Brexit and the City
What Shall We Do if the EU Will Not Play Ball? UK WTO Trade Strategy in a Non-Cooperative Continent
17 February 2017
Available to download here.
16 February 2017
EFT forecasts show that a ‘tit for tat’ policy of maintaining tariffs against an un-cooperative EU could cost the UK 8% of GDP.
Press release available to download here.
New Analysis of UK's WTO Trade Options Shows UK Could be 4% Better off or 4% Worse off Depending on Tariff Policy
16 February 2017
Available to download here.
Achieving Economic Success with Global Free Trade
16 February 2017
Presentation slides available to download here.
Economists for Free Trade Launch Presentation
A vote for Brexit: what are the policies to follow after and what are the economic prospects?
The Economists for Free Trade experts lay out the optimal economic and legal outcome for the UK, taking into account the clear view expressed by the outcome of the EU Referendum on June 23 in the following paper:
Economists for Free Trade presentation slides (13th July 2016) can be viewed here.
A written submission to House of Commons International Trade Committee providing additional support to oral answers on November 29th to the question, “Why do you think there are not great risks on losing passporting rights outside of the Single Market?” can be viewed here.
A Brief on the City After Brexit
The Economy After Brexit
Economists for Free Trade has published a pamphlet with a briefing from each economist covering areas including regulation, trade, jobs and investment, immigration, the City, EU budget, EU funding and a comprehensive post-Brexit economic forecast which can be viewed here.
Patrick Minford – Brexit and trade:
- The UK would not need any new trade agreement should it leave the EU. 70% of exports are traded outside of the EU, all of which are under WTO rules. That remaining 30% would fit within the WTO rules.
- Walking away from the EU, not negotiating a new agreement with the EU or putting up any new trade barriers will bring about a 4% gain in GDP, consumer price fall of 8% and an expansion of the UK’s competitive services sector to take the place of diminishing manufacturing output.
- Agriculture (at just 1% of GDP) can be supported by direct Treasury payments instead of CAP, funded by just part of the money the UK would save from EU budget payments.
Gerard Lyons – The impact of Brexit on The City and Financial Services:
- It is hard to imagine London not being the main financial centre in Europe, regardless of its membership. The debate on whether the UK should join the Euro centred around this fear and no European city has come close to rivalling the London’s position.
- In fact, it is that dominance which would help the UK retain that position post-Brexit. 2.2 million people work in the financial services industry and the infrastructure associated with that is not easily replicated. London leads globally, with no major European competition.
- One major concern cited about Brexit for financial services is the loss of passporting rights. However, given the single market has not performed well in financial services, in retail markets many firms already have representation in many EU countries. On the wholesale markets, the vast majority of activity takes place in London anyway.
- There has been a recent trend of the UK’s inability to influence regulation in the financial sector, which has seen many interventions by the European Court of Justice. Remaining in the EU does not resolve this and indeed the recent renegotiations by the Government has not achieved ‘water tight’ protection.
Roger Bootle – The EU’s poor economic record and the dwindling importance of the Single Market:
- Over the last 20 years, the EU’s economic record has been very poor indeed when compared with other developed countries, not just as a result of the Euro but by a series of bad decisions which have reduced efficiency.
- Regulatory burden, misuse of EU funds and the continual absorption of political attention on EU reform matters have all contributed to poor economic performance.
- Some argue that poor EU decisions are more than made up for by the benefits of the Single Market, as if it was a door which could be opened or closed depending on EU membership status. The reality is that many countries sell into the Single Market without membership (the US being the largest exporter to the EU).
- Only 10-15% of the UK’s GDP is accounted for by exports to the EU but the UK remains subject to all the regulation.
- This, combined with the fact that the benefits of the Single Market continue to dwindle in a global market, means the EU is a club of which the UK should not want to be a member.
- Regulation – Professor Tim Congdon stresses that the burden of regulation imposed by the EU has been a major factor in the region’s poor economic growth.
- Jobs and Investment – Ryan Bourne’s message is simple – Outside the EU jobs and investment would expand in an environment of higher growth.
- Immigration – Neil McKinnon says that the UK is currently prevented from controlling immigration from the EU and the only way for the UK to ensure it obtains the mix of immigrants with the right mix of skills is to leave the EU.
- EU Budget – Warwick Lightfoot explains that the UK could better spend its large EU budget contribution elsewhere.
- EU funding – Professor Kent Matthews says that many areas which receive EU funding (and therefore fear losing that funding), including areas such as Science and agriculture, actually receive that money from the UK anyway.
- Detailed forecasts – Patrick Minford presents detailed forecasts of economic prosperity following an exit from the EU, based on his respected and proven Liverpool Model.
The Treasury Report on Brexit: A Critique
Treasury ‘gravity model’ approach fundamentally flawed and approach offers no foundation in economic theory.
- Proper analysis shows WTO trade model improves GDP by 4%, as opposed to the 8% fall calculated by the Treasury.
- WTO model allows the UK to abandon all EU regulation within the Single Market, bringing further gains to GDP and, politically, gives full freedom from the EU in every respect.
Highlights of the report
- All analysis undertaken by the Treasury uses a ‘gravity model’ approach, a fundamentally unreliable way of analysing a post-Brexit world, given that it fails to take into consideration major structural changes in tariffs and other trade barriers and overhauls of regulations, all of which fundamentally alters underlying assumptions. In essence, its model is a series of associations and there is no reason to believe that those assumptions will be repeated.
