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Hard Brexit 'offers £135bn annual boost' to economy

Removing all trade tariffs and barriers would help generate an annual £135bn uplift to the UK economy, according to a group of pro-Brexit economists. A hard Brexit is “economically much superior to soft” argues Prof Patrick Minford, lead author of a report from Economists for Free Trade.He says eliminating tariffs, either within free trade deals or unilaterally, would deliver huge gains.Campaigners against a hard Brexit said the plan amounts to “economic suicide”.

What is the customs union?The UK is part of the EU customs union, and so imposes tariffs – taxes on imports – on some goods coming into the country.Countries in the customs union don’t impose tariffs on each other’s goods, and every country inside the union levies the same tariffs on imports from abroad. So, for example, a 10% tariff is imposed on some cars imported from outside the customs union, while 7.5% is imposed on roasted coffee.Other goods have no tariffs.The UK has said it is leaving the EU’s customs union because as a member it is unable to strike trade deals with other countries.A quick guide to the Brexit negotiations
Farmers back temporary customs union

Prof Minford’s full report, From Project Fear to Project Prosperity, is due to be published in the autumn.He argues that the UK could unilaterally – before a reciprocal deal is in place – eliminate trade barriers for both the EU and the rest of the world and reap trade gains worth £80bn a year.The report foresees a further £40bn a year boost from deregulating the economy, as well as other benefits resulting from Brexit-related policies.Prof Minford says that when it comes to trade the “ideal solution” would still be free trade deals with major economic blocks including the EU.But the threat that the UK could abolish all trade barriers unilaterally would act as “the club in the closet”.The EU would then be under pressure to offer Britain a free trade deal, otherwise its producers would be competing in a UK market “flooded with less expensive goods from elsewhere”, his introduction says.He argues UK businesses and consumers would benefit from lower priced imported goods and the effects of increased competition, which would force firms to raise their productivity.
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However, Open Britain, a campaign group arguing for the UK to remain within the single market and the customs union, said the proposed strategy would be damaging to the UK economy.”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,” said Labour MP Alison McGovern, a supporter of the cross-party group Open Britain, which is campaigning against a hard Brexit.”The levels of bankruptcy and unemployment, especially in industry and agriculture, would sky-rocket.”This is a project of economic suicide, not prosperity. No responsible government would touch this report with a barge pole as a source of ideas for our future trade policy.”Economists for Free Trade is a group of 16 economists, including former government advisers and academics.The group plans to release further chapters of the report in the run up to its full publication.Andrew Walker, Economics Correspondent, BBC World ServiceIt is a counterintuitive idea, but actually the economics textbooks do provide some support for the idea of unilateral trade liberalisation.This analysis suggests that removing trade barriers produces benefits for consumers and businesses buying components or raw materials that exceed the losses suffered in industries that face stiffer competition. The downside is that it may take time, perhaps years, for the workers who lose their jobs to find new ones. Professor Minford has expressed the view that the British economy is flexible enough to cope. There is also the question of how the new jobs would compare with the old ones. The mainstream view among economists is that while countries overall may gain from trade liberalisation, there are usually some specific groups that lose. Prof Minford also directs criticism at Chancellor Philip Hammond’s current approach to Brexit, which he says amounts to “throwing away our hard-won freedom from EU rules”.The chancellor is viewed as favouring a softer approach to Brexit, but recently co-authored an article in the Telegraph in which he proposed that the UK would leave both the single market and the customs union in March 2019, but that there would be a “time-limited” transition period to help businesses adjust.

A government spokesman said the UK would maintain a “deep and special” relationship with the bloc after departing the EU.”The economy has grown continuously for four years and there are more people in work than ever before. “As we leave the European Union, we will build on this success by maintaining a deep and special partnership with the EU while embracing the wider world as an independent, open, trading nation.'”During the referendum campaign last year Prof Minford stoked controversy by suggesting that the effect of leaving the EU would be to “eliminate manufacturing, leaving mainly industries such as design, marketing and hi-tech”. However in a recent article in the Financial Times he suggested manufacturing would become more profitable post-Brexit.
Source: BBC News

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