A weak argument

Over at The Guardian, Tim Worstall's Least Favourite Tax Advisor and some Tory activist give their answers to the question: "Should Britain become the new Switzerland?", i.e. loosen ties with the EU or even leave.

TWLFTA is of course completely against, he kicks off with a big fat lie (think Swatch, cuckoo clocks, precision engineering, skiing/tourism, pharmaceuticals etc, do these all count as "banking and finance"? Methinks not) so I couldn't be bothered reading the rest of his and skipped straight down to the Tory activist, who makes some good points, but spoils it with this nugget:

"To demonstrate further, the Swiss are consistently listed in the top three richest countries in the world, and exports twice as much per head to EU countries as the UK does."

There's a glaring grammatical error there "the Swiss... in the top three countries... exports", but worse is the fact that the exports-per-head comparison is meaningless. There are two main things which drive a country's exports-to-GDP or exports-per-capita ratio (or indeed the corresponding imports ratios), and those are:

i. The size of the country's economy and population. The smaller it is, the more likely it is to be specialised in certain things and the less likely it is to be self-sufficient in other things, so the larger the amount of exports and imports (in relative terms). Switzerland's population is one-eighth of the UK's*.

ii. Geographical proximity. Switzerland is land locked and surrounded by other EU member states (ignoring FL), so it is far more likely that they will trade with other EU member states; the UK is a large island in the North Atlantic (plus a bit of the smaller island next door). A fairer comparison would be between Switzerland (pop. 7.8 million, not an EU member state) and the Alpine, land locked country next door which is Austria (pop. 8.4 million, an EU member state).

I did a graph with all the statistics to show that this theory stacks up in real life and explanations here, it's pretty blindingly obvious if you think about it.

* The statistics suggest that the trade-to-GDP is inversely proportional to the logarithm of the population. The logarithm of 7.8 million is 0.89 and the logarithm of 62 million is 1.79, so ball park, we would expect Swiss exports-per-capita to be twice as high as the UK's anyway. If you then factor in 'geographical proximity', it appears that Switzerland is doing pretty badly!