Hypocritical Attempts to Derail the Referendum

Emile Woolf, Going Postal

The most important Brexit issues have been clouded by uncertainty, exacerbated by predictably negative forecasting by supposedly neutral authorities. This has generated a totally unwarranted fear that has paralysed the resolve of even those upon whom we most rely for clear thought and direction.

During the 2016 referendum campaign the Treasury forecast that a vote to “Leave” would cause a year-long recession; the average household to be worse off by £4,300 per year; an immediate drop of 3-6 per cent in national output; and the need for a “punishment budget” of tax rises and spending cuts, merely to fill the hole in pubic finances.

You would think that this widely publicised prediction from such an authoritative source as the UK Treasury would have put most voters off any notion of leaving the EU. But 17.4 million people ignored the prophets of doom and voted to get away from EU autocracy and re-take our nation’s destiny.

Not even one prediction came close

As if to emphasise the point, not one of the dire Treasury predictions came close to what actually happened. The average family has maintained its standard of living; the economy has grown by 4 per cent; there has been no recession; taxes have been cut, and government spending has gone up – almost an exact replay of 1999’s dire warnings of what would happen if we failed to join the euro. But there was no mention, after our decision NOT to join, that the UK’s growth of 44% exceeded, by a sizeable margin, the growth achieved by the three next largest economies of Germany (32%), France (32%) and Italy (9%).

But the fearmongers never give up

The forecasting arena has now shifted to the horrors of a “no-deal” Brexit next March. The latest withering predictions include lorries backed up between Dover and London; massive supply-chain disruption; deliveries of fresh food rotting on the quays; planes grounded; vital NHS supplies halted; labour shortages in hospitals; queues for visas to cross the channel. And so on. Next on the list of consequences will surely be rising sea levels, tempests, hurricanes and forest fires.

The lingo speaks volumes: “crashing out” and “cliff edge” are the BBC’s favourites. Even “no deal” should more accurately be described as an exit on World Trade Organisation (WTO) terms.

It is no surprise that this time the Treasury has refused to support its warnings with details of its economic model, or the assumptions on which it rests. As ex-chancellor Norman Lamont put it, they “have cried wolf too often to be believed”. Modelling by more objective bodies, including Economists for Free Trade, show that our public finances would be much stronger under WTO rules after the inevitable initial disruption settles down.

Fearmongering works both ways

A complementary fear clearly exists in the EU. Its leaders have been laying plans to prevent “regulatory dumping” by Britain after it leaves. A high-level presentation earlier this year to 27 member states included the possibility of “blacklisting” the UK if it becomes an “uncooperative tax jurisdiction” or is seen to indulge in excessive relaxation of EU regulations.

Nothing could show more clearly the lengths to which our so-called “partners” are prepared to go to (i) scupper the possibility that Britain might actually benefit from a successful Brexit; or (ii) demonstrate to any other potential leavers what fate they will suffer if they dare declare, “We’ve also had enough of you!”

Single market membership – in practice

If it is such a great idea why is there no single market in East Asia? Or North America? The concept of “single market” sounds harmless enough but, while it appears to connote the wholesome notion of free trade, it actually means trade that is free only within the limited arena of a defined club of nations.

Furthermore, membership of the single market imposes the following additional obligations:

(i) Immigration

To stay in the single market when not a member of the EU is quite possible, as in the cases of Norway, Liechtenstein and Iceland – but only if you permit “free movement” of goods, services, capital and people. Perhaps Icelanders, Liechtensteiners and Norwegians are less anxious about that last stipulation, but many in the UK recognise that, as members, immigration would be impossible to control. [Note: “control”, not “prevent”!]  The inability to control our own borders just happens to be one of the reasons so many voted to leave in the first place.

(ii) Annual payments & subjugation to the ECJ

Membership of the single market also requires making substantial annual payments towards the EU’s budget, and accepting the blanket jurisdiction of the European Court of Justice.

(iii) Regulatory jungle

Members of the single market are subject to myriad regulations, including packaging and safety standards, as well as inevitable trivia such as the minimum level of alcohol in a drink before you can label it a cocktail, or the maximum noise level permitted to a lawnmower – matters that would more sensibly fall within “any other business” on the agenda of a parish council meeting, and are hardly the stuff of international concern.

