David Davies: I voted and campaigned for Leave. But here’s why I’m supporting May’s Brexit plan.

Opposing this proposal serves only to help those who wish to undermin eour desire to respect the referendum result. It is only by being united that we can fight them off.

David Davies is Chair of the Welsh Affairs Select Committee, and is MP for Monmouth.

Ever since I entered Parliament in 2005, I have passionately and sincerely campaigned for the United Kingdom to leave the European Union. Back in 2011, long before it became policy, I joined the Parliamentary rebellion to support a referendum on the issue.

Immediately after the referendum was announced, I began my daily campaign for Leave, both in my constituency and across the UK. I have knocked on countless doors and addressed many meetings in aid of this cause. So I do not think anyone can say I have not done my bit for Brexit.

It is precisely because of my longstanding support for Brexit that I will be backing the deal proposed by Theresa May.  It is not perfect, and there are many things I would like to have seen done differently in the negotiations. The Government should have begun planning earlier for no deal ,and made clear our willingness to follow this path if necessary. This would undoubtedly have increased our leverage in the negotiations.

And, there are areas where I will seek further reassurance. Not least, that no deal planning continues so that we maintain our ability to walk away if we have to.  But all of us have to deal with where we are now – with the circumstances in front of us.

This deal will take us out of the EU on 29th March 2019, as planned. Not as far out as I or many of my colleagues would like, but out nonetheless. And once we are out, there is no returning.

Franklin D Roosevelt famously asked people to ‘judge him by the enemies he made’. The Prime Minister would do well to ask the Conservative Party to do the same when it comes to this deal.

It is telling that some of the most vehement opponents of the deal are longstanding Remainers, who are explicit about their desire to overturn the referendum result. And, of course, the entire Labour frontbench, which smells an opportunity to try and remove the Conservative Government from office and usher in a Marxist one.

If this was truly as bad a Brexit as many claim, it is hard to see why those groups are working so hard to defeat it. Ultimately, their aim is for Brexit to fail. The reason they are working so hard to stop this deal is because they know that, if it is passed and we do leave in March next year, there is no going back.

After working and campaigning so hard for Brexit, I cannot understand why my colleagues would rather walk through the lobbies with those who have spent the past years trying to thwart them. Surely they can see doing as much would only play into their hands.

Many of my colleagues believe that if this deal is voted down, it will lead to us getting a better deal, with a cleaner break from the EU or just to no deal at all. But, with the greatest respect to them, there are no guarantees. It is just as likely, and possibly more likely, that we will end up locked into the Customs Union and Single Market permanently or, even worse, that we do not leave at all.

Lining up against this deal fundamentally risks what we have all worked so hard to deliver. Ultimately, it only serves to help those who wish to undermine our position and our desire to respect the result of the referendum. It is only by being united that we can fight them off.

This has been shown through the recent history of the Conservative Party. I fought my first general election in 1997. And, as with many of our candidates that year, I was resoundingly beaten. Why? Because our party had spent the past four years tearing chunks out of each other over Europe. The public have always taken a dim view of such division and self-interest. They will do so again. In the end, they simply want us to get on with it.

There is undoubtedly more work to be done over the coming weeks and months – even years. But this deal allows us to end the free movement of people, end our contributions to the EU budget, end our membership of the Common Agricultural Policy, take back control of our waters by ending the Common Fisheries Policy and have the ability to strike our own trade deals for the first time in over 40 years. Most of all ,it allows us to leave the European Union.

The honest truth for those of us that have long supported Brexit is that if this deal had been offered to us before the referendum, we would have gratefully grabbed it with both hands. We should all do so now.

Amber Rudd & Andrew Percy: Brexit. Why a Canada-type deal won’t work for Britain.

The UK should copy Canada only in regard to how it pursues a deal, and that means securing a deal that is bespoke to our economic needs and realities.

Amber Rudd is a former Home Secretary, and is MP for Hastings.  Andrew Percy is currently trade envoy to Canada, and is MP for Brigg & Goole.

Canada, a great and progressive free-trading nation, of so much more than moose and Mounties, is an unwitting participant in our Brexit debate. Canadian friends are a little nonplussed to find their wonderful country, or rather its trading relationship with the EU, quoted repeatedly as a basis for a future UK-EU relationship.

