Britain’s exit from the EU: the Brexit Prize
Many readers will already know that a respected British think-tank – the Institute of Economic Affairs (IEA) on 16th July 2013 announced that it was staging a competition for the best “Blueprint for Britain outside the EU”[1].
Later guidance on responding to this challenge stressed that the “precise mechanism and procedure for exit should not be the primary focus in the final submission. Rather the full submission should look at the areas of government policy and overall political economy that would be affected by a UK exit and suggest a coherent and structured set of policy responses including environment, immigration, trade policies, regulations, foreign policy and wider issues of economic policy”. “The successful entrant should include a clear sense of the practical steps that would need to be taken and their likely timetable.”
The first stage of up to 2,000 words elicited 149 entries, which were reduced to a long short-list of 17 on October 29th. The second stage submissions were constrained to 10,000-20,000 words without counting appendices, footnotes and references. The six finalists were announced on March 26th, the actual winner on April 8th. The main prize was €100,000, the other finalists receiving much smaller sums. All received a plaque commemorating their achievement.
Six Finalists
One of the six finalists was Prof Stephen Bush, whose essay is available to read on this website at “A Brexit Blueprint: Britain Revitalised and Independence Regained” (138 pages). The winning submission by Iain Mansfield entitled “A Blueprint for Britain: Openness not Isolation” can be found on the IEA’s website www.iea.org.uk. At the presentations on April 8th it is said that Mr Mansfield announced that he was undecided about whether Britain should leave the EU!
By comparison with the other five finalists, Bush’s scope is extremely broad but practically focussed as seemed to be required by the essay guidance notes, in particular showing that while exit from the EU was a necessary step for future prosperity and a respected place in the world, it was not sufficient on its own. The other five finalists dwelt overwhelmingly on trade statistics with other parts of the world and with EU regulations.
In fact “wider issues of economic policy” are involved, in particular the urgent need to secure our future energy supplies, design and install new immigration controls to cope with 500 million more people potentially subject to them from the EU, and increase the range of manufactures made in the United Kingdom, in order for the UK to have goods to sell. Otherwise more trade agreements, popularly seen as a key benefit of leaving the EU, will simply make it easier for other countries to sell to us[2].
Likewise, while the repeals of some of the EU’s regulations will be facilitative, they won’t of themselves produce and sell a single product. Mr Mansfield’s essay has nothing to say on this central reality. Indeed manufacturing and energy on which the success of our economy are based, are not mentioned except as they are subject to regulation. Likewise jobs and immigration are only referred to in the context of regulations, not the actual numbers which the British people are desperate to increase (jobs) and decrease (immigration).
Mr Mansfield’s overall conclusion is that Britain outside the EU could be £1.3 billion better off. This sum is obtained from a series of guesstimates of trade changes – some positive, some negative – and further suppositions about the value of these gains and those from regulatory changes. £1.3 billion is 0.08% of current UK GDP, and it is impossible to measure. It is about one tenth of Britain’s net payments to the EU in 2012.
Put another way £1.3 billion amounts to about 2 weeks’ growth of UK GDP if you believe the IMF’s latest estimate of UK growth in 2014, 4 weeks if you believe their previous estimate in January. Either way the sum is trivial and if true would not be worth the upheaval involved in Britain’s leaving the EU. Prof Bush’s essay believes it is not true and the actual and potential gains are profound. Not paying the EU budget and customs dues will give Britain, cash in hand £15 billion for starters from 2017.
It is not altogether surprising therefore that published comment on the IEA’s choice of winner is somewhat unflattering – “dismal”, “feeble”, “gift to the Europhiles” are some of the more polite expressions.
Economics terminology can be misleading
It is worth noting that one of the disjunctions between economics and the real world of business and commerce is bound up in language. Free market economists place over-riding emphasis on “trade”, “free trade” in particular, and trading “partners”. There always has been trade throughout history, but in the 20th century there are numerous instances where free trade, in agriculture for instance, has led to the wholesale destruction of complete industries, unmitigated by any advantage to the people or country concerned.
On a less dramatic scale, Professor Bush’s essay points out (Table 2.6) that while UK free trade with Germany has been good for Germany, which has doubled its share of UK imports in the 40 years since 1967, the UK’s share of Germany’s imports in 2007 is exactly where it was in 1967 (3.65%).
Writing as a manager of a company, the primary consideration for nations, as for companies, about any proposal should be not whether it enhances trade (it may do), but whether it answers three key questions satisfactorily – “who benefits, when and by how much?”
The phrase “trade partners” is grossly misleading when used about nations. In business, partners are those who combine together for a specific purpose from which each expect to gain.
Trade between countries is rarely carried out this way except in the specific field of defence contracts of shared production and shared markets which is more like the mercantile system so deplored by “free market” economists. Normally, a firm in one country will sell – say cars of a specific type – to firms in another. It may be that a firm in that country will sell, say biscuits, to firms in the first country. There are no “partnerships” involved – indeed the car maker and his customers may not even know of the biscuit maker and his customers.
What we have are competitions between different car makers and different biscuit makers. Trade statistics are the result of the multiplicity of competitions in all the world’s products, not their cause.
[1] The IEA was founded by Antony Fisher, John Harding, Oliver Smedley and Ralph Harris.
[2] From 1960 onwards, both Japan and China have achieved enormous exports without a single trade agreement with anybody.
