The Brexit Consequences Thread

That should help Albania out no end, Macedonia too.
They are the next two accession countries and Turkey is still loitering in the background.
And getting accession funding.
What could possibly go wrong?

(Apart from Nigeria joining too)
I have just watched Macron at the EP this evening and am convinced in my own mind that he is an Idealist. That said he got a shellacking from his own MEP's about migration. Totally ignored the warnings, but crucially completely sidestepped the issue about how European co-operation was meant to work.
That should help Albania out no end, Macedonia too.
They are the next two accession countries and Turkey is still loitering in the background.
And getting accession funding.
What could possibly go wrong?

(Apart from Nigeria joining too)
The Mafia will be pleased too, they have there hands in lots of EU money especially construction projects, and agricultural subsidies
EU issued with Brexit WARNING: Terrified European regions demand trade deal with UK

"TERRIFIED bureaucrats from across Europe are calling on Brussels to strike a trade deal with the UK to prevent the prospect of a hard Brexit with border controls and tariffs which could clobber ports which rely on trade with Britain . . .

Zeebrugge, the port in the Belgian region of Flanders through which huge container ships pass every day, is particularly concerned about what will happen after the UK quits the bloc next year.

Currently, 17 million tonnes of cargo is shipped to the UK annually via the port, while 78 per cent of all British exports arrive there".

By: Ciaran McGrath
PUBLISHED: 31 May 2018.
EU issued with Brexit WARNING: Terrified European regions demand trade deal with UK
The remainers favourite JRM on his vision for a global facing outward looking post brexit britain

People often think of the 19th Century as being entirely, from our point of view, about the British Empire – but it was more than that. There was a degree of understanding of an international and global approach and the famous quotation from Canning is that: “I call the New World into existence to address the balance of the Old.” This was in a speech on the affairs of Portugal in the House of Commons in December 1826. Canning wanted to ensure that we could look away from the squabbles within Europe and further afield and that there could be some balance in our relationships because we were not exclusively dealing with our nearest neighbours. This proved very important to us in the ensuing century.

So, there is good historic precedent for what we are trying to do and what we are beginning to do in terms of Brexit.

However, there are three types of Brexit. There is, in the words of the advert, “I’m sticking to you, because you are made out of glue”. I seem to remember that was some kind of car advert at some point, I believe Hyundai in 2002. This is the view, quite commonly held amongst those who did not want to leave in the first place, that our best option is to stick close to the European Union. We may have decided we are no longer legally obliged to follow the EU, but will follow it anyway. This is because we are used to doing so and if we do not follow our neighbours it will damage us economically, especially if you believe gravity trade models work.

There is then the gloomy closed view, which is to say that we need to man the barricades. We need to close down immigration. We need to protect our economy. We need to create a sort of sepia-tinted 1950s version of the United Kingdom.

And last there is the view which I take, which I shall concentrate on in my comments, that the UK should be open to the world; that our history is as a global nation and that if you think of the UK as a ship of state, the ship of state has been moored in harbour since 1973 and can once again take to the high seas and look at the whole world rather than the narrow European sphere.

If you look briefly at each of those options in turn, the problem with the sticking to the EU model and following it closely is that you then need to ask what is the point of leaving. Because if we are within the EU, we may not have that much influence. It may do things that we do not want to do. We may accept unpleasant regulations but at least we have had some say in how they are created and at least we have had some votes in the Council of Ministers and some modest effect in the European Parliament. If we just accept what the EU does from outside, we must surely be the vassal state. If you look at the list of our Norman and Plantagenet Kings, there were numerous rows that they had over vassalage and bending the knee to their overlords, which of course King John agreed to do to the King Phillip II of France at Le Goulet. It was an unhappy place to be.

A vassal state is not a good state, nor is it a strong state. In truth the vassal state is worse than membership of the European Union. In this regard Norway’s example is interesting because the Norwegian people never wanted to join the EU, but Norwegian politicians have always been keen to join. So, essentially, they have set up a system where they are members but they have not quite admitted it to their electorate, which consistently votes against joining when offered the chance. This is indeed the case for most people who vote against the EU when offered the chance, which is why they are not offered the chance very much any more.

The second model economic history tells you will not work because protectionism harms those who put up the barriers. This is because they increase their own costs, they defend inefficient industries and they find as time goes on that they need to make much more radical reforms than would have been necessary if you had allowed the normal course of economic events to take place. The large-scale closure of businesses in the 1980s was in part because of the extent to which they had been protected in previous decades and eventually their inefficiencies and their lack of economic success caught up with them. This led to a dramatic scaling back, which is much harder for communities and indeed the individuals affected by such changes to cope with.

Going backwards will not work: there is no sepia-tinted 1950s vision, it will not help the least well off in society and indeed it would make them worse off. Closing doors to all immigration would be cutting off our nose to spite our face. What we want is high-skilled immigration that is beneficial to the economy. We do not want low-skilled migration for two reasons: one is that it stops productivity growth because cheap labour replaces innovation, especially mechanisation. But it is also the type of migration which it is most likely to depress wages of those who have probably been failed by the education system and have the least advantage within our society.

So, we come to point three and this really is the Canning/Peel-like opportunity. There is much we can learn from our 19th Century statesmen, that by opening to the world we offer ourselves not just economic opportunity but we offer ourselves the chance to play a full role on the world stage in influencing how things will develop. Not on our own, I am not suggesting that we have some neo-imperial vision and are going to become a superpower, but by cooperating with allies beyond the European sphere.

