Business
We’ve nothing to fear from a world‑trade Brexit
By Matt Ridley, Times 5/8/18
Aug 6, 2018 - 8:37:20 AM

Remainers’ apocalyptic claims about leaving EU with no deal are scaremongering and misunderstand how trade works

In Jonathan Swift’s satire Gulliver’s Travels, the traveller finds that Lilliput has been riven for 36 moons by a dispute between Big-endians and Small-endians, who disagree about which end of a boiled egg to crack: “These civil commotions were constantly fomented by the monarchs of Blefuscu . . . Many hundred large volumes have been published upon this controversy.” The problem, of course, is that no compromise is possible: you have to choose one end or the other.

Swift’s satire of Catholics and Protestants in 18th-century England echoes today’s increasingly bitter Leave-Remain divide, the monarch of Blefuscu being, of course, Jean-Claude Juncker. As for civil commotions, a forthcoming stage comedy People Like Us by the journalist Julie Burchill and the novelist Jane Robins starts with people being expelled from a north London book group for voting Leave.

Most of us who voted Leave have had similar experiences of social stigma when we’re in Remainia, and no doubt if metropolitan Remainers were ever to venture as far as Stoke or Sunderland they might enjoy pariah status too. I sometimes read articles by Remainers about what Leavers think which resemble studies written about the rituals of hunter-gatherers by anthropologists who have yet to decipher their subjects’ language.

Yet it is worth remembering that, despite Swift’s satire, the differences between Catholics and Protestants in the early 18th century mattered. On them turned whether Britain would be more monarchical or parliamentary, more commercial or agrarian, more allied to France or the Netherlands. And so it is today. This one is about whether we are more global or European, more entrepreneurial or dirigiste, more common law or civil law.

I have no idea what is most likely to happen next year. All the options seem equally implausible and yet we will wake on March 30 and find some version of one of them is happening. The only thing to be said for the miserable Chequers plan, I thought at first, was that it might help avert Corbynism; but the opinion polls suggest it is so unpopular it has made a Jeremy Corbyn premiership more likely. Chequers is surely dead.

Few Leavers can summon enthusiasm for the newly fashionable idea of remaining in the European Economic Area, even as a temporary measure. A second referendum and the cancellation of Brexit are the fantasies of a minority of the metropolitan elite; Brenda from Bristol (“not another one!”) will surely not approve. And a free-trade deal along the lines agreed with Canada, which had seemed to be the May government’s, and Donald Tusk’s, favourite, has apparently been vetoed by the unelected pair of Michel Barnier and Olly Robbins.

It seems that there is no way to satisfy those who want to crack the big end of an egg and those who want to crack the small end. Therefore, leaving without a trade deal with the European Union 27 is growing more likely. Both Mark Carney, governor of the Bank of England, and Liam Fox, the trade secretary, have said so in recent days.

The prospect need not terrify us. Project Fear has grown steadily more absurd as we have progressed through the grid of scary announcements prepared by the anti-Brexit campaign to fill the silly season. A sandwich drought? Insulin shortages? Not enough avocados? Airbus off to — er, China?

Project Fear Mark 1 was wrong and the chances are Mark 2 will be too. The economy is running at near full capacity, unemployment is close to a million below where George Osborne promised it would be by now, the deficit is shrinking faster than expected and foreign direct investment is continuing, all in sharp contrast to what we were promised if we voted to leave.

Mark Carney was still at it last week, but his chief economist Andy Haldane put it best when commenting on Project Fear Mark 1: “If you look at how the consumer performed during the course of the last year it’s almost as though the referendum had not taken place”.

Any measures that Blefuscu/Brussels could take to strangle our economy in retaliation would be illegal under the World Trade Organisation rules. Claims from the Confederation of British Industry and the National Farmers’ Union that there could be customs delays and non-tariff standards barriers against British food exports or imports fly in the face of what we actually know, that the WTO’s Agreement on Sanitary and Phytosanitary Measures, its Technical Barriers to Trade Agreement and its Trade Facilitation Agreement all now forbid discrimination against a WTO member. This was not the case when the single market was created.

And, since all the scare stories seem to involve imports, we are free under WTO rules to drop, either temporarily or permanently, some or all of our tariffs to zero, or wave EU consignments through with no border checks — not a problem since our standards have been harmonised over 40 years.

The evidence suggests that WTO terms work well. Michael Burrage of Economists for Free Trade has calculated that over the 22 years from 1993 to 2015 the leading countries that export to the European Union on WTO terms grew their trade with the EU almost twice as fast as countries within the EU grew their trade with each other, and much faster than the growth of UK exports into the single market. Britain currently exports to more than 100 countries on WTO terms, and has grown those exports three times as fast as exports to the rest of the EU since 1993.

Remember the words of Roberto Azevêdo, director-general of the WTO: “About half of the UK’s trade is already on WTO terms with the US, China and several large emerging nations where the EU doesn’t have trade agreements. So it’s not the end of the world if the UK trades under WTO rules with the EU.”

Departing on WTO terms would save much of the £39 billion bill for domestic spending here instead, compensating for any problems that do arise. The prospect of missing out on that contribution to the EU budget from the British taxpayer may yet concentrate minds in Blefuscu, and a deal may happen. But Liliput should be sanguine about WTO terms and not just as a negotiating ploy, but because we could make them work. We’ve got to crack one end of the egg.