Most economists say Brexit will hurt the economy—but one disagrees

IT IS rare to find economists united, but on Brexit most are: leaving the European Union will reduce GDP, and quitting the single market and customs union (a hard Brexit) will make the loss bigger. Yet a group called Economists for Free Trade, led by Patrick Minford of Cardiff University, disagrees. Mr Minford forecasts that a hard Brexit followed by the unilateral abolition of all trade barriers and much EU regulation would boost Britain’s GDP by 6.8%, or £135bn ($175bn).

This was enough to persuade the BBC, perhaps mindful of criticism of anti-Brexit bias, to make Mr Minford’s claim its lead story and give him much airtime. His analysis contains a kernel of truth. Unilateral trade liberalisation is beneficial even if other countries do not reciprocate by cutting their own tariffs, as David Ricardo demonstrated 200 years ago. Yet as Monique Ebell of the National Institute of Economic and Social Research, a think-tank, points out, tariffs now matter less than non-tariff barriers, especially for services but also increasingly for goods. It is doing away with these that gives the single market its value. Mr Minford ignores them.

Moreover, Mr Minford’s calculations are based on dubious assumptions. He also ignores the “gravity” effect, whereby close neighbours trade more with each other. He reckons any fall in trade with the EU will automatically be made up elsewhere. He attributes all the rise in Britain’s trade with the EU since it joined in 1973 to trade diversion, not trade creation, ignoring evidence to the contrary. And he says all price differences are caused by protection, whereas most reflect differing quality or regulatory standards. Swati Dhingra and her colleagues at the London School of Economics have used their Brexit model to recalculate the gains of unilateral free trade. It reduces the loss from a hard Brexit, but only slightly, from 2.6% of GDP to 2.3%.

If Mr Minford’s economics are dubious, his political judgment is worse. Scrapping trade barriers unilaterally would draw howls from British farmers and manufacturers, just as abolishing much EU regulation would rile environmentalists, unions and consumers. Theresa May, whose Tory party manifesto criticised untrammelled free markets and promised to keep and even improve workers’ rights, is unlikely to adopt either course. And he ignores modern trade talks, which rely on mutual concessions. If a post-Brexit Britain unilaterally scrapped its barriers, it would lose all its bargaining clout. It is perhaps as well that Mr Minford is an economics professor, not a trade negotiator.