What You Are About To Read Is An EU Conjuring Trick.

Graham Charles Lear
9 min readDec 5, 2020


What you are about to read is something more in line with a magic trick of the like we have not seen since Paul Danials was on our television. Danial's sleight of hand has nothing on the EU's trickery.

David Blake is Professor of Finance at City, University of London, and is a member of Economists for Free Trade. He has been published regularly in the Daily Telegraph, Financial News, City AM, CAPX, and others, and is writing here in a personal capacity.

First of all, this is what he is writing about

  1. How the EU’s Euro currency has been used to dump its goods at artificially-reduced prices onto the UK and world markets for years
  2. How this has increased the massive trade deficit which the UK has with the EU
  3. How Germany has benefited most of all
  4. The risks of the Euro to the UK and the World
  5. The opportunities for Brexit Britain to counter the threat and deal with it

The European Union is seeking a ‘level playing field’ with the UK after Brexit. One of the key issues concerning the EU is ‘dumping’. It is worrying that the UK will become a super-competitive, de-regulated ‘Singapore-on-Thames’, undercutting the prices of products produced in the EU in the same way China does globally.

In fact, the opposite is the case. It is the nineteen EU member states operating a single currency, the euro, that are dumping their goods onto world markets ‒ in particular the UKbecause the euro is a structurally undervalued currency.

The scary truth about the euro

The global economic and financial community regards the euro as ‘just another currency’. It is not.

Firstly, it is ‘incomplete’. Unlike every other currency, there is no single sovereign standing behind it. Each member state stands behind the euro only to a certain percentage and collectively the member states do not share joint-and-several liability for each other’s national debts. This makes them ‘sub-sovereign’ members of the Eurozone (EZ).

This is very different from what happens in fully sovereign states, like the UK and US, where their central banks and Treasury departments stand fully behind the bonds issued by their governments and can, if necessary, print enough money to pay off their national debts. The European Central Bank does not have the legal power to do this.

Secondly, it is an artificially-constructed currency, as a consequence of the fixed rates used in 1999 to convert the domestic currencies of EZ members into euros. This affected not only the internal exchange rates between the EZ members but also the international value of the euro.

The net result has been a downward bias in the international trading value of the euro, with the inefficient southern member states dragging down the value of the euro relative to what it would be if all member states were as efficient as Germany and the Netherlands

How the artificially-undervalued euro has damaged the UK

The euro is undervalued against sterling on a purchasing power parity (PPP) basis and has been all of the time since its introduction. The UK has almost always run a trade deficit with the EU over the period of its EU membership, but the deficit worsened considerably after the euro was created.

In 2019, the UK’s trade deficit with the EU was £73bn and the ratio of exports to imports was only 80%: for every £1 of goods and services we buy from them, they only buy £0.80 from us.

We know that Germany is desperate for a trade deal with the UK

Looking at its massive trade surplus with the UK we know why. The chart below shows that in 2019 the UK had a trade deficit in goods with 16 EU member states. Germany leads the list with £29bn, mainly in automobiles. Even allowing for potential quality differences between British and German cars, a key explanation is again the undervaluation of the euro. Germany’s trade surplus is, of course, our trade deficit.

If the UK maintains the close economic ties with the EU that the EU wants, the UK will remain a captive market for German and other EZ member goods and will be unable to address the structural disadvantage which it finds itself in.

The UK could impose an anti-dumping duty of over £65bn on the protectionist EU

The euro is undervalued against sterling by 15–20% on a PPP basis. Had the euro been correctly valued, then EZ exports to the UK in 2018 would have been lower by between £67.2bn and £88.4bn. The UK would therefore be entitled to impose an annual anti-dumping duty on the EZ in this range.

The EU is following a classic ‘beggar thy neighbour’ strategy. This is where a country or trading bloc follows a protectionist trade strategy that adversely affects its trading partners.

Typically, this involves tariffs and quotas, but in this case, the EU’s weapon is a structurally undervalued currency.

The European Union is seeking a ‘level playing field’ with the UK after Brexit. One of the key issues concerning the EU is ‘dumping’. It is worrying that the UK will become a super-competitive, de-regulated ‘Singapore-on-Thames’, undercutting the prices of products produced in the EU.

In fact, the opposite is the case and below are some threats but also some opportunities.

Here is what the UK could do

The UK government has introduced a Trade Bill which will establish a new Trade Remedies Authority (TRA) to prevent countries from dumping cheap goods onto the UK market and potentially putting key domestic industries out of business.

The Bill may have been intended to target China, in particular, but trade remedies can be levied against any World Trade Organisation member, including the EU, whether or not there is a Free Trade Agreement (FTA) in place.

The EU wants its unfair practices to continue, tying the UK into EU law

We are told that the EU ‘holds all the cards’ in the trade negotiations with the UK. EU Commission President Ursula von der Leyen says the EU is “ready to design a new partnership with zero tariffs, zero quotas, zero dumpings” with the UK.

The EU’s current treaty-based proposal for avoiding trade dumping would involve the UK applying EU law. This includes (extraordinarily and uniquely in international trade between properly sovereign nations) the application of that law as interpreted by the European Court of Justice.

