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Liam Fox is half right
28 Feb, 2018

and draws all the wrong conclusions

London4Europe Committee member and former HM Treasury senior civil servant Michael Romberg looks at Liam Fox’s 27 February 2018 speech "Britain’s Trading Future". He’s right about opportunities outside the EU and the problems of a customs union with the EU. He is wrong to think that we need to leave the EU to realise them and he does not even bother to justify his position. The Global Britain case for Brexit? It’s just rhetoric.

What Fox gets right

Fox is right about the problems of joining in a customs union with the EU: no say; we would have to offer 3rd countries tariff-free access to the UK without necessary gaining anything in return; reduced ability to agree our own deals.

Jeremy Corbyn promises a fantasy deal where all the problems are magicked away; a political gambit not a practical solution.

Anyway a real world customs union – while necessary for maintaining our existing close trading relationships with the EU and solving the Irish border question – is not enough: we need also to be in the single market. Liam Fox seems to have understood that in his Mail on Sunday article on 16 September 2012 when he argued for “a new relationship with the European Union – one based on an economic partnership involving a customs union and a single market in goods and services”. But that was then, when he was unemployed; now he has a Ministerial job to keep.

(A not so serious take on the Government’s stance of obtaining frictionless trade without a customs union comes from David Allen Green.)

Fox is also right about the huge and growing opportunities outside the EU.

Fox misses the point – distance matters

For trade, distance matters. That is true not only of goods but also of services. And the effects of distance have become more, not less important, over time.

That is why we do not really have globalisation, although that is how it is always described. What we actually have is regionalisation. The chart reproduced in this LSE blog Why distance matters in trade makes the point clear.

The only economists who have positive forecasts for Brexit – Patrick Minford’s Economists for Free Trade – use a model that ignores distance, quality and non-tariff barriers. Just ask yourself: if bread is 1p cheaper in a supermarket in the next town, do you travel there to shop or do you go the shop closer to home?

Europe will always matter more to us.

Fox misses the point – why will we sign better trade agreements?

Fox states that after Brexit we will be able to sign trade agreements and partial sectoral or technical agreements to facilitate trade. Quite right. The EU can do so now. But why would we be able to do so better than the EU? Fox does not address the question. In other words, he makes no case for Brexit.

The reality is that the problems that the EU faces in signing good trade deals will still be there. The problems in the EU signing a trade deal with India for example include Theresa May’s refusal to grant more visas; is that going away? Which bit of America First does not apply to the UK?

Fox misses the point – what stops us selling to China now?

One simple statistic shows what is wrong with the Brexit claims for Global Britain: Germany exports 4½ times as much to China as the UK does. Why does the EU not prevent the emergence of Global Germany?

Fox has no answer. He does not even address the question. At the highest level the answer is simple: we do not make enough of stuff that others wish to buy and we do not sell it well enough to them. That is not down to the EU. It is down to the UK. Fox has no plan to change that. And obviously we do not have to leave the EU to do so.

Martin Donnelly sums it up

Sir Martin Donnelly, lately permanent secretary at Liam Fox’s Department for International Trade, summed it up in his own speech on 27 February 2018: “You’re giving up a three-course meal, the depth and intensity of our trade relationship across the European Union and partners now, for the promise of a packet of crisps in the future, if we manage to do trade deals in the future outside the EU which aren’t going to compensate for what we’re giving up.”.

Global Britain: a fig leaf for a mean Brexit

For the elite Conservative Brexiters, Global Britain has been a genuine motivating force – along with the desire for large-scale deregulation, which Davis seems to have abandoned, while Michael Gove has said he will not agree to reduce the UK’s animal welfare or food standards or environmental protection.

For the large numbers who voted for some notion of sovereignty, for immigration control, it is hard to see Global Britain as a real driver. Rather, their vote was based more on a desire for cultural homogeneity and a rejection of values of openness. If they mentioned Global Britain it was perhaps more of a fig leaf to conceal the underlying motives.

The right answer? Remain in the EU

It’s not difficult. All the benefits of the Customs Union including the many full and sectoral deals the EU has signed with third countries, plus being in the room when decisions are made. All the benefits of the Single Market. All the benefits of Freedom of Movement. And contributing to the great European peace project.

Implications for Campaigners

The Global Britain arguments for Brexit make no sense. The EU does not prevent us selling abroad; there is no reason to suppose we could negotiate better trade deals than the EU can.

Why are we letting Brexiters get away with not having to justify their views? In part it is because we exaggerate the harms of Brexit. Many of us misunderstand the economic forecasts to mean we will be poorer than we are now rather than less well-off than we would have been had we remained. Brexit does not mean ragged children starving by the roadside.

We can use really simple tools to challenge assertions. One is to ask “what do I have to believe for this statement to be true?” Or to ask the sort of question that Conservative Ministers used to pride themselves on asking, like: “How does that actually work, then?”.

That would cut the ground away from under Brexiters’ claims.