Those who oppose the UK leaving the EU without a deal have forgotten a key point: just as the EU was, and continues to be a long-term project, so is Brexit. The success or failure of both can only be judged over years.
No Deal might cause some problems. But they are obviously only short-term and will be resolvable in months, if not weeks. We are dealing with the laws of men, not the laws of physics. Nor will those problems cause any long-lasting, non-reparable damage to the UK – we may catch a cold, but we will recover quickly. It is possible that Brexit is a wrong choice and that we might grow more slowly if we leave the EU – but the fundamental point is that what happens in the future is entirely unrelated to how we leave now, unless we lock ourselves into pre-existing structures and rules that restrict our choices.
What will determine the success or failure of Brexit are the trade deals we do over the next five or ten years, what our long-term relationship with the EU is, what we do in terms of tariffs and regulation. None of these is set in stone by “crashing out” as some put it. We could rejoin the Customs Union, become a member of the EEA, put in place highly protectionist tariffs. Everything and anything will still be possible under No Deal. No lasting damage will have been done to the UK economy. By contrast, delaying or stopping Brexit, or holding another referendum, will cause serious and lasting damage to the UK, destroying whatever trust remains between the electorate and politicians and creating all sorts of dangerous political precedents.
But what about the various forecasts of long term economic disaster? Paul Krugman is a Nobel Prize-winning trade economist. He believes that Brexit is a mistake and we would be better off (economically) staying in the EU. Yet his reaction to the Treasury’s forecast under a No Deal scenario was incredulity.
“I don’t understand how you can get that kind of cost without making some big ad hoc assumptions about productivity or something… As best I can tell, the big results depend on assumed relations between trade/FDI flows and productivity. It’s really important to understand that this channel does not follow from basic trade theory and comparative advantage; it’s a black-box story.”
Krugman is not somebody Remainers can simply dismiss in the way they do Brexit-supporting economists such as Patrick Minford. After his initial reaction, Krugman later discussed the forecasts directly with the Treasury. He said this in an article in the New York Times:
“On the substance: I’m skeptical about the supposed effects of trade on productivity… But relying a lot on effects we can’t model seems dubious…What about disruption at the borders? This could indeed be a huge problem. What’s puzzling about the scenarios is that they show these disruptions going on for multiple years, with barely any abatement. Really? …And even in the short run, I wonder why Britain couldn’t follow the old prescription, “When all else fails, lower your standards.” If laxer enforcement, special treatment for trusted shippers, whatever, could clear the bottlenecks at the ports, wouldn’t that be worth it, despite the potential for fraud, as a temporary measure?”
More recently he said:
“First, drop the hysteria about the costs of no deal. It’s true that the complete absence of contingency planning means that a sudden end to the customs union would cause huge disruptions – but that could still be avoided, and wouldn’t last all that long.”
Nor is he alone in these views. Ashoka Moody, Visiting Professor of International Economic Policy at Princeton University and former Deputy Director of the IMF’s European and Research Departments, writing in The Independent, said:
“No trade economist believes that the long-term cost of this shift in sales patterns [Brexit under WTO] is any more than 0.5 per cent of GDP. Throw in 2 to 3 per cent of GDP as temporary disruption costs. Estimates higher than that are ad hoc.”
As with many Remainers, the Treasury believes No Deal will be terrible because it extends short-term effects into the long term. There is simply no justification for that. No Deal does not set the future in stone. Both Krugman and Moody warn against the “motivated reasoning” of those making these doomsday forecasts. Moody says:
“All official agencies, trapped in an echo chamber, are competing to paint the grimmest picture of economic consequences of a British exit from the European Union. They are straining so hard because their projected costs of exit have no basis in economic theory or empirical findings.”
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Many Remainers seem to be completely unaware of the criticism of the official forecasts from independent sources. And these official forecasts have been reinforced by the bizarre and largely unofficial claims about the immediate effects of No Deal. These range from empty shelves in supermarkets via epidemics of STDs to shortages of radioactive isotopes. None of these claims have stood up to scrutiny, but they just keep coming.
The other week David Gauke, a Cabinet minister, went one better. He made claims in The Times that sounded like a rejected script from Robocop or The Purge. Apparently No Deal will lead to a drastic and terrible upsurge in criminality. Piling scare story upon scare story upon scare story, Gauke said that drastically reduced food imports will lead to empty shelves which will lead to an upsurge in criminality. Let’s give each assumption a probability of 20% and we end up with a less than 1% chance of this surge actually happening. His latest pronouncement, accompanied as ever with the tired threat of resignation, made no sense at all. And even if this happened, even if his worst fears were proven correct, it would be for only a very short period of time – unless a minister is saying that the Government will never again be able to ensure we import sufficient food or be able to contain criminality.
