11/08/2016
If Britain crashes out of the European single market for goods and services in the wake of the Brexit, the country could be permanently poorer by 4 percent of GDP, according to estimates from the
Institute for Fiscal Studies.
This was carried by the
Independent yesterday â one the many papers to carry the news, alongside
the BBC. The Institute has obviously got past the "stupid" filter, boosted by its prestige, which helps it get an altogether unremarkable conclusion into the public domain.
We are being told that signals from Theresa May's government in recent weeks suggest the Norway option is "politically impossible" and that ministers are preparing to leave the single market and attempt to generate some kind of free trade agreement with the rest of the bloc.
That, of course, cannot and will not happen and, if a free trade agreement is not agreed, as we've already said dozens of times on this blog, the IFS acknowledges that the UK would default to World Trade Organisation (WTO) rules. After all this time, the message is beginning to break through. As we frequently observe, they get there eventually.
But what has not yet penetrated is the scale of the problem. According to
World Bank figures, currently (2015), 27.4 percent of the UK GDP is attributable to the exports of goods and services. Of that, the EU contribution makes up around 12 percent.
Now here's the rub. If we drop into the WTO option, our export trade with the EU collapses. We've set this out abundantly clearly in
Brexit Monograph 2. That means we don't just see a 4 percent hit to the economy. It's more like 12 percent â and that's assuming that imports are not affected.
Effectively, the IFS â like so many â is grossly under estimating the problem. I suppose the sheer enormity of the problem is stopping people coming to grips with it. But there is also a fundamental lack of understanding of the nature of the Single Market and how it works.
For too long, people have been obsessed with tariffs, and seem unable to cope with the idea that the Single Market's main hurdles are non-tariff barriers. Neither do they understand that every single developed country in the world has build up their own networks of agreements with the EU, dealing not only with tariffs, but also the non-tariff barriers and vital things like customs cooperation.
As it stands, all our systems have been absorbed into the EU so, if we leave without agreeing replacements (such as the continuation of the EEA Agreement), then we start with a blank piece of paper.
The point here is that this is a unique situation. In peacetime, there are no parallels â no instances where a country has so completely broken off long-established relations with its trading partners. We are in virgin territory.
This is, of course, why this is never going to happen - it can't be allowed to happen. But it would help if think-tanks such as the IFS would call it straight. At least, though, they're in the ball park, which is more than you can say for some
fantasists. They would have us wreck our economy.
