Great news: UK-EU Trade heading in the right direction.

Large economies like the EU Single Market all tend to produce goods and services near the financial centre of the economy or, in the case of very large countries, in two or three economic centres. Having been produced centrally the goods are then sometimes finished locally or distributed from local warehouses. The regions become poor and require regional aid and the centre becomes ever richer.

This pattern has been happening strongly in the EU and countries such as Greece often accuse the EU of economic colonialism. The accusation results from the north west of the Continent being the financial centre of the EU and hence the focus of EU industrial and commercial activity.

The UK has also suffered from regionalisation within the Single Market. Trade between the UK and EU has been hugely in deficit for about 20 years. This deficit is due in large measure to the EU ownership of UK companies which have been converted to warehousing operations for EU products.

In February 2021 the UK balance of trade in goods with the EU was less in deficit than has historically been the case.

ONS Data

Some readers may recall the reports on the BBC and in the Guardian etc. that announced a catastrophe for UK-EU trade in January despite the fact that December, the month before the end of Transition, was worse. these publications are being remarkably quiet about the recovery of trade in February. Can you trust the BBC or Guardian?

The simple truth is that it is too early to tell anything about the effect of the end of the Transition Period on the UK economy, especially with the complication of COVID. All that can be said for certain is that nothing spectacularly good or disastrous has happened over the past two months.

We can see from the large deficit with the EU that concerns over "just in time" production after Brexit were concerns about shipping parts for finishing goods that were largely produced on the Continent. The resultant trade and current account deficits lead to increasing indebtedness in the UK, damage to the UK production base in both services and manufacturing and the eventual impoverishment of the British. China and Germany are the currently successful economic superpowers and avoiding trade and current account deficits is the cornerstone of their economic policy.

13/4/2021

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