here's a list of germany's top trading partners: United States: US$134 billion (8.6% of total German exports) France: $124.4 billion (8%) China: $109.9 billion (7.1%) Netherlands: $99.8 billion (6.4%) United Kingdom: $96.8 billion (6.2%) Italy: $82.6 billion (5.3%) Austria: $75.2 billion (4.8%) Poland: $74.7 billion (4.8%) Switzerland: $64.3 billion (4.1%) Spain: $52.4 billion (3.4%) Belgium: $52.3 billion (3.4%) Czech Republic: $51.8 billion (3.3%) Sweden: $31.1 billion (2%) Hungary: $31 billion (2%) Russia: $30.6 billion (2%)
EU feels like it has no choice or the whole thing will blow up. eventually they'll have to give in though.
I do t think it will ultimately deny entry but rather it will be on new terms. Of course there is also the concern that if they make it easy to leave they figure others might be more likely to follow. It insulated the union from flavor of the day politics. But doesn’t protect it long-term if member states stop seeing value or figure that the drawbacks outweigh the benefits.
Trade balance is a good way to look at it but that works best when thinking about a strengthening or weakening single currency. It works well there. But when you are necessarily moving both currencies in each trading partnership then where you export vs where you import matters. For example, Germany has a trade surplus of roughly 270 billion (as you said, 8 or so percent of GDP). But if there too 20 partners, which account for 200 billion of that surplus, 180 billion is in the EU. This suggests to me that most of the surplus comes from the EU (90% of this sample). So if the mark goes up 30% and the average former EU goes down 30% (it wouldn’t work out exactly like this but just keeping total value constant in this example), Germany is now facing an increased currency headwind of 1.85x (1.3/.7) on 90% of its trade balance. That hurts a lot.
It’s hard because your subset only adds up to 70% so I was extrapolating for smaller trading partners. I didn’t count Russia as Europe. I did count Switzerland because they negotiated entirely into the European Free Trade zone along with the EU.
I pulled full export/import data. The trade balance isn’t as EU-specific as the top 20 trading partners suggests. Of a 297 billion trade surplus in 2017, 65% is in the EU. So while they see currency headwinds on all of this, it’s exaggerated on 65% of it due to the valuation / devaluation impact.
I forgot to add in countries like Switzerland so this is just pure EU. I’d say it’s at least 70% within the free trade zone. Also worth noting that some of the larger trading partners are more stable than smaller. So the devaluation wouldn’t be spread equally and would help mite the effects.
If it’s HQ’d in the U-S-A, they have no business with a factory in the UK, and can bring that on home. Brexit is already paying off.
So, they’re directly and financially incentivized to make the UK’s exit as painful as possible? Why not just let them leave if they want, and keep up good relations in that process? They’re still European brethren, after all. This is going to sound smart ass, but it isn’t intended as such - but if it’s as truly great and profitable to be in the EU as they believe, I’d throw them a party when they left, because leaving is not only it’s own best punishment, but it’s providing even more benefit for those who remain. It’d be like the SEC trying to make it hard on Miss St. wanting to leave, and with Clemson, FSU, Texas and Oklahoma on deck. Hell, we’d help them pack.
I don’t think that the EU is completely being irrational here. They are negotiating within the terms that all parties agreed to. There is a penalty for walking away. There are specifics that must be agreed to with regard to U.K. citizens in Europe and vice versa. Irish border. Etc. Let alone the trade deal. No deal - or hard Brexit - has a lot of consequences so that means the U.K. is encouraged to have a deal. But that means the EU get some negotiating power. Again I think we can see a deal here. And the EU doesn’t want this to end with the U.K. trading under WTO trade rules rather than a Euro zone trade agreement. But that deal likely will be less favorable to the U.K. There decision to make if they want it. They can walk and not pay the penalty but then there will be no deal (unless they think the EU needs them more).
It is better. But if the U.K. will pay the full penalty and then sign the trade deal my guess is this is done - but I think that’s been a sticking point. And the EU needs to make it difficult to leave. What good is the EU if countries are coming and going every few years.
If we’re all going to start acting as if we can will our own reality into existence, then I choose the one where America always wins, at everything, all the time. P.S.
I wouldn’t sign jack shit. And I’d promise a sweet trade deal with any other EU concubines that followed me out.