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		EU trade policy is biased against Britain The European Journal - January 10 2006 New figures from the Trade Policy Research Centre (TPRC) show that the EU's trade policy, and particularly its extensive network of Free Trade Agreements (FTAs), is radically biased against Britain and British trade interests. More generally, it is biased against the "Anglosphere" -- the English-speaking countries which are former British colonies, or members of the Commonwealth, or both. This shocking picture emerged at a meeting in Strasbourg in September when Ronald Stewart-Brown, Director of the TPRC, presented an analysis of EU trade policy to a group of concerned MEPs. He clarified the difference between a Customs Union, whose members effectively unite together to create a common trade policy with the rest of the world; and a free-trade area, whose participants each retain control of their individual trade policies. World-wide there are only some 11 Customs Unions in existence or being created, of which the EU is the only important example between advanced economies. This compares to 109 or so actual or embryonic free-trade areas. The welding together through the Treaty of Rome of the six original members of the EEC into a customs union with one single international trade policy can rightly be seen as the first major step towards the creation of a single European state. The parallel with the process of German unification, starting with its commercial unification through the formation of a German customs union (or Zollverein) under Prussian leadership in 1834 and culminating with the full political unification achieved by Bismarck in 1871, is uncanny. Mexico provides an excellent example of the dis-benefits of Customs Unions. Mexico, a NAFTA member, has an FTA with the EU. So why is it that Britain (say) cannot have an FTA with NAFTA? Surely that would be fair and symmetrical? But the key feature of a Customs Union is a common external tariff. So no individual member of a Customs Union may have an FTA with a third country, since it would breach the common tariff. No such restriction applies to a member of an FTA. It is clear, however, that the EU recognises the power of FTAs, because it has been setting them up between the EU itself and third countries at an extraordinary rate. Currently the EU has FTAs in place with some 12 countries, and is negotiating FTAs with some 100 countries more. Indeed, to understand the extent of the EU's engagement in FTAs, it is simplest to look at the countries with which the EU does not have any form of preferential trade agreement in place or under negotiation. And it is here that the radical anti-British bias of EU trade policy is dramatically exposed. The 10 countries in this category include the USA, Canada, Australia, New Zealand, Hong Kong and Singapore -- a roll call of Anglosphere countries. If the EU had made a deliberate decision to exclude the Anglosphere, and to disadvantage British trade interests, it could hardly have done better. Indeed, it would be reasonable to conclude that the EU has in fact made such a decision. Why does this exclusion matter for British trade? It is here that the TPRC figures show the dramatic impact of the policy. British exports of goods to each of these countries, as a percentage of total goods exports, are running at about double the corresponding level for the rest of the EU (see table). For example in 2003 the USA accounted for 15.8% of British goods ex¬ports, but only 7.9% for the rest of the EU. The corresponding figures for the total of the six countries are 21.1% (UK) against 10.4% (Rest of EU). It is more difficult to obtain data for exports of services from the rest of the EU, but UK exports of services are even more strongly focussed on the Anglosphere than is the case for goods, at 31.2% for the six countries cited compared to 21.1% for goods exports. There is considerable evidence that FTAs have a strongly positive effect on trade flows. Therefore if the EU's FTAs are concentrated in areas where the UK does less trade, but other member-states do more, there is a clear and systematic bias against British interests. The UK has strong links of language and history with Anglosphere countries, and would expect important benefits from greater freedom to establish or acquire affiliates in these countries, especially in services, and from comprehensive professional and other mutual recognition arrangements. Many politicians have been calling in particular for a transatlantic free trade area -- from former EU Commissioner Leon Brittan and former Spanish Prime Minister Aznar to, most recently, (British Chancellor of the Exchequer) Gordon Brown. The Conservative Party has set an objective of global free trade by 2020, with a transatlantic FTA as a key stepping-stone. But such proposals always fall foul of the EU's deep undercurrent of anti-Americanism, and France's instinctive protectionism. I have now written to the Commission, pointing out these facts and asking them to concede that EU trade policy is profoundly biased against the UK. The Commissioner responsible is of course our own Peter Mandelson, who showed such a striking grasp of trade policy issues in the recent "bra wars" episode. I look forward to hearing his reply. Candidates in the recent Conservative leadership election suggested various possible policy areas that ought to be repatriated from Brussels to nation-states. I don't think anyone mentioned trade policy. But there is clearly a case to be made. Acknowledgement: The author is grateful to Ronald Stewart-Brown and the Trade Policy Research Centre for their research and advice for this article.