|
|
UK
Trade
The Community
effect
The pattern of UK trade has changed significantly
since her accession to the European Community (EC) in 1973, as other
members of the Community have accounted for an increasing proportion of
UK imports and exports. It is not clear how far these changes can be
attributed to EEC membership. In Discussion Paper No. 110, Research
Fellow L Alan Winters discusses the difficulties of measuring the
effects of accession on UK exports and imports of manufactures, and
discusses several studies which have attempted to provide such
estimates. He also discusses the problems of assessing the welfare
effects of accession and offers tentative conclusions about its overall
impact on economic welfare in the United Kingdom.
The dramatic changes which occurred during the 1970s in the pattern of
British trade in manufactures suggest that accession mattered. Prior to
1973, European countries were gradually increasing their shares of
British exports and imports; subsequently, however, the shares of the
original six EC members shot up and those of other European countries
fell, while those of non-European countries continued to decline at
faster rates. Furthermore, after 1973 the share of imports in total UK
purchases of manufactures rose even faster than before, suggesting that
goods from the Six were displacing domestic sales. The behaviour of the
UK share of foreign markets also suggested strong integration effects:
prior to 1973 the UK share fell in all markets, but subsequently her
shares in EC markets rose or stabilized, while those in other markets
fell faster.
Winters surveys previous attempts to measure the effects of accession,
and concludes that many of the techniques used in these studies do not
capture adequately the effects of accession. Winters' own investigations
are based on consumer demand theory. They stress the importance of
modelling import flows and domestic sales simultaneously, because the
substitution between EC and non-EC imports is critically affected by the
demand for home products. Winters' studies also incorporate the effects
of relative prices on market shares in a rigorous fashion consistent
with the economic theory of consumer behaviour.
Rough estimates based on this approach suggest that by 1979, as a
result of accession, home sales fell by #8 billion. UK imports of
manufactures from her new Community partners rose by #8 billion, such
that for every individual member of the Six, over half of actual UK
imports in 1979 can be attributed to accession, with imports from
West Germany alone rising by #3.75 billion. Exports of UK manufactures
rose by #3 billion, the result of a #4.5 billion increase in exports to
partners and a decrease in exports to other countries of #1.5 billion.
It is clear that accession worsened Britain's trade balance in
manufactures, Winters concludes, but he argues that this was not
necessarily a bad thing. It gave Britons access to cheaper and better
manufactures and probably had little effect on the balance of payments
or on aggregate demand. These are determined largely by macroeconomic
factors independent of trade policy, and so the increased deficit in
manufactures was mostly offset by increased surpluses or reduced
deficits in other sectors. Assessing the effect of accession on welfare
is much more complex, according to Winters. Although the changes in
manufacturing trade were probably beneficial to the United Kingdom,
Winters argues that economists have not yet produced soundly based and
convincing estimates of these welfare effects.
A fuller discussion of the effects of accession on UK trade can be found
in the article by L Alan Winters in Bulletin No. 15.
Britain in Europe: A Survey of
Quantitative Trade Studies
L Alan Winters
Discussion Paper No. 110, June 1986 (IT)
|
|