EU has made trade deal with Australia ‘difficult’ says economist
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Economists have said that the negative impacts of the UK leaving the EU will “fade over time” as “uncertainty clears”. Meanwhile, the country can still expect investment and trade to recover as the Government signs new trade agreements around the world and cuts red tape.
As the UK withdrew from the EU, it has signed a series of free trade agreements around the world, and is expected to make more next year.
Julian Jessop, an independent economist and former Chief Economist for the Institute of Economic Affairs, told Express.co.uk: “The initial impact of Brexit has been negative. I think that was ever since vote to leave in 2016, investment has been held back by uncertainty.
“Trade has fallen quite sharply at the beginning of this year of when the new trade barriers were introduced. So the initial impact has been negative, but I think less than many people feared.
“And also good reasons to think that even the negative impacts are going to be going to fade over time [as] people get used to the new rules as the uncertainty clears.”
Going into 2022, he said: “Investment is going to recover, trade is going to recover.
“And then over time, we’re going to start to get the benefits of Brexit come through, which as I say, hasn’t really happened yet, because we’ve not got rid of a lot of red tape.
“We’ve not yet done any major trade deals with the rest of the world. There’s still some big benefits to come.”
Patrick Minford, chair of Applied Economics at Cardiff University, said that the Government was “doing quite well on free trade.
“They’ve got Australia, New Zealand agreed, and that’s quite important because those are very big agricultural producers, which could have a big effect on food prices.”
He added: “If they can join this big Southeast Asia [Comprehensive and Progressive Agreement for Trans-Pacific Partnership], that will be another big gain, because those are big trading nations in that.
“And so I think they’re doing quite well on that. But their own civil servants are undermining them.”
Professor Minford claimed that whenever the Government makes a move on free trade, “the civil servants put out a note that it’s going to have absolutely trivial effects on welfare.
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“The official line from the civil servants is that the deal with Australia, New Zealand will add 0.02 percent to GDP, which is the most stupid underestimate, because it’s completely leaving out the enormous impact it should have on our consumer prices and on the availability of superb world agricultural produce for the UK market – which has an enormous impact on our welfare.”
He added: “We know from our history, if not from the modelling that we’ve done of what happens when you get free trade, which says there are big benefits because of competition and lower prices.
“The civil servants have completely put that on one side and said that actually we’d be damaged because we’re making trade with Europe harder – which is not really true. Because there’s no reason for having a border with the EU making it much harder to trade with the EU; there are no tariffs because we’ve got a trade agreement.
“So they’ve basically said Brexit will damage the economy and these free trade agreements won’t do it any good, and the fact that we’ve made trade a little bit harder with the EU is going to have enormously damaging effects on it – all of which is complete nonsense.”
The gloomy outlook from the Government “is damaging to the economic outlook, because it means the OBR [Office for Budget Responsibility] is too pessimistic about the economy.”
Professor Minford noted that historically “we’ve had tremendous gains from free trade.
“Before the First World War, we traded all around the world, basically with free trade and [it was] tremendously beneficial. We were very much as a powerhouse.”
Meanwhile, “we did very little with Europe”. Trade with Europe had been “induced by policy” when the UK joined the EU, “putting up barriers against the rest of the world.”
Opening up to free trade, he said, “gives our consumers the prices they should always have had, that they were denied by this very protectionist EU.”
When asked to comment, the Cabinet Office directed the matter to the Department of International Trade.
A DIT spokesperson clarified that the figure Professor Minford referred to was an out of date estimate which has since been updated.
They said: “As an independent trading nation, we are striking free trade agreements that will boost jobs, attract investment, create huge opportunities for British businesses and level up communities across the UK.
“We have already secured over £760 billion worth of trade deals with 70 countries plus the EU, and 2022 will be a five-star year for Global Britain as we launch trade negotiations with India, Mexico, Canada and the Gulf, as well as securing accession to the £8.4 trillion Indo-Pacific free trade area.
“An independently-verified, updated assessment of the deal we signed with Australia shows it is estimated to increase UK GDP by around £2.3 billion by 2035 [equivalent to 0.08 percent of GDP] – significantly higher than the previous assessment published earlier in the year.”
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