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The leaked Brexit report - highly dubious!

The leaked government Brexit report has been seized upon by Remainers as another weapon in their arsenal, but a closer look finds it conceals as much as it reveals.

1) Officials believe the methodology for the new assessment is better than that used for similar analyses before the referendum.

SL: The whole piece rests on the above assertion. There is no description of the previous methodology or of the changes that make this analysis better. Is the methodology different from the one used previously to “prove” that the UK economy would tank if it did not join the Euro?

2)The biggest negative impact comes from the UK’s decision to leave both the EU’s Customs Union and the Single Market … Leaving these arrangements creates what the analysis calls “non-tariff barriers” to trade, such as loss of market access in certain sectors and new customs and border checks and practices.

SL: Even within the Single Market and Customs Union, France manages to erect non-tariff barriers to trade. Which sectors would the UK lose access to as a result of new non-tariff barriers and what would these new non-tariff barriers be?

Over the last two decades China, from outside the Customs Union and the Single Market and with no free trade agreement has managed to achieve nearly 10% of UK imports. It follows that the Customs Union, the Single Market and free trade agreements are not the prime factors driving successful penetration of EU markets.

3) Moving away from the existing set of rules and standards would also make it harder to trade with the EU in the future, and would be politically controversial domestically.

SL: Once again countries such as China successfully trade with the EU and those goods they export to us have to comply with EU rules and standards. The fact that outside the EU the UK would be free to produce goods for non-EU markets that do not comply with EU rules and regulations is a potential bonus that in no way precludes UK companies from complying with EU rules and standards when selling products into the EU.

4) Trade deals with other non-EU countries and blocs, such as China, India, Australia, the Gulf countries, and the nations of Southeast Asia would add, in total, a further 0.1% to 0.4% to GDP over the long term.

SL: The EU has been a declining market for UK exports which have fallen from over 60% to under 45%. The majority of UK exports are therefore now bound for outside the EU. It seems illogical to predict that losing free trade agreements for 45% of UK exports will outweigh the potential of striking free trade agreements with the rest of the world which already account for 55% of UK exports, given that non-Eu economies are growing far faster than the EU.

5) There is a risk that London’s status as a financial centre could be severely eroded, with the possibilities available under an FTA not much different to those in the WTO option.

SL: The role of London as a financial sector is as much a curse as it is a blessing. With the City of London Corporation acting as a hub for money from offshore tax havens, sterling is heavily overvalued and capital is drawn into asset price speculation, especially the property market, and away from the real economy.

With the wages of those in financial asset and property acquisition counting towards GDP, the figures on growth are not fit for purpose. They reflect the asset price speculation of a casino economy and do not accurately measure growth, or lack thereof, in real living standards.

6) "It also contains a significant number of caveats and is hugely dependent on a wide range of assumptions which demonstrate that significantly more work needs to be carried out to make use of this analysis and draw out conclusions.”

SL: In view of all the above, this is an understatement.

The UK has a massive trade deficit with the EU which needs to be addressed. Since the 15% sterling devaluation, regarded as being triggered by Brexit, UK manufacturing exports have grown by over 12%.

The price the UK charges the world for its exports together with investment in the real economy, not the financial sector, are the key factors which drive growth in living standards. While current uncertainty has put some investment on hold, the long-term success of the UK economy does not depend on whether it is or isn’t in the EU.

The majority of short term predictions by mainstream economists are wide of the mark and long term predictions wider still. Until they revise their models they should be treated with extreme caution.  

 

Steve Laughton, Dip Econ.

Labour Leave shares a number of viewpoints from external commentators, both Leave and Remain, without necessarily endorsing any of the viewpoints therein.


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