Within the EU we are one of 28 and we are bound by sincere cooperation to go along with what the other 27 agree. You can see this in the current trade row with Donald Trump but we will be obliged to put trade barriers on the United States. We can do nothing to limit the effect of any trade barriers that he might impose on us because we are tied into a European system and this means that even if Donald Trump said ‘look the UK is a most friendly nation and our closest ally, we are not going to put any tariffs on the UK, we are just going to stick them on France…’ we would be obliged by EU law to put tariffs on the US goods that the EU decided to penalise. So, once we are free of all that our opportunities are much greater to deal with, with other people.

Where do these benefits come? A great deal of work has been done by Patrick Minford and his team of economists on Free Trade, who have calculated that there will be a post-Brexit dividend of £135 billion just between 2020 and 2025 and a further £40 billion a year from then on. These benefits will come from a mix of global free trade for Britain outside the Single Market and the Customs Union, plus opening up the British economy to the beneficial effects of entrepreneurial dynamism. I am not going to quote George Bush Junior and say that the French do not have a word for entrepreneur as there is an obvious flaw in that argument, but that Europe is near the bottom of the class when it comes to the number of business start-ups tells you something important about its attitude to enterprise.

The most obvious benefit from Brexit for individuals and their families will be our ability to leave the EU’s prison of a protectionist Customs Union which puts up barriers to global trade and keeps prices of non-EU products at an artificially high level. On average, 21% of people’s income is spent on food, clothing and footwear. Now that figure will be higher for the least well-off in society for obvious reasons and the prices of these three commodities are crucially important to all our standard of living. The Customs Union does not care about the least well-off because these three items are the highest tariffed sectors within it. An average of 23% on food plus non-tariff barriers which make some imports impossible, then with 11.87% on clothing and 11.4% and footwear. Now some of these tariffs are on things that we simply do not produce in this country. For example, oranges are more expensive but the trade barriers do not defend any UK interest – only those of Spanish orange growers. I wish Spanish orange growers every success and happiness, but I do not want the people in North East Somerset, in Radstock, in Midsomer Norton, in Keynsham, to pay more for their oranges to benefit continental agriculture.

This cost to individuals reduces their standard of living for no benefit for our domestic economy and politicians should surely want to put their voters first. If we are to lift these tariffs then suddenly and quickly there will be an improvement in the standard of living, most particularly for the least well-off. But it is actually better than that because economically, if we open up to free trade, we will concentrate on those areas where we have got a comparative advantage and we will benefit from the lower cost of goods where others have a comparative advantage. Even better than this, because it would be generous if we were to open up our own market, it is then likely that others would be more willing to open their markets to us. Now some people do not believe this; some people say ‘let us do this all through trade deals’, but Donald Trump said it at the end of the G7 Summit, which was not much noticed. He said ‘I am putting these tariffs on you but I will also offer you complete free trade if you reciprocate’. We should grab that opportunity because it could lead to such economic dynamism and other countries, once they saw it succeeded, would want to follow. This is from a basis where it is already expected that 90% of global growth is going to come from outside the EU anyway in coming decades.

So, this is not just theoretical, it is economic sense to open up the nation to anyone that will want to trade with us. Moreover, it will boost all our living standards but especially those of the least well-off.

In addition, under our current system we currently provide a 20% wage subsidy to unskilled EU migrants, of about £3,500 per worker per annum. Getting the level of unskilled EU migration under control – and that means reducing it – could help see the living standards of the least well-off rise by 15%. This is achievable once we are outside the constraints of the Single Market. Giving a tax benefit to encourage people to come here to compete with those in our own society who are least able to compete is one of the most ridiculous aspects of the rules of the Single Market. We should not offer benefits to people who have not worked in this country for several years. We want to have an immigration policy, as the Home Secretary Sajid Javid is moving towards, that welcomes higher-skilled labour so that we do not keep out doctors who we need but protect the most vulnerable in our society by reducing the admittance of the least-skilled workers. This will have an economic benefit but it may also have a social one in that we will feel as one nation, as one society, that we are all supporting each other and putting the interests of our fellow Britons first.

In addition to these advantages economically, there is some fascinating work done by the Economist Intelligence Unit on the economic advantage of ending the colonial effect. The unit produces long term forecasts for developed and developing economies in its country forecast reports. Its model looks at the main determinants of long-term growth including quality of institutions, demography, human capital, trade, regulating the environment and so on. Interestingly, the model includes a variable on an independent statehood. The colonial effect suppresses actual growth in GDP per head by about 1%. Laza Kekic, who developed the model, has written the ‘colonial effect’ in the model is strong and extraordinarily robust on all specifications. Moreover, it is persistent over time even after the end of colonial rule.

Although EU membership is of course not literally the same as being a colony, the factor does capture the importance of self-rule or taking back control. The long-term growth model suggests a maximum positive impact from these two growth sources of some 1.2% a year (the other being the shake-up effect). By applying just half of this, we would increase annual average growth by 2050 to 2.8%, or 2.4% in per capita terms – a similar rate achieved by the UK economy during the periods 1950 to 1973 and 1995 to 2007. So it is a perfectly achievable level of growth.
Yup, all the dog whistles are there:
  • "vassal"
  • "bending the knee to overlords"
  • "unskilled EU migrants"
  • "Minford economics"
He didn't use "kowtow" this time, perhaps he's giving it a rest...
I particularly liked how you produced a cogent and compelling argument to refute each of JRM's points, one by one.

Well done you.
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