Economists for Brexit rebrand highlights the real issues

by Bill Emmott | 10.03.2017

Amid a lot of evasiveness and duplicity among Brexiters, the candour shown by the group formerly known as “Economists for Brexit” is admirable and welcome. This group, which is led by City economist Roger Bootle and Patrick Minford of Cardiff University, has this week renamed itself “Economists for Free Trade”.

This is welcome because it highlights the fact that the real issue surrounding Brexit is what policies the UK will actually follow outside the European Union – and whether those policies are likely to be maintained in five, ten, 20 or 30 years’ time.

That is what “taking back control” means: setting your own policies but also taking the risk that successive governments might change those policies, as the political winds change.

The name “Economists for Brexit” sounded as if it was merely intended to counter the accurate perception that most economists in the UK favoured Remain. Yes, it was saying, there really were some economists, even experts, on the Leave side.

The funny thing about the new name is that this time it goes with the profession’s grain – virtually all economists do favour free trade – but may nevertheless struggle to muster widespread support. It may sound like “Economists for Motherhood and Apple Pie” but in fact there are many different interpretations among economists about what is meant by “free trade”.

One indicator of that is the fact that a co-founder of Economists for Brexit, Gerard Lyons, the former chief economist for Boris Johnson when he was mayor of London, has declined to join the newly rebranded group.

Economists for Free Trade has declared its core aims as being threefold:

  1. That the UK should adopt unilateral free trade in goods and services, in other words zero trade barriers of any kind.
  2. That the UK should leave the EU single market entirely, so as to free all companies operating in the UK market from EU regulations.
  3. That the UK should promote skilled immigration while “carefully controlling” the unskilled sort.

So why wouldn’t virtually all economists sign up to this? Many would likely agree in principle with the first core aim, for even though the EU’s average tariff rates are already among the world’s lowest (2.3% as a weighted average, on non-agricultural products), there could still be benefits from lowering them and extending free trade to agriculture.

However, those economists that have some political awareness may sensibly ask whether public support could be maintained for completely open and unsubsidised markets in agriculture, for example. New Zealand has done it, but would Britain?

They would also wonder whether it would make sense to enter negotiations with countries around the world that are a lot more protectionist than the EU is, such as China, India and Brazil, holding out an open promise of unilateral free trade. While that would benefit UK consumers, plenty of UK exporters will object, since China would most probably just say “thank you very much” and not open its own markets to UK exports any wider than now.

It is with the second and third aims that the biggest disputes begin. While backing free trade, many economists hold that to leave the EU’s single market and customs union is itself an act of “protectionist vandalism” as Martin Sandbu described it in the Financial Times. The whole point of the EU single market is that inside it there are already “zero trade barriers”, at least for all the goods so far covered by the single market. The best solution, as Lyons said in his 2014 report on Europe for the London Mayor, would be to work to extend the single market, not to leave it.

Whether or not the UK will benefit from its non-exporting companies no longer being subject to EU regulations depends on what the new regulatory regime will look like. It would appear – though they have not yet made this explicit – that Economists for Free Trade favour very light touch regulation, echoing perhaps the approach of the Trump administration in the US. It is far from certain that future governments will agree with them. Freed from EU restraints, they could even make UK regulations more costly than EU ones.

Then there is the third aim, which is in fact a good reason for remaining a member of the EU. Free movement of EU citizens has meant, on any reasonable definition of “skilled”, the free movement to Britain of well-educated, skilled workers. Fairly few EU migrants have come with educational or skill levels below the UK average. Some skilled migrants may be doing unskilled jobs, but unless Economists for Free Trade favour a highly interventionist labour market policy, somewhat at odds with their free trade principles, there is little that could be done to prevent that.

This, nevertheless, is where the real debate needs to take place. What sort of trade negotiations? What sort of regulation? What sort of labour market intervention? If Economists for Free Trade can now lead the debate towards those issues, and away from silly arguments about “enemies of the people”, that will be welcome.

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    Edited by Luke Lythgoe

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