Not Jeremy Corbyn, of course. In this case it’s Jeremy Warner, economic correspondent of the Daily Telegraph.
Now I have a huge respect for Jeremy Warner, because generally speaking he makes a great deal of sense, and I’ve learned a lot by reading his columns. So I was particularly surprised and disappointed when he came up with a piece in the Sunday Telegraph of Sept 6th which could have come straight out of the “Yes to Europe” playbook. Under the headline “Outers wrestle with economic case for Brexit” he agrees that there are powerful reasons to leave the EU, in terms of borders, laws, foreign relations – but goes on to add that “the economic case is much harder to make”.
The following paragraph particularly stuck in my throat:
“Neither (the case based on regulation or on budget contributions) is compelling, since part of the price of staying in the Single Market is certain to be that Britain continues to comply with these regulations, only with no say in them, and to contribute to the EU budget. Alternatively, Britain could leave the Single Market, but that truly would be a leap in the dark.”
Let’s leave aside, for the moment, the fact that we have precious little say in making regulations at the moment. Tory MEP Kay Swinburne claims to have achieved wonders in modifying financial legislation for the City of London, but I have served on a number of parliamentary committees over 16 years, and my experience is that we rarely if ever make a substantial difference, and the British government rarely if ever succeeds in stopping legislation which it regards as damaging.
But Jeremy, why this obsession with the Single Market? The Single Market is just an old-fashioned, protectionist Customs Union (on the 19th Century Bismarckian zollverein model), overlaid by massive and damaging regulation. I wish that Jeremy would read William Dartmouth’s excellent book “Out of the EU into the World”, which sets out the case for leaving.
One stunning point that too few people understand is that the three largest sources of imports into the EU are China, America and Russia. By definition, none of these countries is a member of the EU, and none currently has any preferential trade deal with the EU. Are they obliged to follow EU regulations, or to subscribe to the Single Market to be allowed access? Of course not. The idea that being outside the Single Market would cost exports or jobs is simply absurd.
At the same time, the EU already has, or is negotiating, free trade deals (FTAs) with dozens of countries around the world. These countries do not have to obey EU rules (apart obviously from conforming to EU product specs on products exported to the EU), nor do they pay for the privilege of exporting to the EU. And the second point that too few people realise (although surely Jeremy does) is that the UK (when we leave) will be the EU’s largest customer in the world, in both gross and net terms. Bigger than the USA, or anyone else. How on earth could the EU not have a free trade deal with the UK? (Although even if we had no trade deal at all, the total duties payable on British imports to Europe at current levels would be only a fraction of our EU budget contributions).
Jeremy, where do you get the bizarre idea that we’d have to make contributions to the EU in order to trade with them? We buy much more from them than they buy from us. If they think they can charge us (say) €10 billion a year for access to their market, then we could charge them €15 billion a year for access to ours. It makes no sense at all. Jeremy, we have a substantial deficit on automotive trade with the continent. Do you really think that those smart guys in Munich are going to accept the loss of their BMW exports to the UK? And the same applies to other auto makers, and other industries. This proposition that “We’d have to obey the regulations and pay for market access” is a read-across from Norway. But the UK is not Norway. The read-across makes no sense at all. Do America, and China, and Russia, obey EU regulations and pay for market access? They do not.
After Brexit, our trade with the EU will continue, but we shall be much better placed to make our own deals with fast-growing countries, in the Commonwealth and outside it. How is it that little Switzerland, and even tiny Iceland, have free trade deals with China – and we don’t? The Yes camp will argue that without the EU, we couldn’t get an FTA with the USA – we’d be too small, they say. So please explain why the USA has a number of bilateral FTAs, all of which are with economies smaller than the UK? If we hadn’t been in the EU, I believe we’d have a trade deal with the USA, on our terms not Brussels’ terms, decades ago. They will argue that we are in a stronger position to negotiate trade deals as part of a large European bloc. But in fact the reverse is true. Before EU trade negotiators can even sit down at the table, they have already had to trade off Britain’s interests and priorities against those of twenty-seven other member-states. Our vital interests can be lost in the horse-trading
Brexit is fundamentally about freedom. Freedom from a mountain of stultifying regulation and bureaucracy. Freedom from the regulatory and other costs of membership, widely estimated at around 10% of GDP. Freedom to develop our own trade deals with the fast-growing areas of the world. Freedom from the EU’s perverse and damaging energy policies. Freedom to manage and profit from our fisheries..
