David Cameron has promised that in 2017 a newly elected Conservative government would hold an In/Out referendum on our membership of the European Union. What will the world economy look like four years from now and, in particular, how vital will our trading relationship with the EU be to us? It will be 42 years after the 1975 referendum, the first and so far only popular vote on the UK's position in "the European construction". Suppose that in 2017 the British people vote to stay in and that a similar 42-year wait follows before the next testing of public opinion. Can anything useful be said today about the world of 2059?
To answer the first question let us consult the website of the International Monetary Fund. As the data there may come as a shock to our eurocentric politicians, it needs to be emphasised that the IMF is a good, unbiased source. The IMF is far from perfect in its behaviour or forward vision, but it is at least well-informed, objective and impartial relative to most of the alternative authorities. The key message is that the importance of the European Union in the world economy has declined, is declining and will decline further. (2017 is the last year for which it made projections in its October 2012 World Economic Outlook publication and the related database.)
In the last few decades the EU has been the dominant market for British exporters, being typically the destination for between 50 and 60 per cent of all the goods and services that we sell abroad. This is hardly surprising as Britain is geographically part of Europe, and the EU in the 1980s and 1990s accounted for a high share of world output. In 1980 the EU's share of world output was almost a third, at 31.1 per cent. In the early 1990s, as the plans for the single currency were being advanced, it still represented over a quarter of the world economy.
However, its subsequent fall from grace has been abrupt and severe. According to the IMF, the EU's share of world output last year was 18.8 per cent and in 2017 will be down to 17.1 per cent. Its planners may have dreamt that the new single currency would have replaced the dollar as the world's leading currency by the 2020s. But the eurozone's share of world output has dropped even faster than that of the EU. Last year it was 13.3 per cent and in 2017 the IMF expects it to be down to 11.9 per cent. The eurozone will never overtake the US economically, while the dollar will continue to outshine the euro as an international currency.