Thursday, October 20, 2016

An Adam Smith Institute case against "Hard Brexit"

I must take issue with the accusation by some "Remain" supporters such as Ben Chu  that leaving the EU immediately with no trade deal and scrapping all import tariffs is an unworkable "libertarian fantasy."

Because this appears to be unfair to at least some libertarians.

A comprehensive pro free-market demolition of the case for that course of action can be found at the Adam Smith Institute's website, written by Sam Bowman and called

"The free-market case for hard-Brexit doesn't add up.

He argues instead of an "open Brexit" which maximises our ability to trade with the rest of the world including as much access as we can get in reasonable terms to the European single market and which would probably look very much like "Flexcit."

Ben Chu's piece makes a sensible attempt to categorise the possible outcomes Britain could try to negotiate into five categories as follows:

* "Brexit One" the Norway/EEA option)

* "Brexit Two"  Flexcit - adopt the Norway/EEA option for a temporary period while negotiating a comprehensive Free Trade deal

* "Brexit Three" Comprehensive Free Trade deal with the EU

* "Brexit Four" Leave the single market and customs union with no free trade deal in place and trade with Europe under World Trade Organisation rules.

* "Brexit Five" Leave the single market and customs union with no free trade deal – but unilaterally scrap all import tariffs. - e.g. the model which Sam Bowman demolishes in  the ASI blogpost linked to above.

It does to some extent depend what terms are available under each of these, but I cannot see any realistic short and medium term alternative to strategy two. The Norway option is not politically possible as it is basically just second class EU membership with almost all the drawbacks and not as many of the advantages and, in particular, would not allow us to "take back control" of our borders.

However the economic price for models four and five is likely to be unacceptable. Option three is probably our best long-term solution but there is not a snowball's chance in Hell that we will be able to get a comprehensive trade deal in two years.

Canada have been working on their trade deal with the EU for seven years and it appeared to be almost sorted out but there is now a serious danger that Wallonia, a region of Belgium with a population of 3.5 million people, will block the whole thing.

(And before anyone who voted Leave makes any comment about how this shows how difficult it is to get agreement to do things which are needed through the EU's decision making processes are, you might have a point but nevertheless the people in Wallonia who oppose the deal with Canada are making exactly the sort of protectionist and anti-globalist noises which elements of the Leave Campaign in Britain used to stir up opposition to TTIP and to EU membership.)

Hence the option of having the Norway solution in the short term while working on a comprehensive trade deal, and hoping that nobody like the Walloons vetoes it, will almost certainly be Britain's best bet. It won't be an easy two years - or, probably, an easy five to ten years - for the negotiators.

2 comments:

Jim said...

So tell me Jim-
Is the flexcit answer perfect? - No its not
Is it the best possible answer for the UK? - No its not
In the ideal world would you back Flexcit - probably not

Jim, why do you back Flexcit so much then? - because its the only option we have that is realistic and stands up to any sort of scrutiny in the real world, like the one we live in.

It does to some extent depend what terms are available under each of these, but I cannot see any realistic short and medium term alternative to strategy two. - nor can I, and that is exactly the point.

Chris Whiteside said...

Indeed