Why is the BBC Perpetuating the myth that Brexit has damaged UK EU trade?

A false narrative that Brexit has harmed UK trade is now firmly entrenched in the British public psyche, but it is not true. The trade data does not show this. Just as false is the idea that trade friction has reduced UK-EU trade. The vast majority of UK and EU trade is conducted by multinational companies who sell goods all over the world without baulking at the paperwork, but the UK media somehow assumes these companies are too stupid to cope with some additional UK-EU paperwork.

In an article reporting on an interview with the German Finance Minister, the author, BBC’s economics editor Faisal Islam, included some spurious trade figures perpetuating this false narrative. These were not attributed to the finance minister but were threaded into the text to imply he said them. However, this was a very good lesson in data manipulation and propaganda.

Islams’ additions include:

·         According to the German Chamber of Industry and Commerce, German goods exports to the UK were 14.1% less in 2022 than in 2016 - the year of the Brexit referendum.

·         The UK slipped from [Germany’s] third most important export partner to eighth. Combining trade both ways, the UK is no longer in the top 10 of German trade partners.

·         Car exports from the EU to the UK have nearly halved in number since Brexit, falling by €10bn (£8.6bn) in value.

·         German and British industry have complained about extra red tape - not just for goods exports but also for worker travel.

None of these claims are due to Brexit, and some of them are unlikely to be true. I will endeavour to explain the misleading use of data.

1.       Purport to prove your claim using data from a carefully selected time frame.

Apparently, the German Chamber of Commerce is measuring UK-German trade from 2016 to 2022 and claiming any change as a Brexit effect. However although the Brexit referendum was held in June 2016, the UK did not leave the EU until Jan 2020 and the UK’s trading regime with EU countries did not change until Jan 2021, after the Transition Period ended.

The German Chamber of Commerce would presumably view German trade figures in Euros, where the high point for German exports to the UK was in 2015 and they have been falling steadily ever since. But 2015 was 5 years before the UK left the EU’s Customs Union. So Brexit is not the cause of this decline.

2.       Neglect to mention other possible explanations for the changes.

As for the complaint that the UK has slipped from Germany’s third largest export market to its eighth, and out of its top ten trading partners for total trade: could this possibly be because other countries are growing and buying more German goods? German exports to China, for example, were up by 42% while German exports to the US were up by 47% between 2016 and 2022. Or could it be because Germany desperately needs fuels and so the US has become one of its largest import suppliers. German imports from the US were up by 60%, between 2016 and 2022, due to increased German LNG purchases. Or even because Germany is buying more and more goods from China. Chinese exports to Germany more than doubled between 2016 and 2020, an increase of about Euro100 billion according to COMTrade. Neither change has anything to do with Brexit.

Meanwhile, German imports from the UK were up by 8% between 2016 and 2022 but up by only 6% from France? How does the BBC or the German Chamber of Commerce explain this? Surely lower German imports from France were not caused by Brexit.

3.       Switching the subject of the evidence, conflating proportions with values and flipping from trade volumes to trade values.

But why did the BBC’s switch from concern for the fall in German exports to concern about the drop in total EU car exports to the UK? Was this because German car exports increased by £1.15 billion between 2019 and 2022, an admission that would undermine the whole premise of the article?

Certainly, flipping from a proportion and volume - car imports supposedly halving in ‘number’, to an absolute and value - a Euro 10 billion reduction in the ‘value’ of car imports, is very misleading. According to the ONS, UK trade in goods annual country imports by commodity, UK car imports from the EU fell by only £5.5 billion between 2019 (pre-Brexit) and 2022, a fall of only 18% in value. So, if the volume of imported cars from the EU halved, then these must have been very low value cars.

But again, there are other possible explanations besides Brexit. The fall in the UK's car imports from the EU may be due to the ‘Rotterdam Effect’, although it is more the Antwerp effect in this case as UK car imports from Belgium fell by £4.7 billion, 82% below their 2019 import values. The fall in UK car imports from Belgium accounted for 86% of the fall in total UK-EU car imports.

Before Brexit, the Rotterdam effect often caused UK trade with the EU to be overstated by incorrectly recording imports as products of the ports where they were landed, rather than products of the country where they were made. Under the Rules of Origin in the UK-EU Trade and Cooperation Agreement (TCA), this is no longer possible. Rules of origin require goods to have a proportion of their value added in the countries that are signatories to the trade agreement. The proportion varies by type of good. This stops countries not party to the trade agreement from benefiting from its market access.

As the very large drop in car imports from Belgium was matched by a sudden increase in car imports from China, South Korea, Turkey, Mexico, the US, and Japan, it is likely that the change was simply due to the TCA’s rules of origin and removal of the Rotterdam effect.

In 2019, UK car imports from China were less than £400 million but jumped to £3.6 billion in 2022, an increase of over 800% in three years. And yet I rarely see Chinese car brands on the streets of London. Could these increased imports be cars that are ‘made in China’ for EU car companies?

However, not all of the reduction in car imports from Belgium will be due to more accurate trade reporting. Ford, Opel, Volvo, and Audi have car production facilities in Belgium, and all suffered from a semiconductor shortage in 2021 and 2022. A problem that also plagued UK car production.

For the record, the German Chamber of Commerce need not fear Brexit: German car exports to the UK made up 45% of total UK car imports in 2022, while in 2019, before Brexit, they were only 40% of UK car imports.

4.       Transposing difficulties faced by individuals on to large multinational companies.

Finally, we get to the most stupid claim of all – that German and British industries are complaining about red tape. Germany’s major exporters to the UK include Volkswagen, Daimler, BMW, Bayer, Aldi, Adidas, BASF, etc. These companies complete trade compliance forms every time they trade with the rest of the world. They have no problems with paperwork when selling BMWs in Brisbane, Mercedes in Mumbai or VWs in Vermont, so why would they be bamboozled by TCA compliance when trading with the UK? The EU doesn’t even have a trade deal with Australia, India or the US. Individuals may find the trade compliance paperwork daunting but a large multinational with an export department won’t. Multinationals are also very good at moving their staff around the world using Mode 4 of the GATS agreement.

Similarly, The UK’s largest exporters are Rolls Royce, Jaguar Land Rover, JCB, GSK, BAE systems, Diageo, BP, Shell, Unilever, etc. To listen to the BBC Rejoiners, you would think that Britain was a nation of peasant farmers eking out a living selling cheese to the EU. The exact opposite is true, the large and relatively affluent UK market relies on farmers in Ireland, the Netherlands, Denmark and Spain, using mega animal sheds, heated greenhouses and poly-tunnels large enough to be seen from space, to feed the UK’s population. British farmers’ largest market is also Britain.

Just as false is the punchline of the BBC’s article about their interview with the German finance minister - the myth that UK companies can only sell to the EU if UK regulations are exactly the same as the EU’s. UK firms sell to almost every country on earth without aligning with everyone’s regulations. British product standards are very high and if the EU has a problem with that, so what. The rest of the world is growing faster than the EU and seems to be happy to buy our goods.

The greater mystery is why would the BBC be interested in perpetuating the myth that Brexit has damaged UK-EU trade? Do they not understand the nuances in trade agreement rules, or are they still desperately trying to prove that they were right to oppose Brexit during the referendum, or more sinisterly, are they hoping to tie the UK to EU regulations?