There have been many attempts to bamboozle the British population with spurious economic arguments claiming we would be worse off if we were to leave the EU. Unsurprisingly Osborne’s 200-page report highlighted a negative view on ‘Brexit’, however, he conveniently uses methods of economic modelling to suit his argument and fails to use appropriate global trade models in his analysis.
The reality is Britain’s economy would be significantly better off if we were to leave the EU, move to free trade under WTO rules, and agree an appropriate bilateral treaty with the EU, underpinning our common interests.
The first point to mention is self-regulation. Exports to the EU account for about 10% of the UK’s GDP, yet the other 90% of the economy is still subject to all of the EU’s regulation. We are in an over regulated environment which is a significant burden on the economy, discouraging competition in goods markets and causing labour market inefficiencies. We are tied up in a political economy where policies are decided by others. We would be far better off making our own policies which are in our national interest.
It is shocking that Osborne is trying to mislead voters by claiming the EU’s customs union is a free trade arrangement when it is in fact highly protectionist. We would be able to make huge welfare gains by adopting free trade and removing the EU’s high tariff walls which inflate consumer prices, particularly agriculture and manufacturing. Trading in the world market at much lower world prices would be hugely beneficial to the UK consumer and, according to Professor Minford, reduce the cost of living by 8% on day one.
Our main objective when leaving the EU should be to concentrate on producing quality goods in which we have a comparative advantage over the rest of the world. Free trade would encourage resources to reallocate to their most efficient uses.
Would leaving the EU impact investment and jobs?
One of the main misconceptions which has also been claimed by the CBI and government is that jobs would suffer and investment in the UK would be reduced by ‘Brexit’. This is not true.
A protectionist arrangement distorts the economy away from its best shape by protecting too many inefficient industries. Adopting free trade would shift jobs from previously protected industries to more efficient areas of the economy as reallocation of resources and supply-side reforms would ensue. These industries would be more productive as resources would be put to better use, consequently boosting real wages and thus creating even more jobs. The CBI’s report wrongly neglects supply-side reforms which would follow departure. Similarly, investment would change shape in the same way. Investors invest in order to seek a return on their capital and there would be potential for a greater return from more productive industries under a free trade arrangement.
Would EU members make our life difficult?
Many claim EU members would make our life difficult if we left the union, however, this is hard to envisage. We have a trade deficit with the rest of the EU which means they sell more goods to us at inflated prices than we do to them. Due to this trade imbalance, EU producers benefit from the transfer of purchasing power for these excessively priced goods. EU jobs and economies rely on our rich consumers; therefore, it would be against their interest to prevent us accessing their markets.
The importance of being unimportant
Many believe we would have less ‘fire power’ when agreeing trade deals outside the EU. In reality, trade agreements are irrelevant, instead, simply a mechanism for diverting trade. Trade agreements would not affect the world price we buy and sell at, therefore having no impact on overall welfare – this is known as ‘the importance of being unimportant’. Currently 70% of our trade is conducted without trade agreements.
In addition, if one country, or indeed the EU, decided to levy an import tariff on us, it would affect their consumers, but make no difference to us as it would not affect the world price of our goods.
Immigration has become an increasingly sensitive issue. In my view Britain should be able to adopt a sensible policy to prioritise particular groups of people. Currently, we have no control over half of those entering the country and prioritisation is overruled. For example, we should be able to select skilled workers from the commonwealth and other areas of the world.
Ever closer union
Our position in the EU is very uncertain. There is every reason to believe we are on a journey to an ever closer union and will continually play a part in bailing out the Eurozone. Ultimately, we could come under mounting pressure to surrender our opt-out of joining the euro, be involved in a common tax system and be subject to more ludicrous regulation. This would be hugely costly for long term economic prosperity.