The South Korean Model

A look at the recent Free Trade Agreement between the EU and the Republic of (South) Korea shows how Britain's future as a trading nation relies on its membership of the EU - rather than, as eurosceptics claim, being blocked by it.

The FTA came into force in July 2011. In its first year exports of fully liberalised products from Europe to Korea increased by 32%. Exports of the same products elsewhere have increased by just 10%. Comparing the growth of fully liberalised products to Korea with the growth rates of the same products elsewhere translates into around €1 billion of extra exports for European businesses.

British trade with Korea has also been on an upward curve. Figures from UK Trade and Investment show that the total value of British exports to Korea stood at £542 million for the third quarter of 2011. In the same period for 2012, that number was almost double, at a shade over £1 billion. And in the second quarter, exports stood at £1.36 billion – surpassing the figure for the United Arab Emirates, Sweden and Hong Kong (where Britain has historic trading links). Final quarter figures for 2012, just released, show the UK's exports up 26.7% year-on-year – and a surplus in trade in goods of £504m.

Britain also has historical links with India – and yet our exports there are at a lower level than to South Korea. Europe's negotiators are in the final stretch of working out an agreement with the world's largest democracy: a market of one billion people where GDP growth of 6% per year is considered 'depressing'.

A Europe that negotiates as a bloc has a stronger position – third countries will be more eager to secure preferential agreements for their businesses with a market worth $17.6 trillion (like the EU 27) than worth $2.4 trillion (like Britain). Ministers across the globe are more likely to invest their time and reputation in the bigger deals in the same way as the leaders of private companies give the bulk of their attention to clients or contracts with higher yields. And, as the guardians of a far larger market, European negotiators are in a stronger position to extract concessions on behalf of businesses.

Fact of the day

The recent Free Trade Agreement between the EU and South Korea is estimated to be worth up to £500million to the UK economy each year (Source: BIS, The Trade and Investment for Growth White Paper: Progress and Achievements in Year One 2012).

facts of the year

ONS table on exports in goods to some non-EU countries302 KB