Trading places: The UK, Germany and France

 
German sports fans The UK is now Germany's number one trading partner

We will hear a lot this week about the UK's relationship with the rest of Europe. The 50th anniversary of the Elysee treaty also shines a spotlight on the relationship between Germany and France, which these days looks decidedly strained.

But we shouldn't forget that the UK is pretty important to Europe as well. And - on one measure, at least - our economy is now even more important to Germany than France.

We are constantly reminded that the eurozone is the UK's largest trading partner. But the reverse is also true.

If you look at both exports and imports, the eurozone economies do more business with the UK than any other country, including the US. On average, we accounted for nearly 14% of eurozone exports between 2007 and 2011 and just over one-tenth of its imports.

If that doesn't surprise you, maybe this will: the UK recently overtook France and the US to become Germany's single largest trading partner.

David Marsh points out, in a note published today, that Germany's combined trade with the UK in the first nine months of 2012 came to 153bn euros (£128bn; $204bn).

That's more than France or the US.

Figures on the UK side suggest that the reverse is also true - that the UK's total trade with Germany is now slightly higher than with any other country, including the US.

This may not last, but it's consistent with a broader trend in Germany's trade, away from other eurozone countries, which has been much debated in Germany and France, and was flagged up last year by the likes of Goldman Sachs.

The latest figures show that only 37% of German imports and exports in the first three-quarters of 2012 were with other euro member states, down from more than 45% when the euro started in 1999.

As the UK's trade ministers know very well, the fastest growing markets for German products aren't in the UK but in the Bric economies.

The likes of India and China now account for about 10% of German exports. We only sell 5% of our exports to these economies, and France doesn't do much better at 6%. (Consolation prize: the Netherlands, Spain and the Republic of Ireland do even worse.)

By 2020, Jim O'Neill from Goldman Sachs predicts that Germany will be exporting twice as much to China as to France.

It's dangerous to extrapolate. Especially, perhaps, where China is concerned. But it's fair to say that the trade ties between Germany and its euro partners, which helped drive the creation of the single currency in the first place, are not nearly as strong as they were 10 years ago. Whereas Germany's trade with euro "outs" like the UK and Switzerland continues to grow.

I was at an annual get-together of British and French politicians and business leaders this weekend, where the irony of recent events in North Africa was much discussed. Our bilateral security relationship with France has been getting stronger, just as our relationship on European matters has hit a new low.

One senior French thinker and businessman joked: "We make war with the British, and we try to make money with the Germans." The UK seems to be learning to do the same.

 
Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this
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    Comment number 175.

    "A good world needs knowledge, kindliness, and courage; it does not need a regretful hankering after the past or a fettering of the free intelligence by the words uttered long ago by ignorant men."

  • rate this
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    Comment number 174.

    This is all in the context of what would happen if Britain left the deadly embrace of the EU. The cry of the Europhiles is that Britain's biggest trading partner is the EU. But, as Stephanie highlights, we import more than we export. We are customers of the EU. That places the UK in a valued position, especially when times are tough. Brits need to be more comfortable with tough negotiating.

  • rate this
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    Comment number 173.

    171. What is this 'left' of which you speak? Anyone who doesn't agree with the busted flush that is neo-liberal capitalism? Not so much an insult as a statement if you want the CAP abolished and free market doctrine to be the sole control of food production in Europe. As for 19th century thinkers, I know of a few, however times are somewhat different now. 'Their' not 'there' btw, schoolboy error.

  • rate this
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    Comment number 172.

    170. By the way ever heard of Richard Cobden or John Bright?

  • rate this
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    Comment number 171.

    170. Another example of how the left argue; if you disagree with there rather poorly thought out argument they think they gain the upper hand by offering up insults. Oh dear.

  • rate this
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    Comment number 170.

    168. Falling TP. or is it IQ? Without the CAP, thousands of smaller EU farms would go to the wall and we would be reliant on overseas large factory farms which churn out suspect foodstuffs to an unsuspecting population. To be reliant on food from countries and corporates upon whom you exert no influence is simply a ransom waiting to be exercised. No country/bloc has free trade, it is an illusion.