We are two Conservatives who voted for different sides in the EU referendum; one Leave, one Remain. We both understand that there was a public call for change. Moreover, we are two patriots who want the best for our country and recognise the difficulty in securing a deal that works for everyone, let alone one that satisfies everyone!

There has been plenty of talk on what that deal should look like. Politicians from across the political divide have spoken out in favour of various arrangements, the advantages that they feel each option would bring and how they plan to get there. Perhaps none more so than ‘Canada’, with or without the addition of any number of ‘pluses’.

We understand why a Canada-style deal is, on face value, attractive. Those who argue for it say that it will give the UK a ‘clean break’ from Europe. But at what cost? To our mind – Remain and Leave alike – a Canada-style deal fails to recognise that the UK’s relationship with the EU is wholly different to that of Canada, and fails to understand such a deal could exact a heavy price.

First, it could be economically damaging. A Canada-style deal is not an extension of the status-quo, and in many ways could be seen as a failure of the UK’s negotiating position. The EU-Canada trade deal, positive though it is for that trading relationship, is a somewhat limited agreement, principally focusing on the elimination of tariffs and the raising of quotas on certain sectors, such as dairy.

In the context of the UK, it would introduce considerable friction in our trading relationship with Europe, where there is presently none. There would be customs checks at the border, disrupting established supply chains of British success stories; car manufacturers, aerospace and pharmaceuticals companies. A Canada-style deal wouldn’t cover services, the overwhelming majority of our economy; accountancy, insurance and legal services would be impacted. It seems ironic that at a time when we might be free to talk to Canada about co-operating more in the area of services as part of a future UK-Canada free trade agreement, we would be putting up substantial, and potentially damaging, barriers with the EU.

Second, it would be constitutionally dangerous. Such a deal would need a hard border – and there, we have two choices; one on the island of Ireland, or one down the Irish Sea. No serious politician, who cares for either our security or our Union, can accept that. A hard border in Ireland would split communities, throwing away decades of work to bring about cohesion and peace. A hard border in the Irish Sea would split our country and recklessly put our Union at risk.

Finally, it is politically impossible and flies in the face of parliamentary arithmetic. There is no majority in the Commons that would see a Canada-style deal voted through. It would fall at the first hurdle. No plan riddled with so much uncertainty and reliant on goodwill alone would win the requisite number of votes.

Brexit is about making tough decisions in the national interest. It is about pulling together to secure the best possible deal for the UK. We should also be realistic about what we can deliver for the British people. When Canada negotiated its free trade agreement with the EU it did so on the basis of what was in Canada’s economic interests. It secured a good deal for Canadians, and did not seek to copy anyone else’s arrangements: neither should the UK. Canada works for Canada. The UK should copy Canada only in regard to how it pursues a deal, and that means securing a deal that is bespoke to the economic needs and realities of the UK.

These matters are too important to play fast-and-loose with. Aspiration and ambition are worthy traits. But pursuing an agreement that ignores the political reality would at best put jobs at risk and, at worst, do the same to our precious Union.  That is why we back the Prime Minister in getting the best deal that she can. But we all have to recognise that, for now, that isn’t, and can’t be, Canada.

Jonathan Clark: Is it time to sweep away our party system – and clear the decks for Leave v Remain?

The electorate are less and less convinced by such arguments about party identity and destiny. Far underground, the tectonic plates are moving.

Jonathan Clark was a Fellow of Peterhouse; at Oxford, he was a Fellow of All Souls College; latterly he has been Visiting Professor at the Committee on Social Thought at Chicago, and Hall Distinguished Professor of British History at the University of Kansas. His latest book is a study of Thomas Paine.

Nobody knows when the next Tokyo earthquake will happen. Nobody knows what, exactly, will cause it. All we know is that it is statistically overdue, that it is inevitable, and that it will cause major damage. How does the world economy prepare for this shock? It does nothing. Perhaps nothing can be done.

Similarly with the UK party system. Every 60 or 80 or a hundred years there is a fundamental crisis, a realignment, a radical recasting of the structure of parties in the face of new forces, new challenges, new problems.

