Project Fear 3.0 (or is that too low a number?) continues to ramp up the scare stories in these last few weeks of Brexit negotiations. You will find a swathe of articles debunking these myths below.
Now that negotiations have resumed after Michel Barnier’s team came out of Covid isolation, there is renewed push to seal a deal. The European Commission seem keen to seal a deal, with Ursula von der Leyen reportedly ‘keen to unblock things’. David Frost has repeated his insistence that any deal must respect UK sovereignty. We continue to wait and see if the EU will prove reasonable on this point or leave no deal as the best option.
This week we have also added a new section to our website – ‘Culture and Identity’ – which kicks off with two powerful articles by Nigel Biggar and Marie Kawthar Daouda. Here we aim to provide an antidote to the efforts of too many academics and cultural commentators who are determined to paint Britain as a uniquely evil country – despite all the evidence to the contrary (including their freedom to make just this sort of critique…).
For a good example of what is wrong with some of our university professors, can we suggest that you read this criticism of British objections to Maradonna’s cheating in the 1986 world cup. BfB readers may or may not be surprised to learn that disapproving of cheats is a sign of imperial nostalgia. A diagnosis about as believable as blaming imperial nostalgia for Brexit.
On the website this week
Recently, the Bank of England and the OBR have again claimed there will be a big negative impact of Brexit on UK GDP. These claims rest heavily on an assumed link between trade ‘openness’ and productivity. But neither the literature nor the empirical evidence supports the existence of such a link – officials and others should stop treating it as a ‘fact’.
“Given the nature of the evidence it is hard not to sympathise with Harvard economist Dani Rodrik who has dismissed productivity effects of this kind as ‘bells and whistles…used…to produce exaggerated benefits from trade agreements’”
The Car Industry Doth Protest Too Much, by Philip B. Whyman
Despite the message put out by some industry lobbyists, Brexit, far from being damaging, could help the motor industry to face its global problems, but only if the UK does not agree to the type of harmonised regulations and competition policy that the EU is insisting upon. For motor manufacturing, no deal is certainly much better than a bad deal.
“When Brexit is placed into context alongside the other challenges that the industry faces, it can hardly be considered to be the main, or even perhaps a significant, contributory factor behind the vehicle industry’s current difficulties.”
What is in the UK’s Global Tariff? By Alan Winters and Michael Gasiorek
On New Year’s Day 2021 the UK will begin to operate its own tariff regime on imports for the first time since 1973. These new tariffs will influence trade, prices and other aspects of the UK economy. This informative article from the UK Trade Policy Policy Observatory at the University of Sussex outlines the new regime and explains how it differs from the EU’s Common External Tariff regime to which the UK is bound until the end of 2020.
“Tariffs on around 2000 products have been fully eliminated, almost doubling the number of tariff-free products compared to the existing EU MFN schedule.”
Britain, Slavery, and Anti-Slavery, by Nigel Biggar
Britain’s involvement in slavery is a heated topic of public debate. We are told that we need to face up to our past and learn from it. So we should, honestly and in full. Britain was a major participant in the slave-trade and slavery during the 18th century, but there followed 150 years of imperial penance in the form of costly abolitionist endeavour to liberate slaves around the globe. The vicious racism of slavers and planters was not the essence of Britain or its empire, and whatever racism exists in Britain today is not its fruit.
“The injustice was grave, systemic, and massive. The British could not undo the past, but they did do the next best thing: repent of it and liberate the still living.”
On culture wars and the need to belong, by Marie Kawthar Daouda
The religion of Humanity wishes to blur out difference by making signs of national identity a modern taboo. But human individuals need many roots, including the national. When intellectuals partake in uprooting, and in vilifying a country just because they happen to belong to it, they corrode the bonds of community, which newcomers need too. Marie Kawthar Daouda is a specialist in French literature, and a Lecturer at Oriel College, Oxford.
“Far from preventing the creation of new, deep links, to be rooted allows one to engage thoroughly, and respectfully, with the culture and history of the places one lives in.”
Key points this week
Will Brexit really cost more than Covid
The governor of the Bank of England, Andrew Bailey, has recently suggested in an interview with the Commons Treasury Committee that a No-Deal Brexit would have more of an impact than the Coronavirus pandemic in the long run, contradicting the emphasis of the Chancellor, Rishi Sunak, on the larger relative significance of the pandemic. Given the context, Bailey didn’t provide figures in support of his statement, but the suggestion echoes that of an LSE report earlier this year, which itself depends on an analysis of the economic impact of Brexit published by the Treasury in 2018.
