A call to Brexiteers to fill the void on the economic effects of Brexit.

I think that we Brexiteers can be very grateful to Michael Gove for his sparky performance on Sky TV. Apart from having to defend the rather silly figure work of the UK paying £350 million per week to the EU, which we all know to be misleading, he was hung out to dry on his lack of supporting evidence for his assertion that the UK could prosper outside the Single Market.

As the Vote Leave campaign have decided to go for the `nuclear option’ of freeing themselves from the clutches of the Single Market and not embracing the Norway option /EEA route (probably because of the worries about the attendant problems of free movement of people) they must somehow build a firm foundation for this view. At the moment there is a generally held view that evidence for a good outcome is lacking, one which John Major hammered home on the Marr Show on Sunday.

Luckily, there is a group of well-known economists which calls itself Economists for Brexit and which shares Vote Leave`s view. The group has produced a pamphlet which is available on the internet.

This body of erudition can be found here and the summary of their views in the leaflet is that Brexit will result in a better economic outcome than remaining in the EU. Economic forecasts (based on proven financial modelling by Patrick Minford) show that on leaving the EU:

  • Output grows 2%
  • Competitiveness rises 5%
  • Real disposable wages up 1.5%
  • Exchange rate falls 6%
  • Inflation and interest rates rise to 2-3% range
  • Current account improves to -1.5% of GDP
  • Unemployment reduced by 0.2% (75,000 on benefit count)

It also points out that:-

  • The UK does not need to do a trade deal to trade. It already trades extensively with many countries across the globe under the rules of the WTO and can continue to do so with EU countries in the future (in the same way that the US, Japan and China does). Leaving the EU will decrease prices and boost GDP.
  • The City of London will retain its role as the world’s leading financial centre outside of the EU.
  • The UK is a net contributor to the EU budget and those funds could be utilised far more efficiently elsewhere.

To quote from their pamphlet, which is downloadable, they state that: “The Economists for Brexit is a group of eight independent, leading economists who are convinced of the strong economic case for leaving the EU. To date, debate on the economic merits of whether the UK should remain in the EU has become overwhelmed by the Government’s Project Fear campaign. Each of the eight economists have become exasperated by the scaremongering and often economic illiteracy of this campaign.

At the same time, the group believes that whilst there are a substantial number of economic arguments to support Brexit, they are yet to be made in public. The purpose of this group is to explain the very clear economic arguments in favour of Brexit, offering voters – who are crying out for clarity on the economics of Brexit facts based on proven economic models, as opposed to speculation.

It is a useful and insightful view on the way forward if we break loose from both the EU and the EEA and do our own thing. There is even a short but detailed post-Brexit forecast to be found towards the end of the report by Patrick Minford.

Whilst one can understand that were the Leave campaign to link itself to such a document it is then open to the opposition mercilessly to analyse it, tear it apart and use portions of it against them. However, here is a body of professional opinion which is robustly positive for the economic outlook after Brexit and which has some realistic opinions on the excessive burdens which are placed on business by the regulatory zeal of the EU.

The Leave campaign must now ‘up its game’ and use the supporting information which is out there to form a compelling case for life after Brexit. It should also make more use of the information which points to the very real dangers of remaining in a failing, ove- regulated customs union which contains a host of countries whose economies are in a precarious state.

 

Photo by HowardLake

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3 comments

  1. Andrew ChapmanReply

    It seems to me that it would be sensible to seek a simple FTA with the EU, to maintain zero tariffs on industrial goods. The FTAs between the EEC and the EFTA states were negotiated in seven months between December 1971 and July 1972, but include transitional arrangements for the gradual reduction of tariffs, whereas we would just be maintaining zero tariffs, so an even shorter time would be feasible, I would have thought.

    On top of this, one could aim for an enhanced Mutual Recognition Agreement based, where possible, on equivalence of regulations. At the moment, we have identical regulations with the EU, and all the Conformity Assessment Bodies are already in place. We would not want to be tied to always changing our regulations whenever the EU brings in new legislation, over which we would then have no say. So I think we should aim for mutual recognition based on equivalence of legislation based on international standards, as for example the USA EU MRA on marine equipment, which is based on the rules of the IMO. MRAs are sector specific, so different arrangements could be worked out for the different sectors. If there was difficulty in one sector because of a future divergence of regulation, it should not affect the others (see the earlier EU USA MRA which is now functional in only 2 of 6 sectors).

    In Bilaterals I, the EU tied the MRA and 5 other agreements to a Free Movement of Persons Agreement. But the Swiss were aiming for a high level of participation in the single market. If we limited ourselves to seeking a simple FTA and MRA, which are both things that the EU has agreed to with other countries without an FMPA, then I think it would be hard for them to demand that linkage. Probably we could get somewhat more than that without an FMPA, I don’t know. But it seems to me that it would be sensible to keep it as a ‘simple’ Agreement in the EU sense, rather than a ‘mixed’ Agreement as CETA will probably be, to avoid the need for ratification by all 27 states.

    Andrew

  2. Petrina HoldsworthReply

    Andrew, I entirely agree with your analysis of the situation.
    A simple FTA and MRA would provide the basis for unhindered trade between the UK and the EU without the inevitability of a Free Movement of People condition.
    It should not take much time to draw up and would allow us to escape the clutches of the EU whilst maintaining the advantages of easy access to its markets.

  3. Andrew ChapmanReply

    I was struck by the following comment by Keith Armstrong, who is one of the UK’s leading electromagnetic compatibility experts, and knows all about the workings of the EMC Directive, with which suppliers of electrical and electronic goods to the EU generally have to comply:

    ‘I have often heard the EU’s single market described in the USA as Fortress Europe – when the exact opposite has always been true: the EU’s single market does not present any significant barriers of cost or delay to any equipment from anyone, anywhere.’ (http://bit.ly/1VULUxX)

    That may be putting it a bit too strongly, I don’t know, but I think it is important to realise that in his sphere, where manufacturers have to abide by the EMC and Low Voltage Directives, there is no requirement for testing by third party conformity assessment bodies at all – at least for these 2 Directives, which I think are the main ones. Rather the manufacturer can issue his own Declaration of Conformity, and put on the CE mark himself. So for these and many other products there is in fact no need for MRAs at all now, with the EU’s New Approach to conformity assessment.

    Andrew

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