– Treasury predictions slammed as “dishonest, incompetent and shamelessly partisan”
– Exporters to the EU under WTO rules often outperform those exporting to the EU with FTAs – and they even outperform EU members trading with each other
– Report supports earlier studies that have found “no evidence” EU membership has boosted UK economic growth
The Prime Minister should ignore “discredited” and “speculative” predictions made by the Treasury and pursue trade as a most favoured nation under WTO rules rather than persevering with the Chequers proposal, according to Michael Burrage, a member of Economists for Free Trade.
The major new paper slams the Treasury’s “dishonest, incompetent and shamelessly partisan predictions” and accuses them of having “taken advantage of the official status they enjoy to publicise their views, while remaining anonymous and unaccountable”.
The paper says that “the greater part of UK trade is currently conducted according to these [WTO] rules rather than those of the EU, and they do not appear to have given rise to chaos or Armageddon”. In fact, UK goods exporters trading with the rest of the world have far outperformed exporters enjoying the benefits of frictionless trade within the EU.
Despite the Treasury and government economists claiming that trading under WTO rules is the “worst possible option”, Burrage says that UK goods exports to 111 countries under WTO rules with the EU over 23 years 1993-2015 grew at a Compound Annual Growth Rate (CAGR) of 2.9 per cent, three times faster than UK exports to the EU14 (0.9 per cent). They also grew much faster than those exporting to the 62 countries that had some kind of trade agreement with the EU (1.8 per cent).
Burrage says – relative to the Chequers proposals – adopting WTO rules will be the “very best” option in terms of political consequences and that there is “no evidence that EU membership had boosted UK economic growth”.
“Mrs May could deliver exactly what she promised at Lancaster House, and stay well behind all her red lines without the least difficulty. There would be no quarrel about the sequencing of negotiations, no reason for UK negotiators to be supplicants on their knees, since they would finally have some leverage. They would have no reason to make concessions or further payments to the EU, other than for past commitments and for participation in selected future joint activities. And Mrs May domestic political opposition would be limited to those who want to reverse the referendum, a far less daunting task than at present. The government could then concentrate on making free trade agreements with the EU and others over the transition period.”
Burrage makes the case that now is the time to take the no deal option, because it is the best way, even the only way, to make good deals with the EU and many others.
Burrage slams the Treasury analysis of the economic consequences of a WTO rules exit for making predictions on “what might perhaps happen” to the UK, instead of analysing “what has in fact happened” to countries that trade on WTO terms over the past 15 years and more.
The IMF’s Direction of Trade Statistics report shows that of the 22 largest value goods exporters to the EU 12 over the years 1993-2015, 15 were trading as most favoured nations under WTO rules, (or GATT until 1995), and seven were under some kind of bilateral agreement. The former, trading under the ‘worst possible option’, grew by 135% over the period and the latter by 107%. More importantly, they grew almost twice as much as the ‘best possible option’ of exports between the 12 founder EU members, which grew by only 70%, and four times more than UK exports to the other eleven, which grew by 25 per cent.
Please find the paper here.