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Leadsom leads to worst trade outcome

by Sam Ashworth-Hayes | 05.07.2016

There was more than a hint of Trumpian rhetoric to Andrea Leadsom’s appearance on The Andrew Marr Show. The blonde populist told viewers of Marr that she wants to make the UK “the greatest country on earth”. Some of her suggestions show she would be a disaster as Prime Minister.

One of Leadsom’s major pledges is to trigger Article 50 as soon as possible. In her view, “we need to get on with it” and “seize the opportunity”. Launching her leadership bid on Monday, Leadsom followed up on these comments by telling the assembled reporters that “not everything needs to be negotiated before article 50 is triggered and the exit process is concluded”, and that “freedom of movement will end”.

By ruling out free movement, Leadsom has ruled out the Norway model, ruled out staying in the single market, and therefore ruled out the option that was probably easiest to move to. One alternative, arranging a bespoke free-trade deal, would take longer to sort out than the two year window granted by Article 50. Canada, for instance, took seven years to reach its trade deal with the EU.

So unless Leadsom is exaggerating her eagerness to depart, she is effectively pledging to fall back on World Trade Organisation (WTO) rules, the worst case scenario for departure, at least for the period during which the UK tried to negotiate a bespoke deal with the EU. The “certainty” of getting on with it would likely mean greater disruption for the UK economy. Domestic and foreign investment in the UK economy would plunge, risking further balance of payments problems.

Clarity on a trade strategy is especially important since Angela Merkel has said there will be no informal negotiations ahead of an Article 50 negotiation. Here are two priorities for the next UK government.

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    First, hire some trade negotiators. Britain has not negotiated its own trade deals for 40 odd years, and has around 20 active negotiators compared to the EU’s 600 or so. It would be extremely silly to begin the departure process without the staff to manage it, and without having prepared for the talks ahead.

    Second, agree a negotiating mandate. Attempting to begin negotiations without knowing exactly what we want from them would be very messy. Moreover, Britain may have voted to leave the EU, but it has not voted to leave the single market. Some 48% of voters explicitly voted to stay in, and polling commissioned by the Adam Smith Institute suggests that enough Brexiteers are interested in adopting the Norway model to give the idea majority support – which may be why Leadsom is so keen to pull the trigger.

    Andrea Leadsom did not respond to requests for comment.

    Edited by Michael Prest

    2 Responses to “Leadsom leads to worst trade outcome”

    • “Attempting to begin negotiations without knowing exactly what we want from them would be very messy.” Correct.

      “Clarity on a trade strategy is especially important since Angela Merkel has said there will be no informal negotiations ahead of an Article 50 negotiation.” We should not trigger Article 50 until they have.

      The UK and the EU should arrive at “heads of agreement” to provide a high degree of certainty to markets, businesses, and the scientific community before negotiations of the details begin. These should focus on principles and financial arrangements.

      The simplest trade deal is to continue with existing arrangements. The UK should pay for access to the single market and the EU should pay for access to to the UK market. It should not take long to work out how much.

    • She made a speech to her supporters full of platitudes and over optimism delivered with all the contrived charisma of a trainee Tupperware lady reciting her speech in front of a mirror. She’s a lightweight, gaffe prone politician with an infantile knowledge of economics and finance. It’s a joke that she was in charge of investments for a major investment company (which of course was a lie). A nightmare if she is involved in WT negotiations. If she thinks that would be better than negotiating wit the EU for joining the single market, then more stupid that I thought she was.