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Is the United Kingdom Relevant in the EU?

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United Kingdom’s relationship with the EU

In 2014, the EU (European Union) accounted for 54% of the United Kingdom’s total trade in goods and services. Germany is the United Kingdom’s biggest trading partner in the EU and overall. The United Kingdom’s total trade with Germany stood at $155.2 billion in 2014.

The United Kingdom’s relevance in the EU can be understood by the fact that among the top ten trading partners, eight belong to the EU. Its total trade with the EU stands at about $602.4 billion. The United Kingdom’s total trade with the EU grew by an average rate of ~4.6% from 2011 to 2014.

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The United Kingdom’s top exports in goods include automobiles and petroleum products. Integrated oil and gas companies like BP (BP) and Royal Dutch Shell (RDS.B) are the competitors to US-based companies like ExxonMobil (XOM) and Chevron (CVX). The iShares MSCI United Kingdom Index ETF (EWU) represents these companies based in the United Kingdom.

The above chart shows the total trade of the United Kingdom with the EU and its member countries in the last five years. It also shows that the trade relationship of the United Kingdom with the EU is increasing on a yearly basis.

Growing trade deficits with EU members

In 2014, the United Kingdom’s trade deficits with the EU and non-EU members totaled $113.6 billion and $79.4 billion, respectively. Since 2010, exports with the EU and non-EU members grew by an average rate of 2.5% and 5.2%, respectively, on a yearly basis.

Imports with the EU and non-EU members rose by an average rate of 6.1% and 1.5%, respectively, over the last five years. This shows that exports are slowing with the EU members compared to non-EU members. This impacts the balance of payment with the EU members.

The above chart shows the United Kingdom’s growing deficit with the EU and non-EU members. Trade deficits measure the difference between exports and imports. The balance of payments shows the United Kingdom’s transactions with the rest of the world.

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