All this nonsense is intended to create that mythical “ level playing field”.  And that’s another lie: what it actually seeks is to impose full-scale regulatory uniformity, effectively eliminating competitive advantage, whether arising from technological innovation, inventiveness or simply economies of scale.

(iv) Trade “negotiations”

The grand illusion is that the negotiators themselves have magically acquired the power to trade, whereas in reality their so-called “negotiations” are about obstacles to trade – and not trade at all.

Trade requires nothing more than a product, a willing buyer, and a willing seller. These are the traders, and the last thing they need is government intervention.

Customs union

In many ways membership of the EU’s customs union is the most pernicious feature of all. It requires all member countries to club together to agree, and apply, a common level of tariffs against all goods entering the EU from non-member countries.

Could there be anything more antithetical to the opening-up of pathways to international trade than the jingoistic zealotry now masquerading as patriotic protection?

It sets up barriers against imports into the EU of food, clothing, raw materials, minerals, components and many other goods from the developing world. These damaging trade barriers effectively prevent thousands of producers, growers and ordinary workers in Africa, South America and Asia from escaping the shackles of poverty – not by revolution, but through trade with European customers keen to pay reasonable prices for their products.

Instead, people in these developing countries are being sustained by inefficient and corrupt foreign aid programmes that manage to fill the private coffers of feckless elites in countries consistently pillaged by their own rulers.

As with all impediments to trade, this protection is double-edged: people in the EU, whose governments erect these barriers, are also big-time losers. Not only do they have to shell out billions in aid that their own domestic institutions – health, infrastructure, education – are crying out for, but membership of the customs union prevents them from enjoying the cheaper raw materials and products that developing countries are desperate to sell them.

What about the EU’s own finances?

Apart from failing to explain the bounteous possibilities for Britain of economic life outside those twin penitentiaries, the ‘single market’ and the ‘customs union’, “Team-Fear” persistently ignores the comparatively perilous state of the EU’s own finances.

Please remember that four-fifths of Europe’s capital markets are based in London. And, since they keep on yapping about supply chains, have these geniuses not thought about what Airbus needs? Or the three-quarters of a million German cars sold in the UK every year? You would imagine that the EU is the only economic area in the world that relies on integrated supply chains.

Bruno Le Maire, the French finance minister, has shown rare honesty among EU elites in admitting that the euro itself will be dangerously close to collapse when the global downturn arrives; and even the ECB, after years of rampant money-printing, will lack the capability to save it.

Public debt ratios in several eurozone countries now stand at eye-watering highs: 98% of GDP in Spain; 125% of GDP in Portugal; 99% of GDP in France; and 133% of GDP in Italy – where risk spreads on bonds are again over 300 basis points and the Lega-Five Star coalition is heading for a budgetary bust-up with Brussels. This time there will be widespread resistance to the kind of fiscal waterboarding that citizens of Greece and Italy were subjected to after the last round of ECB bailouts.

So what’s the prognosis?

The standard EU monetary response to a financial crisis will simply not be available: the burden of budget stimulus needed will simply be too great. Even to disregard, yet again, the ECB’s own rules on sovereign debt limitation will not avert a disaster.

There is no leeway for even the standard palliative care they usually resort to, such as lowering interest rates. These already stand at minus 0.4%; and the ECB’s own debt stands at 43% of eurozone GDP following all those years of quantitative easing – and it is now unthinkable to reverse its decision to kick the QE habit next month.

As for the Brexit stakes, it’s fair to ask who needs whom the most: while EU bigwigs pontificate on the apocalyptic consequences for the UK of a “no deal” exit, they have somehow forgotten to mention that the e-zone itself is perilously close to existential liquidation. The unsustainable debt trajectories of countries locked into the monetary union are a short step from an unstoppable chain of sovereign defaults.

Footnote

Finally, two points of information: First, following a WTO exit Britain’s “divorce bill” will not be £39 billion. It will be zero. And, finally, just by coincidence, the EU’s vastly bloated annual administrative costs of 8 billion euros equate precisely to the contribution that the UK will no longer have to pay.
 

© Emile Woolf December 2018 (website)
 

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