- For example, the model fails to take into account significant increases in consumer spending power and the shift towards more productive industries and therefore better productivity.
- The many claims made by the Treasury about how FDI and trade would fall and consequently reduce productivity are baseless and not in any way supported by proper statistical analysis. The proven economic model, known as the standard trade model, shows that under the WTO trade option, non-protected sectors would expand; FDI (foreign capital) would gravitate towards those sectors; overall productivity would rise, as would consumer welfare.
Treasury trade analysis offers a poor evaluation of post-Brexit trade alternatives:
- EEA Norway - Whilst not economically the preferred option, The EEA / Norway trade analysis assumes a significant cost increase due to administrative hassle, which is based on little, if no evidence. Standard trade model shows a nil effect of this arrangement.
- Canada option – The Treasury costs this as worse than the Norway option, because it believes financial services Single Market contributes to trade and productivity. However, there is currently no real Single Market in the services industry and therefore, worst case scenario is no effect, but one could conclude a positive impact.
- WTO option – The Treasury assumes, through the impact on openness and FDI a net cost of 8% of GDP. However, it fails to acknowledge even the most basic of facts that that current EU protection increases consumer prices (by our analysis by 20%) and therefore does not recognise the corresponding fall in consumer prices post-Brexit or the resulting benefits on raising productivity and wages.
Following the release of GDP figures (27 October 2016), Economists for Free Trade has issued the following statement.
Latest GDP Figures: Treasury must now publicly reject all pre-brexit forecasts
Britain should prepare to leave the Single Market to enforce Brexit, says Economists for Free Trade member Patrick Minford in Politeia’s publication, Trading Places: Consumers v Producers in the New Brexit Economy. The goal should be access to the Single Market under WTO rules in the same way as other successful economies – e.g. the US, Canada and Australia access it. Exiting the Single Market would bring huge savings by lifting the burdens of EU tariffs and regulations and ending subsidies to unskilled European migrant labour.
Consumers v Producers in the New Brexit Economy
In How to Leave the EU - Legal and Trade Priorities for the New Britain (published by Politeria), Martin Howe QC, proposes when and how Article 50 should be invoked to give the EU notice of departure. The author, a distinguished EU lawyer, explains that the focus should be on the UK’s trade deals globally, with third countries outside the EU. The aim should be to take over free trade deals with such countries to which we are already party, simply replacing the EU with the UK as co-signatory without further elaborate renegotiations. For other new global trade deals, independence from the EU and its remaining 27 Member States, will facilitate the forging of fast and rapid deals.
Leaving the EU - Legal and Trade Priorities for the New Britain
Economists for Free Trade members Patrick Minford and Neil McKinnon are joined by Paul Ashton to discuss the costs of large scale unskilled EU migration to British households.We show that under the UK’s welfare system an unskilled migrant worker on the minimum wage costs the taxpayer in the region of between £57 (for a single person) and £29,000 a year (for a worker with a family).
Estimates suggest that with the current population of 3 million EU migrants the cost to the average UK worker of supporting EU unskilled migrants could be around £2 a week. For workers in an area with a dense migrant population such as Leicester this could rise to £6 a week.
'The Economics of Unskilled Immigration' can be found here (Revised: September, 2016).
Paul Ashton is an independent economist and former member of the Macroeconomic Research Group at the University of Liverpool specialising in the UK tax/benefit system, poverty and income distribution, and aspects of the UK labour market. He has published several works in these areas. For further information please see http://pasheast.wix.com/paul-ashton.
The Economics of Unskilled Immigration
'Measurement without Theory: On the extraordinary abuse of economic models in the EU Referendum debate' by Prof. David Blake can be found here. 'Lies, Damn Lies and the Treasury’s Brexit Reports' by Kevin Dowd can be found here.
Leading senior UK academics Professor David Blake, of Cass Business School, City University, and Professor Kevin Dowd, Durham University Business School, have produced analysis reinforcing the EFT views on Brexit.
Measurement without Theory: On the Extraordinary abuse of Economic Models in the EU Referendum Debate
Lies, Damn Lies and the Treasury's Brexit Reports
Ignore Project Fear: Brexit won't ruin us
'The Brexit Consensus Bug' can be found here.
Prof. Patrick Minford explains why the establishment models have uniformly delivered such gloom and doom results:
- Long term policy assumptions that go against both economic and political logic and British economic policy for the last 40 years; these amount to a reduction in the extent of free trade via Brexit whereas actually Brexit will move Britain into global free trade
- Short term assumptions about policy uncertainty that is avoidable by competent economic policymaking. After Brexit the government will set out its long term policies and how it will implement them over time, rapidly closing down uncertainty.
The Brexit Consensus Bug
Prof. Minford’s open letter to the Financial Times, in reply to Martin Wolf can be found here. Here he clearly offers a rebuttal to the establishment position.
An Open Letter to the Financial Times
Rebuttal of LSE Press Release
Alongside this the authors have published supporting works:
- Prof. Patrick Minford's exemplary work on the UK leaving the EU
- Roger Bootle's book: The EU hasn't delivered the prosperity and growth it promised; the euro has turned out to be a disaster; and the EU's share of world GDP is set to fall sharply.
- Martin Howe's chapter on 'Transforming the UK's Relationship with the EU: The Legal Framework'.