One of the central points against a British exit from the European Union is being challenged in a new report arguing the UK doesn’t need to rely on trade agreements to secure prosper.
The campaign to keep Britain in the EU has hammered their opponents on the economy with trade being a key weapon in their arsenal.
Pro-EU campaigners claim the UK’s current trade agreements with and from the EU are crucial to the country’s prosperity and Brexit would endanger the economy.
But a new report from the Institute of Economic Affairs (IEA) claims unilateral free trade would be a much better deal for Britain than trying to negotiate trade agreements.
In fact, trade deals can have a negative impact on the economy because they divert labor and resources from where they can be most productive. (RELATED: Economist Who Predicted The Great Recession Backs Brexit [VIDEO])
“The UK produces traded goods in a competitive world market, where prices for these goods are set by world supply and demand,” the IEA said in a press release.
“Given the UK has around three percent of world GDP, it is a relatively ‘small’ supplier, making us a price-taker with no effect on the world price. Thus, we have no national interest in trade agreements with any particular country that are forged by the EU, and this why unilateral free trade would best suit the UK.”
The IEA points to the example of China, which has grown rapidly without many formal trade agreements and wasn’t a member of the World Trade Organization (WTO) until 2001.
More than 40 percent of UK trade is in services where the EU has no established commercial policy and roughly half of UK trade is with countries outside the EU. In total, the report estimates around 70 percent of UK trade is conducted under WTO, not EU rules.
Author of the paper, Professor Patrick Minford, suggests taxes put on UK goods in one country will just ensure UK businesses to sell their products to another country. On top of that, the paper argues there’s no incentive for countries to levy tariffs on British goods because it accounts for such a small share of global trade.
“Many people think that to reap the benefits of growing international trade there needs to be an expansion in trade agreements,” said the IEA’s Head of Public Policy Ryan Bourne.
“The reality is they are of limited relevance for a ‘small’ world supplier such as the UK and unilateral free trade is far more preferable to numerous and complicated bilateral and multilateral trade deals,” he added.
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