Britain has “nothing to fear” from a “clean break” with the European Union, according to a report by the group of economists who have consistently argued that Brexit will be a liberating experience.
The Economists For Free Trade (EFFT) report argues that moving outside the EU’s single market could see prices in the shops decline by 8% and the economy grow by an extra 7% over the next 15 years, or by more than £1tn in today’s money.
In their sights was the Treasury’s vision of higher prices, higher interest rates and 500,000 to 800,000 extra unemployed following referendum vote and the threat of a hard Brexit.
Philip Hammond admitted on Tuesday that project fear’s forecasting had been flawed. The chancellor said it had failed to take into account the action by the Bank of England, which was to cut interest rates, and his own department’s albeit modest relaxation of austerity. He observed that it had emerged when article 50 was still some way from being triggered.
Consider that its leading light, the academic Patrick Minford, despite spending years honing a model of the economy in his Cardiff University lab, has never been considered an expert on trade. His model has not been adopted by other academics.
He argues that cutting import tariffs to zero will usher in billions of pounds of cheap goods, reducing inflation and improving living standards.
He dismisses the concern that other countries will retain or even increase their tariffs, saying it would be a breach of World Trade Organisation rules. Except that Donald Trump’s protectionist agenda puts him in breach all the time and there is only tit-for-tat retaliation. Why? Because a WTO dispute takes years to resolve. Ditching the UK’s import tariffs also jettisons any bargaining power the UK might have with other trading blocs, such as the US and EU.
The report goes on to dismiss concerns that without harmonised rules, UK goods would be increasingly blocked from entering the EU. Minford again invokes WTO rules and claims the EU would be punished. Except that the EU places restrictions on the volume of certain goods from non-EU countries entering Europe all the time. China knows this to its cost.
Opening Britain to low-cost imports would also damage vulnerable industries such as agriculture and manufacturing, which are currently protected from cheap copycat goods by being inside the EU’s tariff regime. Government subsidies could offset the effects of intense competition from cheap beef and machine parts, but the huge sums needed would breach WTO rules and even if they were allowed, would chip away at the gains.