© EU Parliament

This would have the effect of permanently advantaging Germany and other Eurozone (EZ) member state beneficiaries and continuing an arrangement that is demonstrably unfair to the UK.

It is quite shocking that the new German president of the European Commission calls for zero dumpings when her own country is one of the world’s biggest dumpers of goods onto world markets

The UK’s massive deficit with the EU, due to the euro

The UK has always run a trade deficit with EU, but the chart below shows that prior to the introduction of the euro in 1999, the size of the deficit was relatively small at around 0.25% of GDP. But since then, the deficit has ballooned to nearly 4% of GDP. The chart shows a strong downward trend and that trend shows no sign of ending. By contrast, we have a trade surplus with non-EU states and that surplus is on a strong upward trend. And most of the trade with non-EU states is conducted on World Trade Organization (WTO) terms and hence involves tariffs.

This chart conclusively demonstrates that sterling is not overvalued (otherwise the trade surplus with non-EU states would not be increasing year-on-year), but that the euro is significantly undervalued.

A trade deal on the basis of the current structural undervaluation of the euro will only entrench the EU’s structural trade surplus with the UK. The undervalued euro acts as a trade subsidy to firms from within these countries, giving them an advantage over global competitors.

We can and must act now to protect UK interests

This cannot be permitted to continue and the solutions are clear. The trade agreement currently being negotiated with the EU is a trap from which we could never exit if Boris Johnson signs it. We can and must act now, to protect the UK from the Eurozone. The Withdrawal Agreement (WA) must be rescinded and Parliament must-pass legislation, such as the Internal Market Bill and the Finance Bill, which reverses the appalling consequences of the WA for the unity of the UK.

Especially important is the Trade Bill and the introduction of the Trade Remedies Authority (TRA) which will allow the UK to conduct its own dumping and subsidies investigations. The TRA’s first task should be to take a very close look at the structurally undervalued euro. This potentially violates two areas of international law: dumping and subsidies.

First, Article VI of the General Agreement on Tariffs and Trade (GATT) points out that multiple currency practices can ‘constitute a form of dumping by means of a partial depreciation of a country’s currency’, thereby benefitting EZ exporters unfairly. The anti-dumping remedy, in this case, is the imposition by the importing state of an additional duty on the dumped goods.

Second, artificially low currencies could amount to an export subsidy and therefore breach the WTO’s Agreement on Subsidies and Countervailing Measures (SCM).

Had the euro been correctly valued, then EZ exports to the UK in 2018 would have been lower by between £67.2bn and £88.4bn. The UK would therefore be entitled to impose an annual anti-dumping duty on the EZ in that range. We should note that China just imposed anti-dumping duties of between 107%-212% on Australian wine.

Trading on WTO terms

Finally, we should not be afraid of trading with the EU on WTO terms. Although this would involve tariffs, the average tariff is low, at around 3%. The benefit is that we would escape the myriad traps that the EU has set for us.

And trading with the rest of the world on WTO terms has done us no harm at all. In addition, we will be able to negotiate FTAs with these other countries and this will remove tariffs with them altogether.

The EU’s unreasonable demands and behaviour

The trade talks were paused yesterday 11. 12. 2020, having become deadlocked after the EU suddenly increased its demands on Thursday. The details of these demands have not been officially released by either side, although there have been various off-the-record hints by diplomats and government spokesmen.

Whatever the details, one thing is clear. The EU is a very long way from treating the UK like a free, independent, and sovereign country. Against this background, the precise percentages of fish that will continue to be taken from UK waters are — forgive us — a red herring. The reality is much simpler. There never has been a level playing field for the UK, and the EU now wish to entrench this in a treaty. It also demands that the UK obeys its diktats, making the idea of the UK becoming a sovereign nation again a non-starter.

The EU’s uneven playing field

In his article, Professor Blake has demonstrated how the EU has used its structurally undervalued Euro currency to dominate trade between the bloc and the UK. In doing so he has shown the shocking scale of the EU’s duplicity in demanding a ‘level playing field’, tying the UK into EU laws and regulations.

The playing field has always been uneven, in part because of the reasons Professor Blake has outlined above, and also because of the fact that the EU has almost always acted in the interests of its continental members and has sidelined the UK’s national interests.

With the exception of the UK’s first year of membership, the UK has only ever subsidised the EU. This is clear from the official declarations of the UK’s net annual contributions to Brussels, but Professor Blake has explained how the true costs started ballooning when the EU created its artificial currency, the euro. I hope you found that this article has helped to illuminate a misunderstood and ignored aspect of the EU’s treatment of the United Kingdom. If the UK does in fact leave the EU as a sovereign country in 26 days’ time, it will be able to start the long process of redress. If Mr Johnson fudges a ‘deal’ and fails to rescind the Withdrawal Agreement, then it will be more or less ‘business as usual with Treasure Island’ for the European Union.

[ Sources: Professor David Blake ]



Graham Charles Lear

What is life without a little controversy in it? Quite boring and sterile would be my answer.