The 10 questions Remainers need to answer before stopping a no-deal Brexit

Brexit now hangs in the balance. A majority of MPs apparently believe that a no-deal Brexit would be some sort of disaster and are prepared to see the UK remain in the EU or, failing that, in an arrangement that amounts to something very similar.

Roger Bootle
21 JANUARY 2019 • 10:13AM

Freight containers at Southampton docks; a free-trade deal
with the EU is still possible even in the event of no-deal Brexit CREDIT: JASON ALDEN/BLOOMBERG NEWS

But “no deal” is a misnomer. It is, in reality, the “multi-deal” option. For if we leave the EU “without a deal”, all this means is that we haven’t reached an overarching agreement with the EU of the sort that Theresa May has proposed. It does not mean that there cannot be agreements on anything. Indeed, there have already been a series of mini-agreements. And as soon as the parliamentary fog clears – whenever that might be – there can be many more.

Moreover, the biggest deal potentially on offer is a free-trade agreement (FTA) with the EU. Remarkably, Mrs May’s capitulation of a “deal” does not include anything substantive on the future trading relationship between the UK and the EU. This remains to be negotiated. We can negotiate an FTA from outside the EU. And, of course, we can negotiate FTAs with countries outside the EU.

There are also a whole series of other issues on which the EU and the UK could forge a close relationship. These include citizens’ rights, the position of EU nationals in relation to nationals from elsewhere within the UK’s new immigration policy, as well as membership of joint bodies on such issues as the environment and academic and research institutions.

So Remainers could get their teeth into this agenda, arguing for as close a relationship with the EU as possible on these various issues, consistent with a full exit from the EU.

They are not taking this position because they must believe there are important elements of belonging to the EU that the above agenda would not match.

But what are they? I think there are ten key things that differentiate the “multi-deal” option from continued EU membership. This list may prove helpful in considering any alternative EU/UK arrangements that might be put forward in coming weeks, as well as helping to flush out the true sources of your friends’/relatives’/spouse’s/MP’s Remainerisim. Where are they on this list of ten arguments for staying in?

1. Continued contributions to the EU budget

Yes, I know this seems incredible but some Remainers do actually think this is a good idea because of the benefits that EU spending brings to Europe.

2. Continued membership of the Common Agricultural Policy (CAP) and/or the Common Fisheries Policy (CFP)

Remarkably, some Remainers believe that, left to our own devices, our agricultural and fisheries policies would be worse.

3. Remaining under the jurisdiction of the European Court of Justice (ECJ)

And again, remarkably, some Remainers do believe that this is more than a necessary evil.)

4. Continued single market membership because of its supposed importance for trade

This is the argument about border “frictions”. Yet Remainers have greatly exaggerated their importance. There have been lots of statements from leading business people to the effect that border frictions are a minor issue.

Moreover, the evidence from international trade backs this up. If border frictions are so significant how is it that countries from all over the world manage to export into the single market so successfully without being members of it?

5. Continued single market membership because it gives unrestricted access to a large pool of European labour

Yet we would continue to have controlled access to EU workers and we would have better access than now to workers from outside the EU.

6. Continued single market membership because it enables people to live and work anywhere within the EU

(Surely, this is nice to have but hardly earth-shattering.)

7. Continued customs union membership because of concern over tariffs on EU imports and EU tariffs on our exports

Yet the average EU tariff on manufactured goods is only about 4pc. Moreover, the British government has the ability to return customs revenues to British consumers by either a reduction in VAT or a unilateral reduction in tariffs on certain goods. Meanwhile, British exporters are well used to facing tariffs when exporting to the rest of the world.

8. Continued customs union membership because the UK would find it difficult to negotiate its own trade deals

Yet, as I have pointed out many times before, the EU’s record in negotiating trade deals is poor. As a smaller entity, not having to get the agreement of 27 other countries, we would be much more nimble.

9. Security

Remainers may believe that inside the EU’s embrace the UK is more secure. Yet the EU directly contributes very little to either our military defence or our intelligence resources. By contrast, it is Nato that protects us and the main element in Nato is the United States.

10. The EU’s future

Remainers may value the opportunity to shape the EU’s future from within – despite the evidence that it regularly steamrollers us. Even so, they may be enthusiastic about the prospect of further integration, including fiscal and political union.

In that case, of course, no other set of arrangements between the EU and the UK could possibly fit the bill. Yet why any British person should support EU membership because they pine for full European Union is beyond me. Increasing numbers of people on the continent want to go in the other direction.

This point 10 is in a league of its own. In essence it represents a quasi-religious belief. Yet if you don’t adhere to any of points 1-9, but you want to stay in the EU, this is what your support for continued membership of the EU rests upon. Good luck with that one.

