Dispelling the "free and frictionless" trade fantasy

A pro-Brexit economist made headlines at the weekend after stating that a ‘hard’ Brexit is economically superior to a ‘soft’ one, as removing all trade tariffs and barriers would help generate an annual £135bn uplift for our economy. We beg to differ.

The UK exports 44% of its goods and services to EU member states and 53% of our country’s imports come from the EU. This makes the EU one, if not the most important trading partner for the UK. Having to renegotiate our trading terms with the bloc will slow down the economy for several years to come – an outcome that will frustrate British businesses. Unless this government actually does its job and secures a good trade deal for us after Brexit, we will have to trade under World Trade Organisation rules and therefore there will be barriers to trade. This would mean that Brits buying goods that have been imported from the EU after Brexit will face higher prices.

The pro-Brexit findings come from the Economists for Free Trade group, a misnomer in itself given that the current arrangements with the EU are the world’s biggest free trade deal. The findings contradict all other trade related studies and have already been disputed by other experts in the field. The Independent reported that “the small print of the modelling reveals the assumption that ‘general international pressure’ over the next decade will compel the EU to reduce its own effective tariffs on imports from 20% to 10% - and that the authors ignore the impact of differences in EU safety and quality standards for goods on producer prices.” These observations were made Prof Alan Winters, Director of the UK Trade Policy Observatory. Several economists wrote for the London School of Economics and Political Science blog to express their shock at how the pro-Brexit report manages to “defy the laws of gravity”. Let’s not forget that 10 Nobel-prize winning economists warned of the consequences of the UK leaving the EU before the referendum, precisely because of the major uncertainty that would loom over future trading arrangements. And if that wasn’t enough to question its validity, the pro-Brexit report which was authored by Patrick Minford manages to raise eyebrows regarding a very basic issue, by stating that “today, everyone has to show identification at the [Irish-Northern Ireland] border.” That is simply wrong. 

After chanting "strong and stable" for a whole month this summer, the Tories – who seem to have taken a liking to alliteration – are now using a new slogan: "free and frictionless" trade. The EU’s response was that we must be living in a fantasy world to believe it. Trade deals take several years to be agreed upon, so to believe that Theresa May’s Brexit team will hammer this out easily when they haven’t even been able to secure citizens’ rights after months of negotiations is indeed a fairytale.

International trade isn’t a matter of ‘que sera, sera’ and Michael Gove’s diagnosis that the whole country has “expert fatigue” certainly hasn’t helped. We need expertise to understand the challenges ahead and pre-empt a disastrous aftermath for our post-Brexit economy. But those choosing to ignore the facts are in for a tough wake-up call come 2019.

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