The article is headlined: Brexit has never offered opportunities for our economy and was written by Terence Kealey, a fellow of the Cato Institute. They can hardly be described as left-wing or pro-EU.
Cato supports lowering or abolishing most taxes, is a fan of small government and, in America, opposes the Affordable Care Act. They advocate privatisation and would prefer to see a US foreign policy of non-intervention. One of the founders was the billionaire Charles Koch, chairman and CEO of Koch Industries. The Fabian Society they are not.
Kealey points out that back in 2014, the essay’s author Iain Mansfield, a former UK trade envoy, calculated that the "total long-term impact [of Brexit] is estimated to be between -2.6% and +1.1% of GDP, with a best estimate of +0.1%."
In short, Brexiteers and the IEA were well aware that Brexit would at best result in a microscopic increase in GDP over the long term. This was the best they could come up with.
The reason Kealey wrote the piece was to counter Rishi Sunak's recent speech where he said Britain "should be taking advantage of the incredible opportunity of Brexit [to deliver] huge benefits to our economy.”
In fact, as the 2014 essay showed there are none to be taken advantage of.
A summary of the essay, published on the IEA website in April 2014, seems to come from another world. It talks of Britain “pursuing free trade agreements with major trading nations such as China, the USA and Russia.”
This was after Russian forces had illegally annexed Crimea in February, an act condemned by then foreign secretary William Hague who described it as “a potentially grave threat to the sovereignty, independence and territorial integrity of Ukraine.”
The full-scale war in Ukraine erupted in 2022 and now threatens Europe. China is supplying Russia with cruise missiles, drones, tank parts, and shells. The two great autocracies are essentially in an alliance to defeat the West. It’s hard to see a point in the future when they are not going to be seen by NATO as implacable foes. Closer ties in the form of more trade is politically and militarily unthinkable.
As for a trade deal with the USA, paradoxically, it's the constant threat that Brexit poses in Northern Ireland that has prevented any progress on that front. I am not even convinced a second Trump presidency would help get a trade deal in place or that it would help our GDP much if it did. This is to ignore some massive problems in reducing our own food standards.
No, I’m afraid time has not been kind to Mr Mansfield’s essay. Both the US and the EU have turned away from globalisation and are building resilience to their own supply chains to make them more self-sufficient and LESS reliant on China, fearing a future conflict in the Pacific over Taiwan. And Europe's reliance on Russian energy is over for good.
More surprising to me than the article itself are the comments appearing under Mr Kealey's piece. Five years ago, he would have needed police protection and even a new identity. He and his family would have to flee abroad lest someone found his address. There would have been utterly merciless attacks on him. But either the Tory party is hemorrhaging members from the right, presumably to Reform UK, or the Brexit supporters have become disillusioned or simply lost interest because there is now a substantial degree of support for Kealey’s arguments.
I think it also reveals that Mr Mansfield in 2014 may well have understood the intricacies of international trade but has little idea about British industry or how uncompetitive much of it is. Opening up your domestic market to foreign competition in return for gaining better access to their market is good if you are in a position to exploit it. All too often we aren’t.
Neither did he understand how integrated we were in the SM, using easily and cheaply available parts from EU suppliers to produce our exports to the rest of the world.
Mansfield said: "Given that the UK is a net contributor to the EU, after reallocating funds in this way, the Government will have a surplus of approximately £10bn. Whilst much of this could be used simply to reduce the budget deficit, some will need to be spent to increase the UK’s administrative capacity in areas that had previously been solely or primarily the competence of the EU."
He was right about increasing the UK's administrative capacity, we have about half a million more civil servants now compared to 2016, but wildly wrong on the 'surplus' of £10bn by avoiding EU contributions. Due to Covid and the reduction in trade cause by Brexit, we now have budget deficits where £10bn looks like a rounding error. It's the worst of all worlds.
The OBR's 'best estimate' of the impact of Brexit is of a 4% reduction in GDP worth circa £100bn a year by 2030. Doesn't seem such a bargain now, does it?
Incidentally, the chair of the committee that awarded the prize was former Tory chancellor Nigel (Lord) Lawson who lives (or lived) in France.