Roger Bootle is chairman of Capital Economics. roger.bootle@capitaleconomics.com

https://www.telegraph.co.uk/business/2019/01/21/10-questions-remainers-need-answer-stopping-no-deal/

Deal or no deal? May chose an uninspiring fudge instead

Theresa May’s Chequers proposal, spelt out in last week’s White Paper, represents an enormous climbdown from what she initially appeared to be aiming for, laid out clearly in her Lancaster House speech in January 2017.

Roger Bootle

15 JULY 2018 • 6:53PM

Theresa May’s Chequers proposal, spelt out in last week’s White Paper, represents an
enormous climbdown from what she initially appeared to be aiming for

In particular, by tying us in to EU regulatory standards on goods, it would make it difficult to secure Free Trade Agreements (FTAs) with other countries, including the United States.

Nevertheless, you could argue that this minimal Brexit is better than nothing, and some Leavers have. But this surely depends upon what the other possibilities are. This deserves the serious analysis that Mrs May and her team have apparently not given it.

There are broadly two options. The first is...
https://www.telegraph.co.uk/business/2018/07/15/deal-no-deal-may-chose-uninspiring-fudge-instead/

This group of pro-Brexit economists says leaving the EU will add £135bn to economy

A group of economists who backed Brexit have predicted that leaving Europe could add £135bn a year to Britain's economy.

Economists for Free Trade (EFT), formerly known as Economists for Brexit, calculate that a so-called hard Brexit would lead to a surge in national output worth around £5,000 a year for every household on average.

Sunday 20 August 2017 9:11am

Economists say dropping tariffs could force a trade deal with the EU (Source: Getty)

In the new report due to be released this Autumn, they say that output surge should be accompanied by an eight per cent fall in prices, the equivalent of a £40 a week boost.

Read more: Ministers say UK will make "sufficient progress" in Brexit talks by October

"Hard Brexit is good for the UK economically while soft Brexit leaves us as badly off as before…hard is economically much superior to soft," said Patrick Minford, professor of economics at Cardiff University and a former adviser to the Treasury, arguing that the UK should pursue global trade deals outside of Europe.

“Backers of soft Brexit say it would preserve jobs, but what they really mean is that it would preserve existing jobs by stopping competition from home and abroad. As every schoolboy knows and every politician ought to know, this aborting of competition reduces jobs in the long run…Competition increases productivity and so employment because higher wages paid for by higher productivity makes work more attractive. Competition also increases our general welfare because we are producing more.”

The group, which also includes Roger Bootle of Capital Economics and professor of economics at Cass Business School, David Blake, also believes the UK should eliminate all trade barriers and tariffs if new trade agreements can't be made with the EU and other countries to benefit from such gains

“This is unilateral free trade (UFT) whereby we simply abolish our trade barriers without asking others to do the same. The most famous example of this was in 1846 when Sir Robert Peel abolished the Corn Laws, greatly reducing the price of food and helping to stimulate the Industrial Revolution," said Minford.

Read more: This top economist says two years is the perfect Brexit transition time

Such a move would put pressure on the EU to agree a deal with the UK "flooded" with less expensive goods from non-EU countries.

Minford said it would be "A strong incentive for the EU to do a trade deal with us – which is what we want politically".

"This is the origin of the political soundbite – ‘No deal is better than a bad deal…Free trade acts as ‘the club in the closet’ to bring the EU to a proper trade agreement with us.”

However, anti-Brexit group Open Britain dubbed such a plan "absurd".

“Unilaterally scrapping our tariffs without achieving similar reductions in the tariff rates of other countries would see Britain swamped with imports, leaving our manufacturers and farmers unable to compete. The levels of bankruptcy and unemployment, especially in industry and agriculture, would sky-rocket," said Labour MP Alison McGovern.

And other economists were not convinced by his arguements.

"One thing that professor Minford gets right is that trade boosts our living standards and the economy standards. But he ignores decades of evidence on how trade actually works, and on the benefits of trade agreements," said Dr Monique Ebell, associate research director at the National Institute of Economic and Social Research.

http://www.cityam.com/270525/group-pro-brexit-economists-says-leaving-eu-add-135bn

ROGER BOOTLE: Brexit will prove to be the Great Escape

The UK has just made a momentous decision that is bound to cause some dislocation

Roger Bootle

25 June 2016 • 6:45pm

hile some people feel elated and others despondent, perhaps the most widely shared feeling after the referendum is anxiety about our economic future.

This is understandable. Yet there is no cause for alarm. In the short term, there may be some modest turbulence but things are going to work out just fine.

Some commentators have suggested that the fall in the stock market is a harbinger of hard times ahead. In fact, the reaction from financial markets has been muted. The London stock market initially fell by about seven per cent but then rallied to finish only slightly down.

