Briefing and Rebuttal: Institute for Economic Affairs “Creating a prosperous post-Brexit UK” - People's Vote

Briefing and Rebuttal: Institute for Economic Affairs “Creating a prosperous post-Brexit UK”

On Monday 24 September, the pro-hard Brexit think tank “The Institute for Economic Affairs” published a  paper on how they envisaged a post-Brexit prosperous UK. This briefing rebuts some of the main claims made in the paper, which is vague at times (including on the Irish border) and muddled in its thinking and is not realistic as regards global UK trade global trade patterns. The suggestions it contains would see the UK have less, not more control, over its borders and whilst the IEA would like to see the UK diverge from existing EU regulations, it is not clear precisely to what degree changes would be made. More generally the paper makes a number of assumptions about international trade which do not stack up.  

Rebuttal

  1. The paper claims that “Many EU regulations are bad for growth: the UK needs the freedom to do better.” and that “continued adherence to EU norms would hold us back”. This despite the fact that it is due to Brexit that the UK has gone from the top of the EU growth league pre-referendum to languishing at the bottom today. It is not EU policies which are holding back growth – it is the uncertainty caused by Brexit which is. Despite the paper’s general belief that its EU policy which is holding the UK back it is not precisely clear how the IEA would change existing rules to make any kind of improvements, other than to “diverge”.  
  2. The paper asserts that “[the UK] should seek to replicate the EU’s agreements with third countries to cover the UK bilaterally”. It is already clear that third countries have yet to agree to such a roll-over trade deals with the UK, causing much uncertainty[1] and there are already problems at the WTO as regards the dividing quotas between the UK and the EU with third countries.[2]
  3. When it comes to trade policy, more generally, the paper argues that “Negotiations should be accelerated to roll over existing agreements and agree a new FTA with EFTA.” The UK already has a very comprehensive and extensive FTA with three of the EFTA member states (thanks to its membership of the EU), called the European Economic Area (EEA) and due to its membership of the EU is part of the EU-Switzerland trade deal.
  4. The paper notes, in a wishful thinking manner that “the Department for International Trade (“DIT”) should seek to conclude these negotiations provisionally, so they can come into effect on 30 March 2019 in case of no Withdrawal Agreement and no Transition Period.” The problem with this argument is that no third country will be able to conclude any kind of agreement with the UK until it is clear what the future UK-EU relationship will be. This is the real concern regarding a no-deal Brexit – there is not enough time to make adequate preparations for this kind of scenario.
  5. The paper claims that “[The UK] should focus on major trading partners with whom the EU does not yet have agreements.” This does not take into regard that countries like the US, China and India will either be able to call the shots in any deal, with the UK in a position of relative economic weakness as regards China and the US. Indeed, Wilbur Ross, the US Commerce Secretary has already been on record saying that the UK would have to accept US Standards, such as “chlorinated chicken” in any UK-US trade deal.[3] The Indian Government have also been adamant that deepened trade would necessitate visa liberalisation[4], something most Brexit supporters are not prepared to countenance.
  6. The paper is vague as regards what the IEA is actually advocating as regards any possible extension of article 50. On one hands it states that “The UK could request an extension of the negotiating period to enable the outstanding provisions of the Withdrawal Agreement to be completed”, whilst at the smart time noting that “Requests for more time will make the UK look weak”.  In any case, any extension of article 50, would require unanimity amongst EU members, where it is clear that an extension would not be granted to further pursue negotiations. Conversely, if the IEA is that keen to extend article 50 then it is clear from EU sources that this could be achieved in the event of a People’s Vote.[5]
  7. The paper puts forward suggestions for joining both the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) as well as the North American Free Trade Agreement (NAFTA). This is despite UK trade with these regions paling in comparison with trade with the member states of the European Union, who together combine for the UK’s largest economic trading partners.
  8. As regards a “no deal” scenario, the IEA suggests that “In the event of no agreement, the UK could elect not to impose checks on goods trade at the Irish border, and apply zero tariffs on agri-food, on an MFN basis for all imports, and selectively reduce and eliminate tariffs on other goods.” This suggests a completely open-border policy, where the UK would have no control on agri-food goods entering the UK at all. This is hardly “taking back control”. Such a free-for-all policy would also hit farmers, farming communities and consumers in the UK.[6] 
  9. The paper also discuss the option for the UK to have “maximum regulatory recognition” with the EU. The problem with this approach is that is unlikely to be accepted by the EU and if anything would lead to a situation where the UK would have to abide by EU regulatory rules whilst having no say over them. Essentially, the IEA would be advocating turning the UK from  a rule-maker into  a rule-taker.
  10. The proposals as regards the Irish border are lacking in detail and accept that regulatory checks could take place (checks which are not required today), “away from the border”. This would increase bureaucracy for businesses and also does not address the issue of smuggling, where the paper somewhat conveniently states that “smugglers would be breaking the law”.      

/ends

[1] https://www.independent.co.uk/news/uk/politics/brexit-roll-over-deals-uk-eu-counties-airline-rights-nuclear-safety-a8527731.html

[2] https://www.theguardian.com/politics/2018/apr/25/resistance-to-joint-proposal-to-wto-leaves-uk-and-eu-divided-us-australi-reject-brexit-trade-plans

[3] https://www.theguardian.com/business/2017/nov/06/trump-ross-says-uk-us-trade-deal-eu-brexit-chlorinated-chicken

[4] https://www.independent.co.uk/news/uk/politics/brexit-latest-australia-india-tell-uk-relax-immigration-rules-free-trade-deal-eu-visa-restrictions-a7540036.html

[5] https://www.theguardian.com/politics/2018/jul/22/article-50-extension-unlikely-without-shift-in-uk-politics-say-eu-officials

[6] https://www.thetimes.co.uk/article/cheap-food-imports-after-brexit-will-hit-farmers-and-consumers-says-report-by-mps-h5gzdx3gg