The last time was when the Labour Party replaced the Liberal Party in the years after the First World War. The previous occasion was when the Liberal Party split over the issue of free trade versus imperial preference. The time before that was when the Conservative Party split over Robert Peel’s repeal of the Corm Laws, that protectionist system designed to preserve the ascendancy of the landowners in the arable areas of England.

Now again we see a single unavoidable, fundamental, non-negotiable issue at the forefront of national life. Both the major parties are split on it, and in a state of rending, agonizing civil war. The Liberal Democrats are at one, but make little electoral capital out of their unanimity. These stresses seem unlikely to go away. Indeed, they are daily increasing.

Is it, then, time for a structural realignment of parties and party allegiances? Would the public interest be better served if there were just two major groups, a Leave Party and a Remain Party? Then the electorate would know what they were getting. They would no longer suspect that their representatives were saying one thing but about to do the opposite. Democratic participation would receive a massive boost. Consistent policies could be framed and carried through. We might even spell out when and how referenda could be held.

After all, it could hardly be said that the current parties do what it says on their tins. Whatever its origins, today’s Labour Party hardly dedicates itself to forwarding the interest of labourers, people who toil in productive employments to advance the interests of themselves and their families. It is no secret that the Labour movement is an alliance of trades unionists with public sector employees and welfare claimants. That alliance now dictates the ideological content of the party’s agenda more than the earlier attempt to boost the prosperity of labourers.

The Lib Dems fare no better. If Liberalism had a clear historic meaning, it revolved around free trade in the years when the merchants and manufacturers of the Manchesters and the Bradfords exported their products around the world. Now, Lib Dems instinctively side with the greatest international protectionist group, the EU. Once, Liberals campaigned for franchise extension and more frequent elections; today, they instinctively repudiate the result of the greatest ever popular vote in the UK; they endorse an EU in which the electorate cannot remove the executive from power, and representatives cannot initiate legislation.

The Conservatives are in little better shape. The National Trust, which conserves things, has five million members and rising; the Conservative Party, which conserves nothing, has a hundred thousand members and falling. Once, the Conservative Party conserved institutions, like the monarchy, the Lords, the Church of England, the armed forces, Oxford and Cambridge, the family. But all these are now embarrassing topics for many of its leaders, and the party is one of radical reform (even if it delivers much less of that than in the age of Margaret Thatcher).

The electorate may say: what, then, is the point of all of this? Why not sweep the career politicians away and begin again with a new set of faces, people with talent, ideas, principles, and candour? Why not have a spring cleaning of the Commons and the Lords in the manner of Macron? Electors could all list many honourable and able politicians who would deserve to survive such a cull; the problem is that the public increasingly thinks that that number is outweighed by others who would not.

What are the arguments against such a reconstruction? That the major parties are great stores of wisdom and experience. That their leaders are practical, prudent men and women who have taken moderate, feasible steps in policy. That public affairs are well administered. That the parties have big money behind them. That major change would cause uncertainty. Inertia.

The strongest argument in favour of the traditional parties’ divine right to continue in their present forms is that each of them embodies an essence, a set of ideas and ideals that is handed on from generation to generation and that inspire the living to complete the great work of their predecessors. Youthful politicians still sometimes write slim volumes attempting to outline that essence. As a matter of historical method, this task was always difficult; some people may now think it impossible.

The larger problem is that the electorate are less and less convinced by such arguments about party identity and destiny. Far underground, the tectonic plates are moving. There is a deep murmur rising from dark places. A suspicion is growing that public affairs are not well conducted, and that (in all the major parties) a Third Eleven is only shielding itself from insight and appraisal by the widespread use of non-disclosure agreements.

As a member of a political party, this intellectual hollowing out of parties distresses me. As a voter, what is happening in public policy formation and execution alarms me. Perhaps the show will be kept on the road after all; but, in that case, I would be reassured if it could be better shown what the rationale for the continuance of present party divisions is. But perhaps it will not.

Iain Dale: If we had a government with Cox and Balls

Plus: Crouch’s revenge. Islam’s departure. Brexit, May’s prospective deal and Labour’s internal agonies. And: Trumpety-Trump as the President claims victory.

Iain Dale is an LBC presenter, a commentator with CNN and the author/editor of over 30 books.

