Brexit Will Be Good For The UK Economy
Greg Lance – Watkins
Five reasons why Brexit would be good for the UK economy
By: Bengt Saelensminde
Say No: making the case for Brexit
While the vote on Brexit may not be coming until 2017, campaigning by both the in and the out camps is already well under way.
Today, I’d like to stick my oar in. And given that the ‘in’ lot like to use the economy as an argument for staying with the European Union, I’ll continue in that vein.
For now, although they’re equally important areas for debate, we’ll ignore the other ramifications of EU membership in areas such as justice, migration, labour directives and even climate change and defence. We’ll just focus on the economics.
After all, last week the Confederation of British Industry said that Brexit would amount to a loss of some £3,000 for every household in the country. Former head of M&S Lord Stuart Rose, who chairs the Britain Stronger in Europe campaign, was downright scathing about the ‘outies’: “To claim that the patriotic course for Britain is to retreat, withdraw and become inward-looking is to misunderstand who we are as a nation.”
But I put it that if there’s any “misunderstanding”, it’s on the part of the ‘in’ campaign. And I suspect it’s a deliberate misunderstanding. As an ‘outie’, with a long history of dealing with and even living in continental Europe, I can tell you that wanting out has nothing at all to do with being inward-looking.
I believe that releasing Britain from the clutches of the EU will help foster a far stronger economy. An economy that is outward-looking. One that is free to trade both with the EU and outside of the EU.
So here are five key economic reasons for backing Brexit.
The EU does not help to protect key strategic UK businesses
Over recent weeks, we’ve heard a lot of awful news from the UK’s steel industry. As anyone involved with the commodities market knows, things have been on the decline for a few years now. China is slowing down. Key commodities that were in shortage have swung into surplus. China is selling as much steel as it can on international markets, making it all but impossible for the Brits to compete.
These are cyclical industries. The key is to be able to hold your breath during the downturns. Trouble is, the EU stands in the way of the government helping this strategic industry through the lean times – that’s because EU rules ban government aid for business. So they cannot help, even if they wanted to.
Now, I’m not a huge fan of government intervention. But on occasion, there may be a solid case for state aid for strategic industries (steel production is crucial to defence, for example), which, once closed are extremely difficult to re-establish.
The EU is less important than it used to be
When Britain joined the EU, it made up some 37% of global GDP. Today it’s more like 20%.
To some extent that’s because emerging markets have grown so rapidly. But it’s worth remembering that this relative outperformance of emerging markets is likely to continue for many decades to come. Meanwhile, Europe’s sclerotic pace of growth looks set to fester on too.
As an ‘outie’ I’m encouraged by our growing trade with the wider world. Despite the shackles of the EU, trade with the rest of the world is growing far faster than EU internal trade.
The trouble is that leaving the EU in charge of doing our negotiating with the outside world is holding back our growth, which brings me to my next point.
MoneyWeek’s latest issue: Why we’re backing Brexit
We love Europe – the continent, the food, the culture. But the EU is an undemocratic leviathan. Britain should leave, says Charlie Morris.
The EU’s disparate, conflicting goals hold us back
The EU is a huge entity, with many conflicting aims. It’s a political football match with all 28 teams on the pitch at the same time. As a result, EU trade talks with the US, Japan, India and the UAE have practically ground to a halt.
As part of my business dealings (as an importer), I’ve been involved in discussions with trade commissioners from two South American countries at their London embassies. These are the guys that are actually involved in setting terms of international trade.
You’ll often hear the ‘in’ camp claim that we need to be part of a strong EU bloc to help negotiate favourable terms of trade with these sorts of guys. They say that Britain is too small to go it alone.
Absolute poppycock and balderdash.
On its own, Britain could strike up meetings and finalise trade deals in an instant. And these would be deals that allow us to set low import tariffs on things that aren’t made in Britain, while setting higher tariffs on cheap competitor products.
Setting import and export tariffs is hugely important to Britain’s economic interests. It should not be delegated to an incompetent team from the EU – a team of bureaucrats pulling in all sorts of different directions.
Britain could become a magnet for trade
You don’t need me to tell you that Britain was once the major global trading hub. For sure, that was largely down to its empire. But given the benefits of re-establishing trade with the wider world, it’s not inconceivable that Britain slowly, but surely recovers some of what was lost.
Even from outside the EU, Britain could actually become a stepping stone for worldwide trade into the EU. I’m not joking. After all, given that Britain imports more from the EU than we export to them, we’ll undoubtedly forge a reasonable trade agreement. And even if the EU does slap on some trade tariffs, our position as an island nation within Europe (not the EU!) will have key attractions.
Britain will have the ability to harmonise trade – to import from the wider world, and add value to products so that they’d be ready for resale into the EU.
I can think of several serious business opportunities, should Britain wrest control back from Brussels. Being outside the EU may not actually be detrimental to trading with it.
Some ideas are just bad
It’s a general principle of economics that trade is good. That’s why Britain joined the EU in the first place.
Another general principle of economics is that central planning (you can call it a socialist state) is bad. And it appears to me that the EU has gradually changed from being a trade enhancer, to a trade obstacle – from a capitalist state, towards a planned socialist state.
Take Australia, Korea and Japan. None of these successful economies are part of a wider trading bloc. Why would they need to be? Why not trade and negotiate individually with whomever they choose?
I know that the rationale for being part of the EU runs wider than pure economic concerns. I know that Brexit would not be without its niggles and strains.
But it just strikes me that the benefits of exit outweigh the downside risks. And it also strikes me that the ‘in’ lobby are keen to spread misinformation on the economic cost of exit.
As far as I’m concerned, as a beacon of capitalism at the edge of Europe, Britain has nothing to fear from Brexit.
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