Now I realise the gamble that I and all other liberal Leavers have taken in voting for Brexit. Is the chance for minor gains in international trade and lower tariffs worth the risk of tanking our economy and turning our country inward? With hindsight I would argue it is not.
Now. I have to be honest. I’m a die hard Remainer. I mean really die hard. I’ve been watching the steadily growing number of #RemainerNow folk who’ve “only just” realised what they’ve unleashed and I’m exasperated, but oddly not exceptionally angry at them (and perhaps you).
But holding all this back in the spirit of debate and support, the reality is, whether we like it or not, the U.K. is one of very few developed countries in the world of any political creed, that has this weird mass Dunning-Kruger sh*t going on. We are exceptionally analytically illiterate as a population (just a fact) so politicians can make claims or assertions which are entirely false and the population have no way of determining the truth of that position. What is even worse is Brexit, or to give it its full title, the scope of the impact of whatever the decision was of the EU referendum, is not a political remit. It became politicised.
The reality is that politics of any form [as practised in the U.K. and a few other countries] only exists due to incompetence somewhere in any system. You are either covering it or managing it. That means, as soon as a politician gets hold of something, it is immediately going to be mismanaged. For example, healthcare as managed by Jeremy Hunt, or education under Michael Gove (this isn’t just limited to Tories, as Labour and LibDems have easily been as guilty with the Iraq War and Tuition fees respectively).
Such an example is the highlighted line. The talk throughout the referendum of a “better and bigger trade position outside the EU” or “the fastest growing economies are outside the EU” needed people to do a substantial amount of research that most didn’t have the time or the skill for (economics is a mathematical subject). One particular example of the dissemination of this idea was that we could trade with the Commonwealth.
The commonwealth has just surpassed $1 trillion of total trade for its entire lifetime. A sum that the EU trades internally every quarter. The commonwealth has even more work to be done due to its multitude of multilateral agreements, to negotiate a position that would allow us to trade with all parties. We would otherwise have to negotiate Free Trade Agreements with the 51 different countries separately, for a total economy of 5/9 the size of the EU, and as we saw with India, that comes with conditions which would be unacceptable to us and according to WTO data, would take an average of 7.5 years for each agreement.
Even though the Commonwealth is a faster growing economy than the EU. The low current starting point for trade (noting that we can trade with them anyway) means that even at double the growth rate on average, it would take 493 years for the Commonwealth to overtake the EU’s trade levels. That’s not a typo. Four Hundred and Ninety Three Years.
In the interim, we would lose the entirety of the Commonwealth’s total trade level, $1 trillion, in average symmetric tariffs of 10% outside the EU, in only 50 years. Not including the tariffs we’d pay to the indirect countries (60 further countries around the world) that we won’t have a trade deal with anymore, including Japan (an economy twice the size of ours) who signed their EU trade agreement last year and Canada, who of course, signed up to CETA.
The Burrage report, as disseminated by Civitas, was used as a mechanism to argue the case for leaving when a number of things about it were blatantly false. Digging deeper to understand why, you then found that:
- The author isn’t an economist
- The strategic advisors for the study were all UKIP members (as identified through the leaked UKIP membership list)
- The focus was always on GDP. GDP is not a measure of propensity to trade! It is a measure of the size of the cash you generate working for others. It’s like what’s in your savings account. That tells you nothing about how much we spend buying stuff from others or selling stuff to others. If you earn 5/9ths of the money of your previous job, but don’t spend it or sell your stuff, there is no trade.
- The study had been peer reviewed and rejected. But Civitas, who’s board had been joined by further UKIP support, published it anyway.
As a scientific mind will tell you, the truth is there was no theoretical basis for leaving the EU. What Leavers had, was a conjecture. A theoretical argument requires all of the above, and more (don’t get me started on the NHS), to be considered. In essence, some person said “we should leave the EU” without justification and they run with it.
Also, any scientific mind will tell you that you cannot make a decision on a 2 option referendum with a 50:50 threshold. A confused populace’s votes present as chance does. They basically vote like a coin. If you fancy trying it out and have a day to kill and some friends, do 100 coin spins each, marking the heads or tales as you go. Some of you will get 48 heads, others will get 52 heads. Indeed, it’s possible to get 55 heads without the coin being significantly different to any other fair coin. That’s just scientific fact (1,000 coon flips shown below) and is the place you could be certain the population have actually voted to Leave.
Still, we are where we are. I’m sure Leave readers will pick up on this and do their usual baseless assertion or slate you in some way. Like “change the record”, “sovereignty” or other such rubbish. But their claim of Project fear is really Project reality biting.
- Biting the NHS (over-representation of EU staff versus EU patients means we take more doctors and nurses out than we put in and take out of the waiting list)
- Price rises and shrinkflation in the shops due to the drop in sterling (some Leavers can’t even see that this is linked. It happened as soon as Sunderland voted Leave)
- Car manufacturers lose JIT production and the U.K. loses car manufacturing. Losing several tens of thousands of jobs in the process.
- Given we import circa €500 bn and export €300 bn now, that’s a trade deficit of €200 bn. Add 10% tariffs to each side, and your trade deficit becomes €220 bn instantly. Gifting the EU and extra €20 billion.
- The payment of VAT up-front requires importers to build the capital to pay it first. If your margin is 8% on an item of £100+VAT, as it is in many businesses, and you pay your VAT once you sold it, you’ve bought that stock from abroad for £92 (plus deferredand sold it for £120, you give £5.60 to HMRC once you’ve sold it. With VAT up front, you pay the £92+VAT which is £110.40, paying the tax (£18.40) to HMRC at the start before claiming it back from HMRC once you’ve sold the goods later (and you can only claim back £18.40, meaning you pay the difference of £1.60)
- We can’t get a trade deal from the USA because as we saw with Bombardier and 300% tariffs in two tranches, two weeks apart, the USA will burn us regardless. We need EU and WTO protection and leaving loses us that
All this barely scratches the surface doesn’t even look at non-economic impacts and we haven’t even left yet.
So you can see how Leave campaigners were throwing literally every single rubbish thing they could think of at the wall to see what could stick. For me, I knew Reman were in trouble a couple of months before the referendum. As Flexciteers came up with their equally preposterous Flexcit manifesto and ethnic minorities also voted for racism, that was the point I thought Remain had lost. It was really easy to be convinced by that if you were looking at anything but the facts. So stick to that, always!