Far from wrestling with the economic case, the fact is that economic and trade opportunities are the strongest arguments from Brexit. We need to free our industries and free our trade from the EU’s straitjacket. Bring it on. The trade argument is a winner for the Out campaign.
I invited Jeremy Warner to respond to my blog post, and I am most grateful to him for doing so (though I don’t necessarily agree!):
“Thanks for asking me to reply to your blog, which makes some excellent points. However, I remain to be convinced. It admittedly seems to me quite unlikely that Brexit would be an economic disaster for Britain, though it may have very serious long term consequences for the City, at present the de factor financial centre for the whole of Europe. It is unlikely this position could be maintained in the event of Britain leaving the UK.
Never the less, for the rest of the economy, the effects may be quite marginal. Much depends on the terms of the divorce. As you say, Germany and the rest of Europe have a powerful vested interest in it being relatively amicable.
However, nor do I see much if any economic upside in leaving. The reason Britain’s trade performance with countries outside the EU is poor is not because the EU prevents us having free trade arrangements with them, but because we don’t produce the stuff they want to buy. Germany manages to trade very successfully with the outside world – much more successfully than us with many Commonwealth countries, as it happens – so it is hard to argue that the EU is in this regard an impediment to our trade with others. The fault lies more with the structure of the UK economy than the EU.
Most modern trade theory has at its heart the idea of “gravity”, or that countries are more likely to trade the closer they are to one another and the more similar they are economically. Admittedly, this may not have been the case when European countries still had empires, but times have changed; under developed nations in far away places can no longer be relied upon to take the mother ship’s goods and services simply because of old historical ties.
In any case, it is a matter of fact that trade is at its most intense within sovereign nations, where common laws, language and proximity support interaction. The idea of Europe’s “internal market” is to recreate this level of intensity at an international level. Unfortunately, cross border economic integration inevitably requires some ceding of national sovereignty. The UK Treasury estimates that the single market has boosted trade between EU member states by 38pc of GDP, though its impact on Britain is estimated to be a much smaller 7pc. None the less, this is a significant gain which would be jeopardised by Brexit.
As for the stultifying regulation, quite a lot of it seems to be home grown. In financial services for instance, the EU had nothing to do with ring fencing, which may yet cause HSBC to re-domicile, or the ridiculous senior managers’ regime, which makes executives down to quite junior levels legally responsible for mishaps even when they have no knowledge of the mischief. Growth in regulation is a modern day disease, which is prevalent almost everywhere. If it didn’t come from Europe, much of it would come from Westminster.
If there is no good economic case for wanting to leave, there may be other reasons for wanting to stay, even if Europe’s disastrous mishandling of the Eurozone crisis would test the loyalties of even the EU’s most fervent supporters, and I am certainly not one of them. My chief reasons for believing it makes sense to stay are in any case not economic, but geo-political. The euro, which requires members to further integrate if it is to survive, already renders our position in Europe one of semi-detachment. Eventually, the eurozone will become the EU, which automatically means a separate relationship with the UK. Cameron is therefore right to try and negotiate one. What is more, Europe is in the midst of a very serious economic and political crisis. A Brexit would further destabilise things with unpredictable consequences for everyone, and to boot would almost certainly lead to the breakup of the United Kingdom, with Scotland voting for divorce from Westminster as a means of staying in the EU. These are not trivial matters. Leaving the EU may work out fine, but if we are to exit, let’s do it with our eyes open. There are considerable risks involved, while beyond regaining control of our borders, the benefits are far from obvious.”