They Voted Leave

The BREXIT referendum is over, more emotion than information sadly and much nonsense talked about economics, so a few pointers to hopefully throw some light where none has been hitherto. Let us look at some numbers but more importantly potential human action. Something Von Mises flagged up many years ago. Be wary of computer models, even more wary of political rhetoric.

So what next?

For the time being, let us ignore fruitless speculation and stick to what we know. Armchair pundits, politicians, and journalists might do well to consider the following.

We must remember what the EU actually is in terms of trade. Set aside the political ideology of which most of the electorate neither care about or even understand.

The EU is a customs union. It is the only one of its kind in the world. 28 nations bonded together by tariff barriers to the outside world, free movement of labour and a significant number of countries sharing a mutual currency. There is free trade in goods amongst the 28, rather less free are services. The UK has decided after free, fair, elections that only free trade is what they want. This, of course, has been apparent for some time. A superficial glance at trade though tells us much. In no order of importance Germany is an exporting nation. 50% of its GDP is export driven. The UK is its third biggest market.  The UK is also France’s fifth largest export market; Peugeot & Citroen are two of the most popular car brands in Great Britain. Wine imports are huge. The overall trade imbalance is 80/20 in favour of the EU to the UK.

The British are also massive buyers of tourism to the Mediterranean basin. The UK is, therefore, one of the EU’s most important customers.

The future is bright

Historically, the UK is a great trading nation, its single biggest nation customer is the United States. More than 50% of their exports go to countries outside the EU and UK exports to non-EU countries are growing whereas to the EU they are in decline. Economically and demographically EU growth is well behind the rest of the world so there is little chance of that changing in the near term. Often forgotten is the UK was the second largest net contributor to the EU budget, it has a different system of law and is a historic maritime trading nation. The British departure from the EU project was inevitable, as General de Gaulle knew it would never work in the long term, he understood the obstinate British too well.

When the wailing and recriminations die down the EU must understand the British are a very valuable asset. Soon Wall St, the City, the Pacific Rim, Indian sub-continent and Australasia will do their numbers and realise a Great Britain back in its rightful place at the WTO table will accelerate its economy if the national debt can be brought under control.

Good advice to the EU would be to remember no one ever won an argument with a customer.

The UK is a very important customer indeed.