Euro bonds
Sir: In your leading article, ‘A new deal with Europe’ (17 September), you argue that as Brussels will not agree to radical reform and massive deregulation, the only remaining options are to renegotiate our membership of the European Union or ‘pull out entirely’. However, we must be clear that unilateral withdrawal is out of the question. Over half the UK’s manufactured exports to the EU would face zero tariffs whether we were in or out of the EU. But if the UK left the EU without any new preferential trade agreement the remainder would face an average EU tariff of over 5 per cent, a decisive handicap in many price-sensitive markets. In particular, the vital UK car manufacturing sector would face EU tariffs of 10 per cent. This would place Honda, Nissan, Toyota (UK), BMW (UK) and Jaguar Land Rover at an unacceptable competitive disadvantage in the deeply integrated European car market compared with their present position.
Negotiated withdrawal from the EU should be seen as a fallback option for the UK if all else fails. As the one leading member state which had the sense not to join the euro, the UK could credibly argue for a less integrated Europe based on trade and co-operation. Failing that, we would be in a strong position to negotiate withdrawal based on a new intergovernmental customs-union-based trade agreement which would enable free movement of goods between the UK and the EU to continue.
Ronald Stewart-Brown
Trade Policy Research Centre
Charlbury, Oxon
Japan’s example
Sir: Allister Heath’s warning about the ‘bubble’ in government bonds (‘This is going to hurt’, 17 September) doesn’t once mention the market for Japanese sovereign debt, yet it’s this very market that should be his main source of evidence.
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