Oh, how the Prime Minister may regret crossing Tracey Crouch, who resigned last week as Sports Minister over gambling regulation.

Why? Because Tracey is writing the Prime Minister’s biographical essay for the second volume of The Honourable Ladies, a two volume book I am editing with Jacqui Smith, containing essays about the 491 female MPs elected since 1918. I’m sure that last week’s feeling of complete let-down by the Prime Minister will have no impact on the conclusions which Tracey will draw in her analysis of Theresa May’s career so far.

The main question we should ponder if whether she will have been restored to ministerial office by the time the book comes out next September. Or maybe it should be whether the Prime Minister herself will still be in office.

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So farewell, Faisal Islam. He’s been poached by the BBC as their new Economics Correspondent, replacing Kamal Ahmed, who is taking on a new management role there.

Faisal’s departure from Sky News could well trigger quite a substantial lobby domino effect, depending on who is appointed to replace him. Beth Rigby, currently deputy political editor at Sky must fancy her chances, and I suspect that Sophie Ridge is a leading candidate too.

Another standout internal candidate would be Niall Paterson, who used to be a political correspondent at Millbank, then covered the defence beat and now co-presents the weekday breakfast show.

If they want to look outside their own team, I’d say Tom Newton-Dunn would be a strong candidate. He has been wanting to get into TV for some time and recently lost ou narrowly to Deborah Haynes for the Sky Foreign Editor job.

Of course, whoever gets the job will operate in the long shadow which Adam Boulton continues to cast. He is Mr Politics at Sky, and I suspect Faisal always found it quite difficult to make his own mark. Adam is a giant among political journalists, and there will be some who would happily make a case for him to return to his old job. He was brilliant at it.

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Those of you who have followed this column for some time will realise I have a slightly puerile sense of humour. So be warned, here goes.

It was pointed out to me yesterday that if Geoffrey Cox had been a member of Gordon Brown’s Cabinet, there would have been a Cox and Balls in the same government. Arf arf. And that if Geoffrey had been in Parliament in the 1980s when the Tories held Hayes and Harlington, not only would we have had Cox, but also Dicks – as in Terry Dicks.

And, of course, in David Cameron’s day we’d have had both Cox and Willy (Hague). There is also a very large Johnson on the backbenches. And as for Jeremy Hunt…  [More, more – Ed].

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Tonight, I am supposed to be having dinner with a Cabinet minister. However, I’m prepared for it to be cancelled just in case there is an emergency cabinet meeting on Saturday morning. The speculation is that the Prime Minister has done a deal with the EU over Brexit, and that she will lay it before her Cabinet before putting it to a relatively quick parliamentary vote.

Who knows if these rumours are true? And as to the contents of this deal? Well, obviously I have no idea – but I suspect that it is a deal which no-one will particularly like, but that it will be one which we will all have to live with. I am not a flat earther on it, but I do believe that if we are to stay in the Customs Union beyond the end of the transitional period, it can only be described as Brexit in Name Only.

We have to be able to sign unfettered free trade agreements with countries all over the world. I interviewed Mark Regev, Israel’s Ambassador, on Tuesday, and he told me that scoping discussions with Liam Fox were already at an advanced stage. We need to be able to sign these kind of agreements on January 1, 2021. My suspicion is that there will be many countries who will think that it’s just not worth the candle if we remain aligned to EU regulations beyond that date. I hope I’m wrong.

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Assuming that the Prime Minister can get the support of her Cabinet for a deal – and I’d have thought that this is likely, – we can expect a vote in Parliament around the first week of December.

In the end, it may come down to how many Labour MPs will support any deal struck by May. Clearly, such an agreement wouldn’t meet Keir Starmer’s ludicrous six tests but, since Labour say that a No Deal Brexit is the worst of all worlds, you could argue that it could justify voting for the deal – and then tell voters that this is in the national interest.

I suspect that it won’t happen, but if Labour did go down that road I think they would garner an awful lot of support. My current bet is that the deal will go through because enough of its MPs will vote for it to counteract the Conservative MPs who vote against. That could trigger internal mayhem in the Labour Party.

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I predicted on Monday that if the Democrats won the House of Representatives, Donald Trump would still claim victory. Guess what? They, did – and so did he.

