspective, the 2nd biggest UK's trading partner, the USA, makes up of about 13% of UK's import and 8% of UK's exports. So the EU dwarfs all of other UK trading partners.

Now some people argue that the UK actually does less trade with the EU than the numbers might say because of the ROTTERDAM EFFECT. What happens in the Rotterdam Effect is that the UK sends some of its exports destined for non-EU countries through Rotterdam Ports before they go to their intended destination. The same thing happens to imports with non-EU imports coming to the UK through Rotterdam before entering the UK. These are counted as EU trades when it could or even should be counted as non-EU trades. It is very hard to quanitfy how much an impact this has on our statistics. The ONS estimates that we should allow for a 2% error margin within the UK-EU trade. Anyway, even with the Rotterdam Effect, its pretty clear that the UK needs the EU quite a bit more than the EU needs the UK from the objective economic lens/ perspective.

But does it work the other way round? Does the EU also need the UK's economic relationship in a like manner? If we do not consider individual countries in the EU27 (technical word for plainly referring to a UK-less EU, ie, just the EU), the UK is the 2nd largest destination of EU's exports just after the US. As of 2017 trade with the UK included in the EU (technical word EU28) makes up about 16% of the EU's exports in total. However, it is important to know that this is not fair because the UK is presently still paying into the Single Market, the EU has a competitive advantage against all other non-EU trading partners such as the USA and China. If the UK was to leave the single market, customs union and free trade area, then EU's exports would certainly drop to 8% and 4% of EU's imports. This means that the UK is responsible for half of the EU exports to the world. Cross reference this with the fact that a little under-half of the UK's exports goes to the EU and another little above half goes to the rest of the world. In essence, the UK is a money machine that makes the EU rich. It is highly beneficial for the EU to keep a trading partner that makes up nearly 10% of exports. Sadly, when it comes to trade, it looks like the UK needs the EU more. This because 44% of the UK's wealth (in terms of UK's total exports) comes from the EU and only 8% of the EU's wealth (in terms of EU's total exports) comes from the UK.

Does the German Car Industry Rely on the UK too much?

There are Brexiters who say that the EU would not let the UK leave on favourable terms because the German Car Industry relies on the UK too much. It's a huge industry worth approximately €482.7 billion in 2016 mainly because of all the huge car brands as seen in the picture above who manufacture in Germany. Are these companies going to be trembling with fear? A lot of their cars do end up in the UK as it's their biggest market buying nearly 769,000 German cars per year far ahead of the USA - in 2nd place - importing about 494,00 German cars per year. This makes life difficult for German Chancellor Angela Merkel. In 2016, she said that she did not want industry-bosses interferring with the delicate negotiations but she does not want it to look like she is not doing all she can to protect German businesses and jobs. That said, if the UK leaves with "NO DEAL" it could seriously affect the overal German Supply Chain. The CEO of the German lobbying group, Dieter Kempf (Picture Above), who represents BMW, Volkswagen and Daimler saying that

"The [German] Supply Chains could be torn apart" - Dieter Kempf

However, despite this, Dieter Kempf claims that the UK will be hit harder than Germany with jobs and production facilities being moved from the UK back to the EU after Brexit. These are not just hypothetical job losses, coming from such a powerful authority such as Dieter Kempf, a number of car companies have said that they are not investing in the UK; or are reducing investment due to uncertainty around Brexit. This is actually very important for the UK because the Top 4 manufacturing companies in the UK are all related to the manufacturing of vehicles. These include

• Motor Vehicles (with petrol engines above 150CC)
• Parts for Aircraft (for civil use)
• Diesel Engines (between 150CC and 250CC)
• Manufacture, Installation & Repair of Military Aircraft

But that could be another topic for another time.

2. MONEY CONTRIBUTION

Another reason that is often given when people say that the EU needs the UK more is the Money that the UK contributes to the EU budget (exclusive of Trade). How much does the UK actually pay the EU? For starters, its not the ￡350 Million per week that certain bus-adverts might have you believe. That would amount to a little over ￡18 Billion per year. Truly, we would be paying this if we did not take into consideration the special rebate given to the UK.

