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Trade and the Brexit fallacy

Trade and the Brexit fallacy

Leavers playing Russian roulette

by Sanford Henry in London

Wed 25 May 2016

Brexiteers speak with the conviction of life-long obsession. If the UK leaves the European Union, they are making cast-iron guarantees to the British people and the country's trading partners. They laud the prospect of an avalanche of worldwide free trade deals.

With these fast-growing economies, so the argument goes, the UK will be free to forge its own commercial accords and loosen its dependence on dreary, sclerotic Europe – a Europe that absorbs close to half of all British exports.

Peddlers of this utopian dream need a reality check. Where is the queue of countries lining up to ink deals with London by the summer holidays? Leavers talk of China and India. But China's president, during a visit to Britain last year, pointedly expressed his wish for the UK to remain in the EU. Big business in India is dead against withdrawal.

Will the US ride to the rescue of Britain's soloists? Unlikely. The next US president – Republican or Democrat – will struggle against anti-free trade sentiment. Supporters of British departure have failed to answer the wider question of why America would want to strike a bilateral trade deal with the UK in the first place.

The clue can be found in the mid-1990s, when Conservative eurosceptics pressured John Major, then prime minister, to seek British membership of the North American free trade area. He was told plainly this would be possible only under an EU-Nafta deal. Britain alone was not sufficient inducement for President Bill Clinton. This would not be any different today, or under the next president.

The conundrum for eurosceptics touches on a truism about global trade. It is increasingly negotiated and conducted by blocs, not by individual states. These layers of trade integration provide for more opportunities, stability and legal certainty – Britain’s exact advantages from the single market today. It is this 'minilateralism' – a phrase coined by Chris Brummer, professor of law at Georgetown university – that represents the future of the international trade landscape.

The EU is not a popular organisation. It should do much less. What it does do, it should do much better.

But at its core is a single market that represents a triumph of economic integration, based on the rule of law, supporting hundreds of thousands – if not millions – of livelihoods in the UK.

If the Brexit faction could come up with solid, irrefutable evidence that this trading hub will be replaced by a brave new world trading with economies elsewhere, we should listen.

Otherwise, they are playing Russian roulette with their country's future. And probably the EU's too.

Sanford Henry is a Partner of Global Resources Partnership and the author of Only Trade Works: A History of Transatlantic Trade, which will be published later this year. This is No.68 in the series – the 100th article will appear on 23 June.

OMFIF’s series on the UK EU referendum presents a wide variety of perspectives from Britain and around the world ahead of the 23 June poll. We are assuring a balance between many different points of view, in line with OMFIF’s overall neutral stance on the issue.

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