The Great Brexit Debate – what next?

The UK referendum on EU membership happened well over a year ago now, but for from settling the matter, it continues to raise more questions and dispute, and ever more strong feelings. If one judges by social media, there is a clamour of people who feel strongly that the referendum result is not legitimate, and must be revisited or somehow overturned. This viewpoint is typically characterized by two things: a conviction that Brexit will be a very bad thing for the UK, and a claim that many of those who voted  to leave the EU did so because they were cynically misled by the Leave campaign, and now regret their decision and would vote to remain if given another chance. Brexiteers often style such people “Remoaners” – which I think is condescending and unhelpful. I need a shorthand term for this post: I will simply call them “Remainers”.

There is no doubt that many of the referendum campaign messages were intemperate, exaggerated, and misleading.  Remainers cite this image ad nauseam to illustrate the point. They challenge Brexiteers with “When will this £350 million ever find its way to the NHS?”, and revel in the backpedalling which ensues.

The campaign also revealed some fairly nasty xenophobic attitudes amongst a highly vocal minority of the great British public. Like it or not, it is clear that at least some of the vote to leave was driven by a perception of excessive immigration into the UK from EU countries, especially eastern European ones, “taking our jobs”, and putting demands on our infrastructure and services -schools, hospitals, housing, etc -which they couldn’t cope with. UKIP, and Nigel Farage in particular, were a big part of that – and I found myself repelled by their narrative. It is also regrettably true that some unsavoury xenophobes have felt emboldened by the referendum result, and engaged in thoroughly nasty behaviour towards those they regard as “not welcome here”. It is important to emphasize that such views and behaviours, though heavily publicized,  are those of an extreme and tiny minority, and don’t represent mainstream UK values.

However, there was no shortage of exaggerated claims made by the remain camp. A prominent spokesman, then Chancellor George Osborne, made dire predictions about economic disaster, should the vote go the “wrong” way. A punishment budget, economic collapse, and soaring unemployment were some of the perils we were led to expect. If Remainers seek to argue that some people voted Leave because they were misled by false information, they must also concede that “Project Fear” dissuaded many voters from voting Leave, who otherwise would have done.

All this, however, is a matter for conjecture. What matters is where we go from here.

A common theme I’ve seen on social media, such as Twitter, is that leaving the EU offers no benefits at all: it will be an unmitigated disaster, a mistake of monumental impact; we must “come to our senses”.

I have never had sympathy with that view, neither before the referendum nor since. When I studied the situation in detail in the lead up to the vote, to help me crystallize my views, it was clear to me that there are arguments on both sides. Which should carry greater weight is a matter of judgement, and that judgement is likely to be better if one has better information. So I wrote a blog post called “The EU: Should we stay or should we go?” in an attempt to provide some factual background to what the EU is and how it works, and to set out the pros and cons of the UK remaining a member. If you’re interested, you can find it here http://www.jims1world.com/?p=206

I wrote it some months before the referendum of June 2016, and have gone back to re-read several times since, to see if my views have been invalidated by events. Perhaps surprisingly, I find the answer is “no”. What I wrote then still pretty much stands up, but in taking that view I would seem to be very out-of-step with current UK public opinion.

However, there are some people prepared to make the case for leaving, and they have largely – and thankfully – left the xenophobia behind.  I am heartened that I’m not a lone voice in the wilderness.

I read an article in The Times of 21 August 2017, by Matt Ridley, and I found it captured rather eloquently the free trade /tariffs arguments, and pointed out some of the less-well-publicized aspects of EU policy which certainly tarnish the “halo” which some commentators ascribe to all things EU. It is well worth a read, so I reproduce it in full here. I commend it for your consideration.

Best hope for free trade is to have principles
Matt Ridley, Times, Monday 21 August 2017
Britain should argue against the rules-based system of the EU and China and champion the ways of the Anglosphere

Why does the European Union raise a tariff on coffee? It has no coffee industry to protect so the sole effect is to make coffee more expensive for all Europeans. Even where there is an industry to protect, protectionism hurts far more people than it helps. Last October the EU surreptitiously quintupled the tariff on imported oranges to 16% to protect Spanish citrus producers against competition from South Africa, and punish the rest of us. It imposes a tax of 4.7% on imported umbrellas, 15% on unicycles and 16.9% on sports footwear.