I’m not sure these results really change an awful lot. The Senate balance means that even if the House tried to impeach the President over the next two years, it would fall at the first hurdle.

Greg Hands: Remaining in a customs union beyond 2020 would be unacceptable to many Conservative MPs – and here’s why

Some will ask “Trump versus China: where does the UK stand?” The answer will be: “Ask Brussels – as the UK isn’t allowed to have a trade policy of its own”.

Greg Hands is MP for Chelsea and Fulham, and a former Minister of State at the Department of International Trade.

It’s been suspected since the very beginning of the Brexit negotiations that the EU would be most satisfied with a Brexit deal which binds the UK as closely as possible to its current arrangements, but without the UK having a seat at the table after next March, and for the UK to pay as much as possible for this diminished arrangement.

A key part of this goal has been for the UK to be bound into a customs union. Note that this is beyond what even Norway or Switzerland have, which are both outside of the EU Customs Union. As I have written before on this site, the only significant country which is outside of the EU, but in a customs union with the EU, is Turkey. Turkey ended up in this very unsatisfactory state because it thought at the time (the mid-1990s), it was on its way into the EU. We, on the other hand, have voted to leave.

Despite a proposed customs union being defeated in the Commons in July, the issue has never entirely gone away. Some argue that a Customs Union can solve some difficult issues: there would be almost no need for an Irish backstop, and it would bring lasting satisfaction to those in the car industry understandably vexed by the prospect of supply chains being disrupted.

It also might appeal to those who urge compromise. The British love a good compromise. And many would note that few of the 17.4 million who voted to Leave would have said their reason was that the UK should have its own customs arrangements. I voted to remain in 2016, but often Leave has been abbreviated to control over “laws, money and migration” (but not “customs” or “tariffs”).

Hence the potential attraction – being in a customs union with the EU wouldn’t seem to be against the verdict of the Referendum. But for an economy the size of the United Kingdom, it would be a serious error, and one of the worst policy choices we could make. It would be a serious surrender of sovereignty over huge parts of our economy. Here are five good reasons why:

Being in a customs union, even if only on a temporary or renewable basis would greatly disincentivise the EU to ever allow us to break free and have a fully independent trade policy, making trade agreements with friends or rivals around the world. The EU would control our trade policy broadly, and our tariff and quota policy in particular. Being in a customs union would more or less prevents us from negotiating free trade agreements elsewhere.

Indeed, the situation would be worse than that: the example of Turkey shows a frightening asymmetry. When the EU implements a trade agreement, Turkey must open up its markets to the third-party exporter (as it is part of the EU’s Customs Union), but better access for Turkish exporter to the third country doesn’t happen (as Turkey is not a party to the agreement, as it is not in the EU), unless Turkey separately negotiates it.

The EU would also most likely run our trade defences. MPs representing constituencies of steel or ceramics producers, to name just two, for whom trade defences are incredibly important, would wonder why we had not only surrendered control over these, but without even getting a seat at the table. It would even be possible for Brussels to make a decision which was actually harmful for the UK, particularly if that product was only made in the UK (and so might find no defender) or wasn’t made in the UK (and might get a heavy tariff, thereby harming the users of the product for no UK gain for any producers).

The EU would also determine our trade preferences for the developing world. At the moment, Least Developed Countries (LDCs) enjoy full access to EU markets for “everything but arms”. That is good, and the UK was big part of this. But many very important countries are Middle Income Countries, and are part of other EU schemes like GSP and GSP+. Pakistan and Sri Lanka, for example, are in GSP+, and Bangladesh may join them. Here, the decision to grant preferential treatment is more subjective, and is decided by the European Commission, with input from the European Parliament and member states.

From March, we will be represented in neither institution. The EU has often threatened to revoke or diminish the access of Pakistan or Sri Lanka. Sometimes this is done in the name of human rights, but it can also be done to protect things like the garment industry in Mediterranean Europe. Most importantly, the UK would have no say in whether or not to grant such trade preferences: that would be entirely a matter for Brussels, with no seat at the table for the UK. I cannot imagine this being tenable in constituencies with big Pakistani, Sri Lankan or Bangladeshi diasporas (of which there are many), who would be appalled that their UK MPs and Government have no say over this at all.