And what is Gauke implying? That we should abandon the result of the referendum, give up the potential long-term advantages of Brexit and ignore the wishes of the electorate, all because there is a 1% chance that it might get a bit difficult for a few weeks? Seriously? Rather than peddling scare stories in newspapers, why is David Gauke not making sure that after Brexit there will be co-operation on crime with the EU after we leave? If he cannot do so, then he should resign, not say that his incompetence means Brexit should be cancelled.
This is not to deny that our lack of preparation for a no-deal outcome will not cause problems. It will. But that is the fault primarily of Theresa May, who decided that in order to force her deal through she would make No Deal as unpalatable as possible. That was deeply cynical, self-seeking and wrong. In this she was supported by the Silent Assassin, Philip Hammond. His role in overturning the referendum has been widely overlooked, but he has been crucial to the Remainers’ cause. He has allowed the Treasury’s outlandish forecasts to go unchallenged, refused to find the money for No Deal preparations and declined to stand up for the result of the referendum in any way.
But there is nothing intrinsic about a no-deal Brexit that will cause long term problems: they would be obviously and clearly only short-term. Countries outside the EU manage to import food and medicines and radioactive materials and, yes, Michael Gove, even chemicals for treating drinking water. They co-operate on crime and on terrorism and all the other things we have been told will become impossible. They do. Look around, Remainers, see what goes on in the rest of the world. It might take a bit of time, and there might be some initial disruption, but again the fundamental point about No Deal is that it sets nothing in stone.
It is absurd to claim that a few weeks of confusion are reason enough to stop Brexit or to force the UK to accept a deeply-flawed deal that does not respect the Leave vote. Even the Bank of England now recognises that its forecasts were overly pessimistic. It claims that this is because No Deal preparations are now reasonably advanced. More likely, the Bank is now itself scared by No Deal. Not because of the effect it might have on the UK economy, but because of the effect it might not have. The same fear is surely driving others to crank up the threats, in a desperate bid to head off the day of reckoning. What if No Deal is a damp squib? What if Brexit day comes and goes not with food riots and lorries clogging up the motorways but with nothing much to bother about?
Remainers may then say the problems are still to come, that the reduction of trade will happen and we will be poorer in the long term. And they might be right. Perhaps, as Ashok Moody has said, we will lose 0.5% of GDP. That is a sizeable amount but it nowhere near the economic disaster Remainers keep claiming. In five years’ time, our growth might be 1.5% instead of 2.0%. Fine, we can then assess and decide what we should do. But it might be 2.0% instead of the 1.5% we would have had if we had stayed in. We cannot know now, nobody can. But what we do know is that unless we make some very poor decisions, it will not be a disaster.
That is the problem with Project Fear. It has distorted the debate and put the claims and reputations of Remainers on the line in a way that means they will fight to the bitter end with every weapon at their disposal. Because they are not just “fighting for the UK” as they like to claim, but fighting for their reputations. If No Deal happens, and there is little or no disruption, there will be nowhere to hide for politicians and commentators – the lack of disaster will happen immediately. Some are even taking steps to ensure that there will be problems, come what may. The Royal College of Radiologists has decided that suppliers warning of “possible delays” means that delays are “inevitable”. It has told radiologists to pre-emptively cancel appointments. Now, even if supplies are not delayed, there will be delays to treatments.
But even then, these problems will pass – and pass quickly. Brexit is change, and change can bring costs and disruption, in the same way that moving house or moving jobs can do. But nobody says they will not take a great new job or buy a lovely new house because moving might be difficult. If we want to argue about whether Brexit is a great new job, then we should do so. We can argue about possible economic costs and how we trade those off against the economic and non-economic benefits of Brexit. That is the debate Leavers tried to have during the referendum campaign and have been trying to have ever since.
But to oppose No Deal because there might be short-term costs is absurd. Those problems will be resolved and then we will be free to do as we want, to decide how to make Brexit work. If that means rejoining the Customs Union or declaring unilateral free trade or never trading with anybody ever again, then so be it: No Deal does not stop us doing any of those. Leaving with No Deal does not condemn us to inevitable economic disaster: how we leave – provided we actually leave – simply cannot determine whether Brexit will succeed. Leaving with No Deal is actually the only way of leaving that preserves every economic choice. It is the only way that gives the UK the freedom to decide how it will succeed. Why would anybody try to prevent that?
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