Prominent UK economist, Patrick Minford, has strenuously rebutted criticism of his Free Trade policies and insists his policies will reap rewards for the UK in the long term.
In a blistering response to criticism published in the recent Forward with Toll article highlighting his position on Brexit policy, he tore away at remarks indicating “harsh things about analysis and expertise of Economists for Free Trade”.
Minford has long been a controversial figure in British political and economic debate. He played a prominent advisory role in the early years of former Prime Minister Margaret Thatcher’s administration, which were years highlighted by economic recession and mass unemployment. His recent policy document was met with widespread derision and led The Economist to suggest “Most economists say Brexit will hurt the economy – but one disagrees”.
One particularly strident criticism was from a group called ‘Open Britain’, which supports the UK retaining a close relationship with the EU. They suggested policies put forward by the ‘Economists for Free Trade’ would create mass unemployment, result in the closure of large swathes of British industry, and would be ‘economic suicide’.
Meanwhile, in a separate development, some secret legal advice appears to indicate that Brexit is not inevitable if the UK parliament deems the policy not to be in national interest, as reported by The Guardian. This recent development adds to the political drama unfolding in the UK surrounding this complex and era-defining process that some commentators suggest is the most momentous in British post-WW2 history.
The economic arguments involved are not straightforward. As outlined in a recent Forward with Toll article, a leading economist at Cranfield University suggested Minford’s views do not take into account the “real world” and would unleash competitive pressures far too quickly for the UK to be able to sustain.
Minford chairs think-tank ‘Economists for Free Trade’, which consists of a group of 16 economists, including former government advisers and academics. He also wrote the introduction to a forthcoming report titled ‘From Project Fear to Project Prosperity’.
In the document, Minford listed why Britain will reap huge dividends by establishing tariff-free trade, not only with the EU but with many other countries across the globe. Minford also suggests where free trade agreements cannot be negotiated; they can be achieved by unilaterally eliminating trade barriers. He recommends replacing EU regulation under Single Market rules with UK-orientated regulation. He wants an end to “taxpayer-subsidised unskilled EU immigration”. Minford calculates a gain of around 7% of GDP, approximately135 billion pounds from Brexit.
Minford believes competition and free trade are good for the economy; and, according to him, circumstances for the UK favour his position, and he wants “cheap and childish abuse” to cease.
He reflected, “It turns out, as in so many other areas of policy where competition is a key element, that the UK evidence on trade favours our position.”
Minford believes that calls for placing barriers in the way of UK trade across the globe expose a paradox at the heart of Government thinking. He said, “On the one hand, we have the Treasury emphasising the big gains to be made from free trade and competition, but bizarrely forgetting to include free trade with non-EU markets.”
Politicians like to promote competition within the industry to improve productivity, living standards and wages, Minford insisted. They even talk of unleashing competitive forces to create more highly productive jobs. However, when it comes to trade policy, politicians’ double thinking is exposed.
Minford bemoaned, “Suddenly our critics have forgotten what they said when in pro-competition mode, and assert that protection and the avoidance of competition are needed to protect jobs and prevent unemployment.
He believes protection will just preserve existing jobs. He added, “In short, to continue with protection is to prevent the competitive process by which new and better jobs will be created,raising the employment rate even further.”
A major issue for ‘Open Britain’ and many of the critics of his views is the lack of a transitional period when the UK economy would be exposed to sharper competition as it moves to more productive industries. It is here that Minford believes pumping extra demand in the economy could counteract the additional pressures stemming from losing protection such as tariffs.
He draws some historical parallels, “This was the case in the 1980s, and it is also the case today: we have had a massive Brexit devaluation – some 15% – which is stimulating our traded sectors, including farming and manufacturing. Recent CBI (Confederation of British Industry)manufacturing surveys are the strongest on record for 20 years.”
Despite some fears that the UK manufacturing sector was in decline, the hugely respected IHS Markit/Chartered Institute of Procurement & Supply factory Purchasing Managers’ Index for manufacturing shows impressive growth for the third quarter of 2017. These figures support those who claim the UK can revamp its manufacturing performance. For instance, The Financial Times recently reported that the CBI index for exports orders was the strongest since 1995.
Minford added, “We have calculated that, as long as this devaluation stays in place, manufacturing will be better off after a full Brexit than before, even if the EU – against its own interests – elects to raise tariffs against us.”
In the longer term, the devaluation of sterling may be whittled away; manufacturers will need to raise productivity incrementally by less than 1% a year to be as profitable, according to Minford.
He then noted, “This should not prove daunting as manufacturing has routinely achieved 3% growth in productivity for three decades while under the restrictive regulation of the EU.”
Minford also rubbishes claims that his free trade policies and the elimination of non-tariff trade barriers will involve dismantling important consumer standards. He states that the UK post-Brexit will be able to take up her influential place on international bodies that monitor and agree on goodconsumer standards.
His research suggests there presently exists a total trade barrier of around 20%, of which three quarters is composed of the non-tariff element. These would be eliminated with trade agreements, asserts Minford. He also painstakingly rebukes economists who assert his economic model does not tally with how modern economies operate.
He concedes, “While one can indeed lose trade with the EU due to additional barriers, one can also gain trade with the rest of the world as barriers come down.”