It is possible that the economy will experience a period of softness

Anyway, the stock market is a poor guide to economic prospects. If it accurately reflects anything, it is the prospects of the big, established companies with international interests. Some of these may well be short-term losers from Brexit. On the whole, the gainers will be consumers, smaller businesses focussed on the UK economy and businesses as yet unborn. These aren’t represented in the stock market.

Similarly, the Pound initially fell quite sharply but then rallied to finish only slightly lower.

Yes, this will increase the cost of foreign holidays and imported goods. But the increases will be modest. And there are more important considerations. The lower Pound will make British-produced goods and services more competitive and this will boost employment and incomes.

Admittedly, it is possible that the economy will experience a period of softness. In fact, it may have been headed for slower growth anyway. But if the economy does slow, there is no good reason for this softness to be extreme or prolonged. And the policy-makers can lend support. The Bank of England may cut official interest rates, which could easily fall to near-zero. I recognise that this would be unwelcome news to savers but it would probably help to boost aggregate demand.

During the campaign, the Chancellor warned that Brexit could oblige him to raise taxes and cut spending. This was a huge error. He should now distance himself from those remarks and reassure people. If the economy does not deteriorate then the fiscal position probably won’t either. If it does deteriorate then he is not forced to do anything. He has a choice. I would do nothing and just let the borrowing numbers rise a bit. If he deems this too dangerous then he shouldn’t clobber UK consumers but should rather suspend the foreign aid budget which would immediately save about £12 billion a year.

Listening to the imploring tones of the Remain campaign, you could be forgiven for not realising that most of the world does not belong to the European Union. And most of it is doing pretty well. Meanwhile, the EU itself has been doing badly. In southern Europe, thanks to the euro – the real self-inflicted wound – there is an economic and social catastrophe.

In the later stages of the campaign, umpteen economics professors including several Nobel Prize winners joined the throng of official bodies at home and abroad warning of the consequences of Brexit. If I needed any reassurance that we should leave, this provided it. Economics is not physics.

The big practical economic issues are not about higher mathematics or sophisticated models but judgment and balance. I am afraid the consensus of economic experts has an extraordinary record of getting big practical issues horrendously wrong.

The UK has just made a momentous decision that is bound to cause some dislocation

In 1931, the UK was forced off the Gold Standard. The economic establishment warned that this would be disastrous. Instead, it ushered in the fastest period of growth in our industrial history. In 1992 the establishment warned that we had to stay in the European Exchange Rate Mechanism (ERM) or catastrophe would be unleashed. We were forced out and the economy blossomed. In the late 1990s we were warned by Uncle Tom Cobley and all that we must join the euro – or else. We didn’t – thank goodness – and we prospered. The weight of academic and establishment economists did not foresee “the death of inflation” or the financial crisis of 2008/9. A prolonged period of modesty from them would be appropriate.

Even though things will not change overnight, the UK has just made a momentous decision that is bound to cause some dislocation. This will inflict some losses. But they will be contained and I am convinced that we can emerge from this better off.

The EU is a failing construct. Before long, it is going to unleash a series of initiatives that have been held up, pending the referendum. In true EU fashion, these will range from the bizarre to the downright dangerous. This will make it crystal clear how wise the British electorate has been yet again. We have escaped just in time.

Roger Bootle is the founder and chairman of Capital Economics and author of The Trouble with Europe

http://www.telegraph.co.uk/business/2016/06/25/brexit-will-prove-to-be-the-great-escape/

ROGER BOOTLE: Remain’s models are built on poor foundations

ROGER BOOTLE
19 Jun 2016, 6:47pm

In this, my last column before D-Day, I want to discuss some key features of the case for Brexit that, in my view, have been misrepresented or ignored.

The Treasury, and some other bodies, have subjected the Brexit option to trial by macro-economic model. Various assumptions were fed into a series of equations which, on the basis of past experience drawn from a number of countries, are supposed to embody wisdom about how the key economic variables will respond. The model whirred and then spewed out forecasts for our post-Brexit future.

These methods are unsuitable for assessing the impact of such a seismic politico-economic event. Moreover, the assumptions that have been plugged into the models have typically been bizarre. For instance, the Treasury study assumed no regulatory changes.

The Treasury's models made some surprising assumptions 

 
Equally, it assumed we would not be able to do any new trade deals with the EU or anyone else. Nevertheless, we would continue to impose the EU’s tariff on imports from the rest of the world. No wonder this exercise concluded Brexit would cause an economic loss from reduced trade.This conclusion derives further loss from lower investment and even weaker productivity growth. But if trade does not fall, there is no reason for these effects to occur. 

