{"id":2620,"date":"2018-08-07T16:21:06","date_gmt":"2018-08-07T15:21:06","guid":{"rendered":"http:\/\/blogs.sussex.ac.uk\/uktpo\/?p=2620"},"modified":"2018-11-07T08:58:34","modified_gmt":"2018-11-07T08:58:34","slug":"trading-on-wto-rules-is-not-the-best-option-the-treachery-of-growth-rates","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/uktpo\/2018\/08\/07\/trading-on-wto-rules-is-not-the-best-option-the-treachery-of-growth-rates\/","title":{"rendered":"Trading on ‘WTO Rules’ is NOT the best option: the treachery of growth rates"},"content":{"rendered":"Share this article: <\/em> \"Facebook\"<\/a>\"twitter\"<\/a>\"reddit\"<\/a>\"pinterest\"<\/a>\"linkedin\"<\/a>\"mail\"<\/a>

7 August 2018\"\"<\/a><\/p>\n

Nicolo Tamberi is a Research\u00a0Officer in Economics for the UK Trade Policy Observatory.<\/em><\/p>\n

In a recent post on Brexit Central<\/a>\u00a0, Michael Burrage examines the growth of different countries\u2019 exports to the EU12 over 1993-2015 and asks:<\/p>\n

\u2018How can trading with the EU under WTO rules be the worst possible option when the exports to the EU of 15 countries which have been doing just that over 23 years of the Single Market have grown four times as much as those of the UK, despite all the tariff and non-tariff barriers they have faced?\u2019<\/em><\/p>\n

The answer is \u2018easily\u2019!<\/p>\n

The first thing one should ask when looking at any growth rate is where did it start from? <\/em>The growth in height of a thirty-three year old NBA player since 2012 is zero, while that of an infant school child is 100%. So who is taller \u2013 LeBron James or the child?<\/p>\n

For well-known reasons, such as membership of the Customs Union and proximity, EU member states already traded heavily with each other at the start of the Single Market in 1993. By starting at such high levels, it is hard to imagine two-digit yearly growth.<\/p>\n

The second question to ask is which countries account for the export growth? The overall growth of exports to the EU12 over the period 1993-2016 from twenty-two countries trading on \u2018WTO-rules\u2019 is 139%.[1]<\/a>\u00a0 However, this hides substantial differences: China\u2019s exports to the EU12 grew by 1555% in real terms, while the United States\u2019 grew by 86%.[2]<\/a> This is not because China had fifteen times better access to the EU, but because, for wholly separate reasons, China evolved from being a middling exporter to being the world\u2019s largest.<\/p>\n

Allowing for countries\u2019 overall growth in exports, a better indicator of changes in access to the EU12 market is to look at the share of the EU12 in those countries\u2019 total exports. For example, although exports of WTO-rules countries to the EU12 grew by 139%, the share of these exports in non-FTA countries\u2019 total exports decreased over 1993-2016, from 15% to 12% \u2013 see Table 1. The corresponding share for China increased a little, and declined a little for the United States and the UK.<\/p>\n

Even more informative is to compare the share of the EU12 in these countries\u2019 exports with the EU\u2019s share of world imports (basically the share of the EU in all countries\u2019 exports). As column 5 of Table 1 shows, this has declined since 1993 as other countries, especially the emerging markets, have grown faster than the EU. For the WTO-rules group and the United States, the export-shares to the EU12 have evolved at basically the same rate as EU imports in general, whereas for China and the UK they have grown more rapidly. The EU has liberalised its trade with China over the period and also with the UK, via the Single Market.<\/p>\n

Figure 1 plots the shares of countries\u2019 exports going to the EU divided by the share of world exports going to the EU.[3]<\/a> As well as showing modest changes over time, it shows clearly that the share of the UK\u2019s exports going to the EU12 is about three times as large as the share for other countries as a whole.<\/p>\n

By themselves, export growth rates are entirely uninformative about the level of access that exporters have to a market. The UK has extremely privileged access to the EU market \u2013 a privilege that it will never get with any other trade partner.<\/p>\n

Table 1: EU12 shares of countries\u2019 exports of goods<\/h3>\n

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Figure 1: Trade Intensity Indices with the EU12<\/h3>\n

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Figure 1 shows the ratio of the share of exports going to the EU12 \/XEU12\/Xworld for each country to the share of the world exports going to the EU 12<\/h6>\n
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[1]<\/a> The WTO-rules group is a set of 22 countries that trade with the EU12 under WTO MFN rules. We restrict the set of countries so that we have data for every year and country from 1993 to 2016. The list of countries included in the group is given in the notes to the table.<\/p>\n

[2]<\/a> The growth rates are computed after deflating the trade values using the US GDP deflator. Data for deflator come from the World Bank.<\/p>\n

[3]<\/a> These ratios are also known as trade intensity indices.<\/p>\n

 <\/p>\n

Disclaimer:<\/em><\/p>\n

The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.<\/em><\/p>\n

Republishing guidelines<\/em><\/p>\n

The UK Trade Policy Observatory\u00a0believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement.\u00a0For online use, this should be a link to the original resource on our website. We do not\u00a0 publish under a Creative Commons\u00a0license. This means you CANNOT republish our articles online or in print for free.<\/em><\/p>\n

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 <\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Share this article: 7 August 2018 Nicolo Tamberi is a Research\u00a0Officer in Economics for the UK Trade Policy Observatory. In a recent post on Brexit Central\u00a0, Michael Burrage examines the growth of different countries\u2019 exports to the EU12 over 1993-2015 and asks: \u2018How can trading with the EU under WTO rules be the worst possible option when the exports to the EU of 15 countries which have been doing just that over 23 years of the Single Market have grown four times as much as those of the UK, despite all the tariff and non-tariff barriers they have faced?\u2019 The answer is \u2018easily\u2019!<\/p>\n","protected":false},"author":214,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[130195],"tags":[96141,96083,147914,147912,123537,96980,147913],"_links":{"self":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/2620"}],"collection":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/users\/214"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/comments?post=2620"}],"version-history":[{"count":6,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/2620\/revisions"}],"predecessor-version":[{"id":2635,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/2620\/revisions\/2635"}],"wp:attachment":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/media?parent=2620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/categories?post=2620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/tags?post=2620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}