Progress | Centre-left Labour politics

The IEA’s inadequate Brexit blueprint

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!

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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

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Photo: European Parliament

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Richard Corbett MEP

is deputy leader of the British Labour members of the European parliament

4 comments

  • Yes – a much better plan was rejected by the IEA:

    http://www.eureferendum.com/blogview.aspx?blogno=84857

    I wouldn’t expect a person such as Corbett to acknowledge it as such – but then, I wouldn’t expect too much integrity from a man who upon being dumped for a BNP candidate, finds a position in an EU department nobody wanted, created by a treaty nobody had any say on, and run by a person nobody has voted for.

    What a wonderfully democratic construct this European Union is.

  • Facile ad hominems aside, Richard is right – this ‘blueprint’, like most proponents of Brexit, is woefully ignorant of reality. As your link states, Britain would still be subject to the entire single market acquis if it wanted to trade with the EU, which would in effect reduce Britain’s sovereignty even further as it would be denied a place at the negotiating table. Moreover, as stated, there is no reason to believe Britain would be in a better position to conclude its own trade deals with third countries. We are seeing more and more large-scale regional trade deals – it is doubtful that major economies would see the conclusion of relatively tiny bilateral deals with Britain as a priority.

  • When it comes to Brexit proposals, the devil is always in the detail. Unusually, in this case, the uncomfortable details are actually admitted rather than obscured (kudos to the author for that).

    My favourite footnote is number 43, where the UK’s potential new allies as part of an ‘EU-out’ group are listed: “Iceland, Liechtenstein, Norway, Switzerland, Andorra, Monaco, San Marino and Turkey”. What a roll-call of world players that is (!).

    Ever heard the phrase “judged by the company you keep”?

  • Not sure what your understanding of the EU is but most if not all of it is decided by governments that are elected by people or by the European parliament also elected by people. Something which isn’t quite the case of the House of Lords. Also not sure why you think playing the man makes your argument any stronger, but fine.

    Regarding your link: Your eight points aren’t really tangible mate. Point 1: how are you going to stop fish from crossing into different national waters? Point 2: is already in place for all EU legislation and anything signed off is already agreed to by the elected UK government (nobody is forcing them). Point 3: how do you imagine putting global organised crime into check on our own? Point 4: how do we, on our own, push the global system towards a regulatory harmonisation that would be advantageous to us? (no but really? us vs China vs US vs EU and we win?) Point 5: ditto. Point 6: fine but how are you going to do that? Do you really think we can just ask for one sector from another country/government and not expect them to want something in exchange? Do you know how trade agreements work? Point 7: not sure how what you are talking about but looking forward to hearing more on that; as well as your ideas for world peace. Point 8: would love that to happen but how are we going to convince tax havens to give in our own? In any case thanks for that.

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