DEBATE: Is the Economists for Free Trade £135bn figure realistic?
YES – Professor Graeme Leach, member of Economists for Free Trade.
The impact of unilateral free trade on an economy is not rocket science, but it is enormously powerful. EU membership means surrounding the UK with a protectionist wall from tariffs against the rest of the world. A post-Brexit unilateral abolition of tariffs on imports would provide the opportunity to trade at lower world prices. Lower prices from cheaper imports for consumers would greatly increase the spending power of households, particularly for food. Lower prices would also increase the competitive pressure on producers, driving up their competitiveness and productivity, and increasing incomes for all. If increased global competition was matched by greater liberalisation of the domestic economy, with a reduction in onerous regulation, that and other factors could add up to a potential gain of 6.8 per cent of GDP, or £135bn. Unilateral free trade is the most exciting economic opportunity to face this country since the abolition of the Corn Laws in 1846. Then the abolition of tariffs helped fuel the industrial revolution. Now it could help propel the next industrial revolution. It is that big.
NO – Thomas Sampson, assistant professor of economics at the London School of Economics.
Economists for Free Trade’s estimate is misleading nonsense. It is based on an economic model that bears no relation to the facts of the global economy and, consequently, is contradicted by the data on international trade. Most importantly, the Economists for Free Trade fail to take into account that trade costs are higher when the UK trades with more distant countries and that consumers care about where goods are made – consider, for example, French cheese vs. English cheese. In reality, there is an overwhelming consensus among economists that Brexit will reduce living standards in the UK, because it will increase trade costs, causing imports to become more expensive and making it harder for UK firms to export to the EU. Rather than wasting our time debating economic analysis that would fail an undergraduate trade course, we should be asking how large a price the British public is willing to pay to leave the EU and what we can do to minimise the costs.