You may have seen references on social media to a 'heavyweight academic’ paper that sets out the "substantial long-term gains" of Brexit. You won’t be surprised to learn this was tweeted by John Longworth, or that it comes from Patrick Minford via Brexitfacts4EU, they are after all just about the only people who would even believe such a thing was possible. In short, it’s another Minford fantasy from the man who once declared "We have done a simulation of leaving the EU. The first thing that comes out is an 8% drop in the cost of living on day one."
As we are all painfully aware there is now a cost of living crisis with living standards set to fall even further as inflation bites. I think we all know whose forecasts from 2016 have proved closer to reality - and, in case there is any doubt in your mind, it isn't Minford who is generally regarded in economic circles as a maverick, to put it mildly.
Here's Longworth crowing about it:
“Substantial long-term gains to the UK” from Brexit, says heavyweight academic study https://t.co/9iw2ricknA
— John Longworth (@john4brexit) July 28, 2023
Brexitfacts4EU presents it in glowing terms as a “detailed academic report on the effects of Brexit, from the distinguished Professor of Applied Economics, Patrick Minford, and his team from the prestigious Cardiff Business School, Cardiff University.”
They add that it’s “an impressive body of work on the economic impacts of Brexit” which is “not ‘dressed up’ and “presents the facts in all their detail – good and bad.”
However, they don't trust their readers to 'get it' and say the full report – all 25 pages – "is of course complex and will not be something everyone will want to read." Brexitfacts4EU then publishes an ‘executive summary’ and an 'abbreviated extract' courtesy of Minford, whilst also publishing a link to the full report.
However, even the bit they do publish is more than enough to dismiss the whole report as just more fantasy from a fantasist.
Minford rubbishes John Springford of the Centre for European Reform who has suggested the UK economy is already 5.5% smaller than it would have been without Brexit. This may well be an exaggeration but the OBR has referenced his work so it can't be that bad. This is from Minford:
"Some studies, notably by John Springford, have used the differential between UK behaviour and the behaviour of a ‘doppelganger’ weighted set of 30-odd other countries as their dataset and assumed that changes in the differential from the date of Brexit in 2016 identify the effects of Brexit. However, this procedure makes no sense.
Without any trace of self-awareness, Brexitfacts4EU says the report's focus is "on an objective analysis of economic data and its modelling. What is striking is how far removed from the OBR’s fanciful forecast of 4% lower growth in GDP over the next five years (allegedly due to Brexit) this new report provides."
Mmmm....., quite. Doppelgangers are an established method for estimating the counterfactual - what might have happened if another policy had been adopted in place of the one that was.
Minford's report is about as far from pessimistic as you can get and says "Eliminating the barriers to these import categories that we inherited from the EU - which are estimated to average about 20% - would according to our detailed model of UK trade and the economy increase UK GDP in the long run by around 6% - a big gain, very many times the official estimate - and lower consumer prices by 12%. This is the ‘static’ benefit, assuming trade does not grow, as of course, it will, given that Asia is a fast-growing part of the world economy."
And as if that's not enough, abolishing all remaining EU regulations, they say, should stimulate the necessary consultations to produce new UK-based regulations with gains from doing this estimated at a further 6% of GDP! I think he is suggesting in the long run Brexit will increase our GDP by a massive 12% or about £300 billion at 2023 prices.
As I'm aware no other economists anywhere in the world, reputable or not, have ever claimed anything like these sorts of gains from Brexit - and the overwhelming majority including The Treasury, the OBR, the IFS, the IMF, OECD, World Bank and Uncle Tom Cobley and all, don't believe there will ever be ANY gains whatsoever. Their estimates are universally negative.
Now, let me point out where he's wrong.
Minford disputes the very idea of a 'gravity model' to explain world trade. This assumes countries geographically close together do most trade together. Obvious? Not to Minford, who says if you combine this with the 'assumption' that the border barrier between the UK and the EU is "large and permanent, then they predict a loss from Brexit due to large UK-EU trade displacement. However, we will argue that this assumption is false and also that the gravity model is rejected by the data as a model of long-run trade."
Every serious, reputable economist and international trade expert accepts that the gravity model is correct, even in services. Minford doesn’t accept it.
My wife tends to shop in Selby, it's ten minutes away by car. She has shopped in Doncaster where they have an ASDA store, and once at M&S in Garforth. But these are exceptions for most shopping. For anything bigger, she uses York or Leeds or Sheffield. Minford seems to think this is somehow unusual or out of the ordinary but as far as I know it's just human nature.
Note he also talks of the “assumption that the border barrier between the UK and the EU is large and permanent.” Again, it’s a bit more than an assumption unless you think the UK is about to rejoin the EU anytime soon, which Minford doesn’t. Quite how the barriers are going to become small and temporary isn’t clear to me. Minford thinks the Trade and Cooperation Agreement (TCA) will bed down and will somehow (in a way he doesn't seem to explain) "achieve its long-run objective of removing trade barriers with the EU, in which case there will be no long run EU trade effects."
The TCA is apparently going to remove the very trade barriers that it has erected! Amazing, eh? I hope someone has told the EU Commission.
I can imagine the paperwork getting easier but removing trade barriers is about aligning standards and rules and the TCA emphatically does not do that. Worse, 6% of his GDP growth is to come from abolishing "remaining EU regulations" which will only serve to increase trade barriers as far as I can see.
He maintains that official assessments have 'totally missed a key point' in that "our importers will now have a barrier-free source of these goods for them to access if they need to, which via competition will reduce our import prices on them to world levels. This in turn impacts on our consumer choices and our production structure."
By "production structure", he means the elimination of UK manufacturing and a much slimmed-down agricultural sector facing world commodity prices and trying to compete with low-wage economies elsewhere.
Brexitfacts4EU says at the beginning that "Professor Minford and his team do not comment on the politics of this" which is perhaps a good thing since no politician is ever going to announce that as a policy, even if they thought it would work.