The EU would also run our trade policy at the World Trade Organisation (WTO). This is, of course, the situation today, but we have a seat at the table when the EU decides policy (it was me in the seat until June!). After March, this will be gone. Yet the WTO determines, for example, quotas for American beef, Thai rice, South African citrus fruits and much more. It is very likely that our interests would not be the same as the EU in these areas.

Readers might be thinking that these do not sound like big problems, or that they might sound collectively smaller than the problems which would be faced by, say, the car industry, in the absence of a significant customs agreement. But the five issues above are only some of the difficulties. And all have a common feature: a complete loss of UK sovereignty in very important parts of our economic and international economic policy. And at a time when international trade policy is growing in importance. Some will ask “Trump versus China: where does the UK as the world’s 5th largest economy stand?” and the answer will be “Ask Brussels, as the UK isn’t allowed to have a trade policy of its own”.

This might work for a small economy. But not even Norway or Switzerland want to be in an EU customs union. And most small countries can rest somewhat assured by being a small economy, where it would be unlikely that Brussels would have a direct interest in wanting them to falter. I couldn’t say this with the same confidence in relation to the United Kingdom, with big producer and consumer interests in trade, some of which would inevitably conflict with the EU-27.

The loss of sovereignty over our economic policy might be acceptable for a short period, in return for a larger gain. But I believe that it would be politically and economically unsustainable for any period beyond some months, and certainly for any period longer than the already agreed implementation period, set to end in December 2020.

I bow to nobody in my desire for good relations with our neighbours. But we mustn’t forget that we are both friends and competitors when it comes to our economies. And we mustn’t forget that no economy the size of UK’s has ever ceded decision-making of its economic policy to its competitors, without even a seat at the table.

Why the UK economy should grow faster in the short term if there is no Brexit deal

Much of the current narrative regarding the Brexit negotiations goes something like this: “Brexit is likely to damage the economy in the short term. Even its advocates accept that. They said that even if there is a good free trade deal with the EU we should expect the economy to take a few years to […]

The post Why the UK economy should grow faster in the short term if there is no Brexit deal appeared first on BrexitCentral.

Much of the current narrative regarding the Brexit negotiations goes something like this:

“Brexit is likely to damage the economy in the short term. Even its advocates accept that. They said that even if there is a good free trade deal with the EU we should expect the economy to take a few years to adjust, sacrificing perhaps two or three percent of GDP growth in the process. Now, they hope to get that back over the medium to longer term — Gerard Lyons talked during the Referendum campaign of a ‘Nike tick’ effect. But only a small set of economists, even amongst those that favoured Brexit, denied there would be short-term losses even if we do a good free trade deal with the EU.

“Well, then, if even a deal leads to short-term losses, how much worse must it be going to be in the short-term if there is no deal? That surely must be very bad indeed! Perhaps it could be so bad that it would undermine the Conservatives’ reputation for macroeconomic management, ushering in a Corbyn government in 2022?”

I think it is fair to say that some version of this narrative is near-universal. Even those keenest on no-deal are largely arguing that although no-deal is worse than the best sort of free trade agreement, at least in the short-term, that is worth doing through some combination of political gains and not sending the EU £40-odd billion we don’t owe them.

I think everyone’s wrong here, and I want to explain to you why. A good free trade agreement (something like a Canada+ deal) would be the best outcome for the UK economy over the longer-term — indeed, I cannot believe anything other than a Canada+ type Free Trade Agreement is sustainable for more than a few years. And if we do do a Canada+ deal, then I agree with those that say they expect the short-term impacts on GDP to be negative — we’ll sacrifice 2 percent or so of GDP growth by around 2022.

So, a deal is better than no-deal over the longer-term, and a deal will mean a short-term loss of GDP growth. But where the discussion goes wrong is in assuming that no-deal means bigger losses of GDP in the short-term. What would actually happen is (after we got through the first few weeks, say one quarter, of disruption, which might well include a non-trivial dip in GDP), GDP would grow faster in the short-term (say, the following 12-18 months) than if there had been a deal. Just because no-deal is undesirable for the economy in the longer term, it does not follow that that means we make bigger short-term losses.