As we’ve suggested before, however, these predictions are characterised by a number of problems. Notably, the government has itself subsequently abandoned these estimates for good reason. The Treasury figures in particular are marred by an overly pessimistic estimation of the benefits to be gained from new trade deals, overly optimistic assumptions about the likely growth of EU countries due to continuing integration, and a failure to account for the regulatory efficiencies which Brexit will enable.
In particular, the relative speed with which Britain will be able to conclude new deals (demonstrated by the substantial number of rollover agreements the government has thus far secured) contrasts with the EU’s tardiness in ratifying agreements, with all the member states needing to be individually placated. They also presume that no new deal would be negotiated after an initial No Deal scenario, and rely overly on the assumption that the trade between two countries is a function of their relative distance (the so-called ‘gravity model’) rather than factors such as specialisation, institutional suitability and so on.
In short, therefore, such predictions of woe form a familiar – if nonetheless unwelcome – feature of Brexit-related alarmism.
Systematic crisis or systematic lack of evidence?
The Guardian has recently had a field day publishing a Cabinet Office briefing from September, which it suggests is evidence of the risk of a possible ‘systematic economic crisis’ as a result of Brexit. Needless to say, however, the government has made substantial No Deal preparations since September, which mitigate a number of the concerns outlined in the report. In particular, the biggest concern outlined in the report is the flow of goods, which could be limited to varying degrees by customs procedures.
Moreover, headlines about a traffic backlog from no deal tests are similarly misleading. The reaction from the French press has been rather different, stressing the success of the joint exercise held by the ports of Calais and Dover. Smart technology, extra staff and extensive preparations suggest that there will be ‘no return to the border of 50 years ago’. Talk of food shortages, then, is simple scaremongering.
Dismal but no Science – the OBR’s No Deal Projections
In connected recent news, the Office for Budget Responsibility has published a gloomy assessment of the impact of a WTO Brexit, suggesting it will reduce GDP by 2% compared to a deal. It’s worth stressing from the outset that these figures are largely guesswork, but are worth tackling in more detail anyway. (See pages 193-7 of the report.)
The estimates of immediate disruption from border chaos (to the value of 0.75% of GDP in the first year) are, as we suggest elsewhere, exaggerated. Likewise, ‘other costs’ section is inflated by assumptions about the dire impact of non-tariff barriers (like regulatory equivalence) – though many of these can be evaded, agreed in separate arrangements with member states, and some indeed are not part of formal negotiations at all.
Besides the estimates of the effects of immediate disruption, however, most of the long-term damage envisaged is thought to come from structural unemployment, productivity losses and lower business investment. A closer look at the report, however, reveals that it relies on the same flawed assumptions about the limited gains to be had from faster trade deals with other partners, the benefits of improved regulation, and the dependence on EU trade derived from ‘the government’s own figures’ (the 2018 Treasury Report that the government no longer relies on) that we’ve critiqued before.
Conversely, the estimate of productivity losses relies on the assumption that international trade fosters competitiveness in domestic firms – despite the fact that the proposed link has never been demonstrated except in emerging markets where conditions are wildly different from Britain’s mature economy. Hardly, in summary, the catastrophe that ‘I told you so’ commentators would like to unfold.
Key Points is compiled by a Cambridge PhD student.
We are also on Twitter, posting articles and retweeting the daily events that bring Brexit to the fore in the national news.
Discussion also continues over on Facebook.
How you can help
There is much about Brexit still to be decided. Our MPs listen to their constituents. Do continue to send them links to our articles, especially on matters relevant to your constituency – for example, in rural areas, articles on the threat to British agriculture. Alternatively, make an appointment to speak to them at their next surgery. Let them know what you want post-Brexit Britain to look like.
As Boris Johnson said in in his post-election address, it is also time for unity and reconciliation. Keep reading our posts and share links to our quality content to help others understand how leaving the EU will be good for the UK economy and for our own democratic governance. We aim to educate our critics to think differently and more positively about the long-term impact of Brexit.
An Oxbridge PhD Student
Dr Graham Gudgin
Economist, Centre for Business Research, Judge Business School University of Cambridge
Professor Robert Tombs
Emeritus Professor of French History, University of Cambridge