  • rate this
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    Comment number 169.

    @152/153
    Hope you both listened to R4's Analysis last night, Michael Blastland's 'Just Deserts' {sic - as listed by iPlayer!} as it shed some interesting light on that very subject.

  • rate this
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    Comment number 168.

    154

    Why is left in denial about the most obvious? Tarriffs & subsidies raise cost of food. Est that in UK food prices are 20% higher than would be in absence of CAP. People on lower incomes spend larger % of income on food; ipso facto it is these people who would benefit most.

    Oh & world trade has not collapsed. UK is a trading nation; it should trade openly in food outside the EU.

  • rate this
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    Comment number 167.

    @155 IR35
    Is that why he's missing today or was it my killer question at 141! ;-)

    Am under no illusions, probably has work to do. Perhaps he's Denis MacShane in disguise?

    Impressive run though. Maybe he should take up poker instead of posting?

  • rate this
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    Comment number 166.

    165 Just_the_Fax

    http://www.ilfattoquotidiano.it/2012/03/25/modello-tedesco/199991/

    The link above compares incomes at Fiat with VW. The article is in Italian, but you can find the numbers and the message is clear.

  • rate this
    +1

    Comment number 165.

    160. http://fiatindustrial2011.message-asp.com/en/library/human-resources

    however if you could provide any evidence to, "The last I heard, Fiat workers in Turin received just over half of the pay of those at JLR in Halewood", I would be interested. I "hear" a lot of things too, just don't believe them.

  • rate this
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    Comment number 164.

    Not sure how much longer the EU will have the willingness to keep re negotiating the plethora of trade agreements with Switzerland....that model has it`s limits..as evidenced by the hardening of the negotiations and terms...

  • rate this
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    Comment number 163.

    Forgive me if I'm wrong, but we export more to the USA than to any country in the EU. Also, I understood trade to mean importing and exporting. We consistently import more from EU countries than we export. So, what exactly are you getting at?

  • rate this
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    Comment number 162.

    French joke: "We make war with the British, & we try to make money with the Germans." The UK seems to be learning to do the same.
    The UK shoul not learn this at all. What is there in this joke to cause Brits to follow like sheep?
    Make war with no one - RATHER NEGOTIATE, NEVER INVADE TO STEAL.
    Make money off no one - AIM AT WIN-WIN.
    Who is more primitive - the Brits, the French or the Germans?

  • rate this
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    Comment number 161.

    160. Balham?

  • rate this
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    Comment number 160.

    "The UK assembly line is pretty cheap though"

    The last I heard, Fiat workers in Turin received just over half of the pay of those at JLR in Halewood. And as for working without an employment contract, social security contributions ... look south!

  • Comment number 159.

    All this user's posts have been removed.Why?

  • rate this
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    Comment number 158.

    So you attended annual get-together of British/French politicians & business leaders, where recent events in North Africa was much discussed. Britain's bilateral security relationship with France has been getting stronger. Is this a prideful thing? I see Mali as nothing but reinposition of French colonialism (for resources), Algeria involvement being logical extention.

  • rate this
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    Comment number 157.

    Cameron out of touch with younger generation. YouGov Poll reveals split. Younger generation is concerned over a future outside the Union.
    - 48% of 18-34 agreed "Britain may become isolated in a world of big power blocs such as US, EU & China". Younger generation also concerned over human rights, believe "united EU can better defend values against regions not respecting human rights."

  • rate this
    -1

    Comment number 156.

    123. yewlodge

    "Now remind me who's car industry is growing whilst that of France and Italy implodes?"

    Erm... the Japanese and the Germans? The UK assembly line is pretty cheap though, no annoying things like union representation on the board, no minimum working time directive, lots of part time jobs on low wages and a nice big golden hello.

    UK for sale, family jewels, gone or going ch€ap.

 

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