The Institute of Economic Affairs’ Brexit prize-winning ‘Blueprint for Britain: Openness not Isolation’ is an illustration of the hazardous assumptions underlying the arguments of those who claim Britain could do better outside the European Union.
Its first such assumption is that leaving the EU would make it easier to boost our trade with the rest of the world. In fact, the opposite is true. It is the combined negotiating strength of the EU that has prised open markets to give our exporters access to many countries and more are currently being negotiated. And talks with the United States for a transatlantic trade area have just started. It is unlikely that Britain by itself could get better deals, except, maybe, with the Blueprint’s ‘top priority’ for a free trade agreement – Russia!
The second is that we could exit with minimal cost. It is worth remembering that by far the biggest destination of British exports is the EU, the world’s largest single market. We sell more to Ireland than to Japan, more to Holland than to China. Over four million jobs depend on those exports. It is all very well to say we could negotiate access to this market from outside, but this raises two questions.
The first is whether or not we could get a favourable deal from our partners having walked out slamming the door. A damning admission can be found in the blueprint’s annex: ‘In the time available, it has not been possible to construct a detailed economic model of how much trade with Europe would be affected by a United Kingdom exit.’ And it admits that some aspects of a favourable deal would require every single one of the other member states to acquiesce – hardly a position of strength in negotiations, especially when they are far more important for us than we are for them: UK exports to the rest of the EU amount to 14 per cent of GDP, but rest-of-EU exports to UK only 2.5 per cent of theirs.
The second is whether, if we do get such access, it would matter that we would no longer have a say on the common rules for the common market, with which our exporters would still have to comply.
The blueprint makes much of the costs of EU regulation, while conceding that we would have to apply much of it anyway (or introduce equivalent national rules). But the main purpose of agreeing common EU regulations is actually to cut red tape by having common rules for the common market, rather than 28 divergent sets. A business can now register a trademark, immediately recognised in 28 countries, without going through 28 approvals, and the accompanying form-filling and costs. A lorry taking British exports to Italy used to need 20 different forms to show at frontiers – now just one EU common document is enough. The blueprint makes no reference to that.
Of course, some EU legislation needs to be reformed, updated or repealed. That is true about legislation at any level. Currently, the EU is engaged in the ‘REFIT’ program to test all existing legislation that potentially burdens business, and repeal that that is no longer warranted. This is normal when regulating markets. Jointly regulating our common market is no different.
Another key issue is whether exit would damage inward investment. Here, the blueprint cheerfully admits that ‘a significant risk of a UK exit is a drop in the quantity of foreign direct investment coming to Britain, which currently makes a significant contribution to jobs and economic activity’. Indeed, a CBI survey found that 35 per cent of firms would decrease their business investment in the UK. Yet the blueprint still assumes a ‘most probable scenario’ of no change in FDI.
The blueprint focuses on trade. But the EU is far more. It is a framework where we and our neighbouring countries cooperate on a host of matters: scientific research, police cooperation, student exchange programmes, environment policy, transport links, foreign policy, overseas development aid and more. The blueprint also totally ignores one of the main reasons for the EU – creating an area of stability and peace in Europe. What economic value do you give to each hour of peace?
And exit to what avail? Even with the dubious assumptions mentioned, the blueprint estimates the impact on our GDP as falling within a range of -2.6 per cent to +1.1 per cent of GDP – a downside risk greater the potential benefits! It also admits that ‘the years immediately surrounding the exit are likely to feature some degree of market uncertainty’.
Perhaps the award that the blueprint’s author should have won is for the understatement of the year!
Richard Corbett is a former Labour member of the European parliament for Yorkshire and Humber and is standing to regain his seat in the upcoming European elections
Photo: European Parliament
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