We quoted a paragraph from Roger Bootle’s article in today’s “Brexit Betrayal” column (here), saying that this important essay deserved a place in our “From Behind the Paywall” feature. Here then are the important passages, the content of which should become ammunition in our ongoing fight to make Brexit happen. Just passing Johnson’s Brexit Bill in Parliament is not sufficient.
The article has the title: “Mrs Merkel take note – Brexit will prove there is an alternative to the atrophying EU” (paywalled link). Mr Bootle refers to the Merkel interview last week (we looked at it here), starting his article thus:
“In an interview last week Mrs Merkel, the German Chancellor, was very revealing. Although she didn’t quite use these words, she is concerned that, shorn of EU rules and regulations, the UK could become something like Singapore-on-Thames. How will the EU respond to this threat?” (paywalled link)
He points out the economic failure of the EU over decades and asks why this message is not being heard in Brussels. His explanations are illuminating:
“One reason is the all-consuming nature of the European dream, as laid out in the Treaty of Rome, signed in 1957. It tends to blind adherents to practical failings.
“But a narrower explanation is that the EU project has been driven by lawyers. Now let me say that I have nothing against lawyers in general. Indeed, some of my best friends are lawyers. And lawyers have their place – if only they recognised what it is.
But they don’t seem to comprehend the law (as it were) of unintended consequences. And they certainly don’t understand the economics of international trade.” (paywalled link)
Next, Mr Bootle describes what the negotiations during the Transition period might look like. He calls it ‘the incremental approach:
“In view of the tight timetable, one possibility is to move towards a new relationship with the EU in stages.
It should be relatively easy to conclude a tariff-free deal for goods by the December 31st deadline, leaving other issues to be agreed later.
Leading EU figures think that this would suit them because the EU has a massive surplus with the UK in goods trade, only partially offset by a deficit in services trade.
This thinking shines a light into the very essence of the EU’s economic philosophy.
Time and again it has been made clear that the EU establishment thinks that exports are good and imports are bad.
Accordingly, securing tariff-free access to the UK market is a great prize, whereas allowing EU consumers to benefit from British-produced goods and services is a concession that may need to be made but is best avoided.
Economists have a name for this derangement. It is “mercantilism”.” (paywalled link)
Mr Bootle then looks at the problem our trade negotiations with the USA might create for the EU:
“According to the same EU establishment, trying to secure a trade agreement with America will undermine the attempt to secure an agreement with the EU.
European officials are worried that in order to secure a deal with America, the UK would have to depart seriously from current EU regulations and standards, including on those two fabled bêtes noires, chlorinated chicken and hormone-fed beef. They fear contamination, if not from these particular foods, then from lower standards in general.
Whatever you think of this argument, the economics point in the other direction.
If we leave the EU without a trade deal then we will levy tariffs on EU produced goods entering the UK. This alone would deliver a blow to EU producers.
But if we reach a deal with America, leading us to reduce or even abolish tariffs on imports from America, then the pressure on European producers will be even greater.
As the price of goods imported from the EU went up, so the price of goods imported from America would go down.
Recognising this looming possibility, continental and Irish businesses will put serious pressure on their governments to do a deal with the UK by the end of December this year, even if it is a partial deal, covering only goods.” (paywalled link)
In the next segment,Mr Bootle describes why the EU was and is incapable of understanding economics. Under the header “Small is beautiful” he begins with a general description:
“There is another general reason for the EU’s failings of comprehension and economic policy.
Why is it that across the world so many small countries do well?
Although there are many specific factors that apply to different individual countries, I think the general answer is that small countries feel the chill winds of competition acutely and they readily understand that bad policy decisions will bring adverse results. So their policy-making is forced to be better.
By contrast, large economic entities that impose the same regulations and standards across their territories and actively seek to suppress competition with regard to economic governance, are shielded. Accordingly, it takes longer for the full effects of bad policies to show up and for the penny to drop with the policy-makers.” (paywalled link)
His conclusion should become required reading for the Whitehall serpents in the relevant departments and for their ministers:
“The EU suffers seriously from large country syndrome. It has not only been a large entity from the beginning but over the years its bounds have been set wider and still wider.
This has served to confirm its belief that its model of economic governance is the right one. Indeed, to use the phrase coined by a lady of very different views, it has seemed to believe that “there is no alternative”. But Brexit is going to show that there is one.
The effect will not happen overnight. Indeed, it will develop over a run of years. But provided that we do not cave in and accept regulatory alignment with the EU, once we have overcome the initial dislocations, I expect to see the UK decidedly outperforming its former partners in the EU.
Paradoxically, as Mrs Merkel hinted, this might be just what the EU needs.” (paywalled link)
Just so – and I seem to remember that the UK economy, “despite Brexit”, has already outperformed such EU stalwarts like Germany, so point all economic ‘Brexit doom-and-gloom’ merchants to this article, especially to that concluding paragraph, and tell them: “The future is bright – the future is Brexit”.
Photo by mikecohen1872