How Britain’s exit from EU can help its economy

How Britain’s exit from EU can help its economy June 29, 2016

Global stock markets and currency exchanges are in turmoil after Great Britain voted to leave the European Union, making it look like the decision is an economic disaster.  But Stephen Meyer argues quite the contrary, that Brexit will bring substantial economic advantages.  For example, the UK will now be able to negotiate a trade deal with its biggest market–the United States–which it wasn’t allowed to do under the European Union.  Also, lifting the EU’s regulatory burdens, which applies to the whole economy and costs as much as 6.5% of the Gross Domestic Product, will be a dramatic shot in the arm for the UK’s economic growth.

From Stephen Meyer, Brexit — Free Trade & Economic Growth Promise to Follow | National Review:

First, the U.K.’s dependence on exports to the European Union is far less than many commentators assume. Only one tenth of the U.K.’s gross domestic product derives from the sale of such exports. The other nine tenths come from the sale of products domestically or to non-EU trading partners, particularly the United States, Britain’s largest consumer of its export goods.

Second, by leaving the European Union, Britain will extricate itself from layers of costly EU-imposed, growth-inhibiting regulation. Though only one tenth of the U.K. economy involves exports to EU countries, all of the U.K.’s economic activity has been subject to EU regulation, including its labor and work place practices, environmental policy, fishing and agricultural industries, transportation system, banking and financial services, and consumer products. A non-partisan referendum-neutral think tank, Open Europe, estimates that the cost of complying with just the one hundred most expensive EU regulatory directives is about £33 billion per year — or more than 2 percent of the U.K. GDP. The distinguished British economist Tim Congdon, a confirmed Eurosceptic, estimates that the total cost of EU regulation is closer to 6.5 percent of the nation’s GDP. The reduction of this regulatory burden will provide an immediate growth dividend for the U.K. economy. By leaving the European Union, Britain will extricate itself from layers of costly EU-imposed, growth-inhibiting regulation.

Third, far from losing access to markets for its exports, the decision to leave the European Union will open up new opportunities for British free trade. From the beginning, the architects of the European project have pursued two distinct goals: the economic and the political unification of Europe. The conflation of these two aspects has often left voters, politicians, and commentators thinking that Britain could not have free trade with Europe (and access to what was originally called the European Common Market) without accepting a loss of political sovereignty and of democratic control over vast areas of national policy. Indeed, full membership in the European Union has required national parliaments to relinquish just such sovereignty.

Nevertheless, Britain can continue to trade freely with European Union nations without having full European Union membership. Neither Switzerland nor Norway, for example, belongs to the European Union, but both have free-trade agreements with it, as part of what is now called the European Economic Area. During the coming transition in its relationship with the EU, Britain will likely want to negotiate a similar free-trade arrangement with the EU. Moreover, because EU exports to Britain significantly exceed British exports to the EU, the EU will have a clear interest in allowing Britain to secure precisely such an arrangement — as Mark Kerber, the head of the German industry group BDI, acknowledged last week before the vote.

RIn any case, by leaving the European Union, Britain has opened up other opportunities for free trade. Until now, the exclusive nature of the European Union has prevented Britain from establishing a free-trade pact with its largest and most lucrative trading partner, the United States, to the detriment of tariff-paying businesses on both sides of the Atlantic. Repeated calls for including Britain in the North American Free Trade Agreement (NAFTA) have been ignored, since under the terms of Britain’s treaty commitments to the European Union, the U.K. has not been free to negotiate its own trading arrangements or to decide on its own trade policy. With Brexit, that will change. Brexit now makes possible the negotiation of free trade deals with other countries (including the United States, Canada, and China) with which Britain and the EU presently lack such agreements.

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