To these trade-related effects is added the impact of uncertainty, which will supposedly persuade people and companies to defer spending. Yet if there is a loss of confidence after Brexit, the responsibility for this will rest with the Prime Minister and Chancellor for spreading pessimism about our prospects outside the EU. 

David Cameron will have to take responsibility
 for spreading pessimism about the impact of Brexit
Credit: Valentina Petrova

In fact, a loss of confidence could be addressed by an appropriate policy response. Admittedly, the Chancellor has warned that interest rates would have to go up. But the City is assuming that the Bank of England would reduce interest rates. I know who I would rather believe.

Meanwhile, a Brexit-inspired fall of the pound is being portrayed as a disaster, just as it was before our ejection from the ERM in 1992. In fact, just as happened then, this is exactly what the economy needs.

Forget the Government’s attempts to scare you – focus on five key issues:

First, over the past two decades, the EU’s average growth rate has been low by comparison with almost all other developed countries. The most important reason is the introduction of the euro, which has devastated the economies of southern Europe. But even Germany has not grown strongly and France is weaker. The euro was not an accident. It was introduced as part of “the European project”. Heaven knows what further delights Team Europe has in store.

Second, you do not need a trade deal in order to trade. Britain does not have a trade deal, for instance, with the US. Nor do you need to be an EU member to trade with “the single market”.

The US, China, India, and countless other countries export successfully into the EU without belonging to it. Indeed, their exports to it have risen faster than ours. So much for the much-vaunted sitting at the table when regulations and standards are debated and established. These countries don’t have a seat at the table nor a single MEP or EU commissioner, but this doesn’t hinder their exports.

The City might see some financial companies leave because of Brexit,
but the majority would remain Credit: REUTERS/Metropolitan Police

Third, although the loss of “passporting rights” may cause some financial business to move from the City to European centres such as Paris or Frankfurt, most would remain. Moreover, this is just one part of a more complex whole. The City has already felt the icy touch of the EU’s regulatory tentacles. There could be much worse to come. One of the greatest threats to the City’s prosperity comes from the EU’s potential imposition of a financial transactions tax. The City can thrive outside the EU.

Fourth, suppose the euro finally collapses, with new currencies having to be constructed and, for a time, financial and economic chaos reigning across Europe. We would be better able to withstand the blow if we were outside the EU.

Fifth, the EU’s direction of travel is towards more integration and heavier regulation, which would bring added costs to business.

If the euro collapses, Britain having its own currency will bring advantages

Several of the points I make here against EU membership apply to what may happen in the future. Some on the Remain side see these as serious dangers but they deploy a beguiling counter-argument. If the EU does turn into the economic and political monster that many have been warning about, that is the time to leave, not now. We should stay, do our best to improve matters, and see how things turn out. We have an option, which we can choose to exercise later.

This is extraordinarily naive. It has taken more than 40 years since the last referendum on the EU for us to be given the chance to vote again. It might be another 40 years until the next one. By that point, unless you think the Prime Minister’s “renegotiation” has protected us, surely it would be too late. Britain as we know it would have dissolved in some common European mush.

If this is not an attractive prospect, then do not let economic fears, or the self-interested bluster of big business, or the model-based prognostications of the gloom merchants deflect you. There is a strong economic argument for Brexit that sits alongside all the others. It is really quite simple. It is about taking control and running our own affairs, just like plenty of other thriving non-EU countries around the world.

The Remainers say the issue of our EU membership will affect the future of our children and grandchildren. They are right. It is just the conclusion that they have got wrong.

Roger Bootle is executive chairman of Capital Economics. The new referendum edition of his book, The Trouble with Europe, is published by Nicholas Brealey.

roger.bootle@capitaleconomics.com

http://www.telegraph.co.uk/business/2016/06/19/remains-models-are-built-on-poor-foundations/

Roger Bootle: Europe is a complete disaster – Britain must leave

By: Merryn Somerset Webb

13/05/2015

Home > Roger Bootle: Europe is a complete disaster – Britain must leave

Merryn Somerset Webb talks to economist and author Roger Bootle about Europe’s economic disaster zone, and the advantages to Britain in pulling out:

http://moneyweek.com/roger-bootle-interview/

Roger Bootle: Europe is a complete disaster – Britain must leave

Roger Bootle: Europe is a complete disaster – Britain must leave

23 Sep 2015
MoneyWeek

Economist & author Roger Bootle talks to Merryn Somerset Webb about Europe’s economic disaster, & should Britain pull out. Recorded May 2015 Roger Bootle is the founder of Capital Economics and the author of many excellent books including The Trouble with Europe. Click here to sign up to MoneyWeek videos: http://tinyurl.com/zg57szy

https://www.youtube.com/watch?v=hqTrQ-Co81s