I find that many Twitter trolls do not even realize that the European “single market” is actually a fortress protected by high external tariff walls. Yet external tariffs are pure self-harm; they are blockades against your own ports, as the economist Ryan Bourne has pointed out. We impose sanctions on pariah regimes, restricting their imports, not to help their economies but to hurt them. The entire point of producing things is to consume things (the pattern of pay shows that we work to live rather than vice versa), so punishing consumers is perverse. As Adam Smith put it, describing the European Union in advance, “in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer”.
Therefore, after Brexit, Britain should try unilateral free trade no matter what everybody else does — and even if the United States turns more protectionist. So argues a group of 16 distinguished economists, Economists for Free Trade, the first part of whose manifesto From Project Fear to Project Prosperity is published today. They calculate that unilateral free trade would benefit the British economy to the tune of £135 billion a year. One of them, Kevin Dowd of Durham University, has also written a powerful new pamphlet for the Institute of Economic Affairs entitled A trade policy for a Brexited Britain.
He argues that unlike in every other kind of negotiation, unilateral disarmament works with trade. Dismantling barriers to imports — removing sanctions against your own people — reduces the costs of the goods for consumers, reduces the costs of inputs for most producers, lowers inflation, creates employment and boosts growth.
So the best negotiating strategy is liberalize first, talk second: dare others to follow suit. As Sir Robert Peel told the House of Commons in the Corn Laws debate in 1846, the government would cease “haggling with foreign countries about reciprocal concessions, instead of taking the independent course, which we believe to be conducive to our own interests”.
Like socialism, pure free trade has probably never been tried, but unlike socialism, the closer countries get to free trade the more they thrive. Consider three examples of unilateral economic disarmament: Britain after 1846-1860, Hong Kong and Singapore today. In all three cases, economic growth was far faster than the global average. Even China unilaterally reduced its tariffs significantly (albeit not to zero) some years ago — to great effect.
Free trade is the very opposite of elitism. Its benefits accrue disproportionately to the poor; its costs to the crony-capitalist rich. However, if this is to be another Corn Laws moment — a major economy taking the plunge for unilateral free trade — then we need to think through how best to dare the world to follow us. For we will run into the problem of how to deal with other blocs’ non-tariff barriers.
The big issue today is not tariffs but standards, or regulatory rules behind the border. How do you ensure that an import is not toxic or unsafe or made with slave labour? And how do you stop such concerns becoming an excuse for barriers against imports?
Tariffs are now mostly low, except in agriculture, but non-tariff barriers, especially in services, are high. As an economy dominated by services, Britain has a strong interest in trying to lead the world into services liberalization.
Here is where the big battle is to be fought in future between two competing approaches, says Shanker Singham of the influential Legatum Institute Special Trade Commission. One, espoused mainly in the EU, is the prescriptive, rules-based system that specifies exactly how a product or service must be produced if it is to be allowed in. In the tradition of Roman civil law, this approach essentially prescribes the method as well as the outcome. China, too, increasingly works in this way, though its regulatory regime — “global standards with a Chinese character” — is something of a regulatory black box.
Such policy is essentially agnostic about consumer welfare: it is driven by producer interests and revenue maximization for government. Our challenge is to shift the world trading system towards a better, common-law approach, which is principles-based, outcome-focused, consumer-friendly. Because of our history and the nature of our economy, Britain can be an effective champion of this challenge.
The issue boils down to defining the word “equivalent” as something other than “identical”. For the EU, the dominant approach has been harmonization rather than mutual recognition: things must be done the same way everywhere within the single market. But outside, mutual recognition of outcomes is gaining ground: for example, between Australia and New Zealand, there is an agreement that “your agency judged this medicine or foodstuff safe, and that’s good enough for us”. Even the EU has accepted this approach of mutual recognition with other countries, although sparingly. This has to be the way to go. To paraphrase Deng Xiaoping, it does not matter what colour the cat is, so long as it catches mice.
The World Trade Organization does provide a mechanism for this kind of equivalent mutual recognition. In the “technical barriers to trade” (TBT) and “sanitary and phytosanitary measures” (SPS) agreements, countries should mutually recognize their systems if the overall objective (safety etc) is the same, but the technical way of getting there differs. So the EU could arguably be breaching WTO rules if it argues that equivalence requires identical regulation.
Free trade works. I live in Northumberland, and it no more makes sense to deny Northumbrians access to products and services from abroad than to deny them cars from Sunderland, whisky from Scotland or lamb from Cumbria.
As Adam Smith said, you should never “attempt to make at home what it will cost [you] more to make than to buy . . . What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”

There. I hope you made it to the end, and I hope it will make you think a little.

 

 

 

 

 

 

 

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