The Rebate was negotiated by Margaret Thatcher in 1984 because at that time, about 70% of the EU budget was spent on the Common Agricultural Policy. Most of this money was used to subsidise French Farming while the UK did not get much out of it at all. This is because of the complicated way that funding allocation is calculated. In essence, the UK does not have as many fields as france and thus, does not get as much money. The UK did not like the idea of subsidising inefficient French Farmers, so Margaret Thatcher negotiated a rebate. This means that the UK does not contribute into the EU as much as they should have otherwise. Most EU countries hate this but its commonsensical. Nowadays, the Common Agricultural Policy accounts for 37% of the EU's expenditure and the UK still does not get much money from it. But thats a separate debate for another article. You can put a comment below regarding this if you want. Regardless, the rebate saves the UK a lot of money, approximately ￡4 billion per year meaning the UK pays about ￡14 Billion per year into the EU's budget which is about ￡250 Million per week the UK contributes to the EU. This accounts for 13% of the EU's budget making the UK the 3rd biggest contributor after France (2nd) and Germany (1st). The UK is also one out of all the 10 net contributors to the EU. By "Net Contributor", I mean that the UK is spending more into the EU than its gets back. The UK gets back about ￡5 Billion back in Public Spending and about ￡1 Billion in private sector credits. With all these "nets" into consideration, the UK contributes about ￡136 Million per week to the profit of the EU. Lets put that in perspective. The UK spends about:

• 136 Million Per Week on the EU
• 1.4 Billion Per Week on Education
• 2.6 Billion Per Week on NHS
• 3.6 Billion Per Week on Pensions
• 800 Million Per Week on Defence

Acording to the Bank of England, economic growth has decreased by 2% because of brexit. If that's true, that is a loss of around ￡400 Million per week to the economy. However you frame it, ￡136 Million per week lost to the EU is still a lot of money against the economic loss. The EU will probably struggle if they lost 13% of their budget overnight. However, the UK signed up to a Divorce Bill with the EU which means that they will continue paying thier EU contribution commitments even after the next EU budget in 2020. The EU's 2020 budget might be a little tighter and may have to ask other EU countries to contribute a bit more money after the UK leaves. Countries such as Finland have already said that they are happy to put a bit more contributions into the EU to cover the hole left by the UK. So far, it looks like the EU might be alright without the UK. But there is one area where the EU might need the UK.

3. DEFENCE INTELLIGENCE (SECURITY)

There is not an EU Army, yet, there are some EU security programs like EUROPOL and European Arrest Warrants. All EU states also have access to the

• Second-Generation Schengen Information System (SIS II)
• the European Criminal Records Informatin System (ECRIS)
• the EUROPOL information system
• any information which is shared as a result from Prüm Decisions which is a commitment towards better cross-boarder cooperation on DNA, fingerprints and vehicle registration information.

The EU also has a Common Security and Defence Policy. At the moment, the UK is one of the biggest militaries in the EU and one of the best intelligent services in the world. The UK plays a big role in EU security. However, Michel Barnier has implied that there would be less security cooperation post-brexit saying that on the 29th of March,

"...the UK effectively becomes a third country when it comes to defence and security issues..." - Michel Barnier

I know its just a negotiation and everything can be used as leverage but it seems silly/ childish to me for the UK and the EU to stop negotiating on security post-brexit. But after seeing the hostile nature of the EU towards the UK and the way they insulted Theresa May such as Donald Tusk's cake, I guess we have no choice but to get childish. Who knows? We might even ask the EU to pay the UK ￡1bn for using our Galileo Satellite for their security and defence.

CONCLUSION

So how much does the EU need the UK? So far, it looks like the EU could loose access to a major trading partner, 13% of their budget and loosing an important security ally. The EU knows this and they have been honest that they want the UK to stay.

But how much does the UK need the EU? The UK will loose single market access to a trading block that makes approximately 50% of their international trade (both import and export respectively), an important security alliance and, although the UK gets to keep ￡136 Million per week, that would be almost be cancelled out (hopefully in the short term) by the 2% loss we have in our economic growth. It seems like both sides really need each other more than they might actually want to think. But the statistics all seems to suggest that that UK needs the EU slightly more than EU needs the UK.

So why have I still chosen to side-with "leave"? Because we get our sovereignty back. Because we will build a better relationship with the EU, one based on true respect. Because we can freely trade with as many other countries as possible as we see fit without the complications of the Big Beaureucracies behind us. And Lastly, I have heard that more EU countries are not working as hard as the UK in terms of work ethics with countries like spain taking siestas and the French taking longer breaks even with their 35-hour working week and Greece pinned down by the EU in debt; I believe that the UK has what it takes to make its own negotiations on its own terms, control its own economy on its own terms and come out of every economic misfortune it might face.