Let me explain why. Let’s step through some of what will happen in the economy, once we leave the EU, and compare how that plays out in the event of a deal versus no-deal. First, let’s list some of the effects there will be, as per the following table.

We can see various ways UK imports will be affected, but it should be pretty uncontroversial that increased barriers to imports from the EU post-Brexit will mean fewer imports into the UK, at least in the short-term, as more of UK demand will be met by UK firms and less by EU-based firms exporting into the UK. Over the longer term, perhaps we will do more trade deals with non-EU countries or unilaterally strip away barriers to non-EU trade, and imports will end up unchanged or even higher. But in the short-term, it’s pretty clear we should expect imports to drop. It should also be pretty clear that in the event of no-deal, we’d expect imports to drop by more than if there is a deal.

Again, it should be pretty uncontroversial that Brexit will mean fewer exports to the EU, and probably fewer exports overall in the short-term, and that the impact will be larger if there is no deal than if there is a deal.

So, fewer imports and fewer exports, in the short term. Which effect will be bigger? Well, the UK is a larger net importer from the EU. We import about €4 worth of goods and services for every €3 we export. So if barriers to exporting and importing are fairly similar (as UK policy-makers would surely ensure they would be in most areas), the expected net impact will surely be a larger drop in imports than exports. So from this source, we’d expect a short-term boost to GDP, as net imports fell and the UK’s trade deficit improved.

Next, let’s consider capital flows. There is a great deal of press discussion of UK finance firms or car manufacturers relocating some activity into the EU to avoid barriers to trade. Perhaps there will be some of that (though so far it seems to be mainly talk), but even so, that is part of that €3 of exports going out. What we do not hear about are all the EU-based firms that would relocate activities into the UK to avoid barriers. Since there are €4 of those for every €3 coming in, we should expect that more EU-based activity has an incentive to relocate into the UK than in the opposite direction.

This is not quite so unambiguous as the imports/exports effect. Some firms exporting to the UK will also export to other EU markets and may face economies of scale losses in relocating into the UK, and it is arguable that economies of scale impacts may more often tend to affect EU-based than UK-based producers’ relocation decisions. So there is some interplay between inward flows, reduced imports and domestic investment. But the difference between €4 of exports and €3 of imports is so large that we should probably expect the effect to be positive nonetheless. And we should expect net inflows to be bigger if there is no deal than otherwise.

Next, effects on consumption. These depend upon whether consumers expect the long-term impacts to be positive or negative for GDP, and the extent to which they react to that in the short term. This one is difficult to call. I would guess there would be little change in the event of a deal and a slight drop in the event of a no-deal.

Last, domestic investment. This includes firms whose investment plans have depended upon our relationship with the EU that will do less investment or even liquidate investment. It also includes firms whose plans depend upon expansions in UK or non-EU activity. I believe it is natural to imagine that, even if the net impact on domestic investment is fairly balanced over the medium term, that will consist of a drop in domestic investment initially, as EU-dependent projects are cut back or liquidated, and the capital then only later being re-allocated to new UK-based or non-EU projects.

That drop in EU-dependent domestic investment is the main reason I expect there to be slower GDP growth in the event of a deal being done. If there is a deal, I’d expect fairly modest impacts on imports and exports in the short-term, and relatively modest short-term changes to capital flows, so the drop-off in domestic investment will probably be the dominant short-term impact, meaning slower GDP growth.

But if there is no deal, these other short-term impacts will be larger. Net imports will fall much more and there will be much larger inward and outward capital flows. So if there is no deal, I would expect those effects to dominate, outweighing the drop in domestic investment in the short run.

Overall, what does that mean? It means that, even though we should expect slower GDP growth in the event of a deal, and even though a deal is better for the economy over the medium term than no deal, if there is no deal then in the short-term we should expect GDP to grow faster, not slower.

I emphasise again that this would be after the first few weeks of drop-off in GDP associated with no-deal disruption. But it would be more than simple catch-up from disruption. It is a reflection of the basic dilemma that net importing countries always face. Free trade is good for economies over the medium to long term, but if a country is a net importer then it tends to gain output, in the short-term, in protectionist scenarios with greater trade barriers. There is no good reason to believe that this long-established basic economic truth should not be expected to apply to the UK in the case of Brexit as well.

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