Institute for Economic Affairs’ Brexit prize – our quick reading of the winning entry

The most recent contribution to the UK – EU debate, which attracted some attention by the press, is the paper by UK diplomat Iain Mansfield awarded with the ‘Brexit prize’ by the free-market think tank Institute for Economic Affairs. The paper – written in a personal capacity – was selected among over 150 initial proposals and 17 invited full submissions. Below is the library’s selection of highlights from the Brexit prize paper.

The paper, aptly titled “A Blueprint for Britain – Openness not Isolation” is in fact a strong plea for globalism and free trade. It moves from the evidence that other EU Member States are going to remain the UK’s main trading partners for at least this decade, although their share is slowly declining.

From this, the paper goes on to set out a negotiation strategy for ‘Brexit’ and a range of internal preparations and flanking measures. The strategy would aim at ensuring that

zero tariffs are maintained on bilateral trade between the UK and the EU in all areas other than agriculture. This would ideally be achieved by joining the European Free Trade Area (EFTA), similar to Norway, Iceland or Switzerland, but could also be achieved by joining European Union Customs Union (EUCU), similar to Turkey.

Later on, Mansfield also draws on the Eastern Partnership as a possible model for future EU-UK relations:

A reasonable compromise between access and regulation might resemble the trade-off offered to members of the Eastern Partnership, who are expected to adopt approximately two-thirds of the acquis communautaire, though a successful negotiation could reduce the burden of regulation still further.

Full membership in the Single Market is however excluded as a goal, since

Whilst many individual aspects of the Single Market are beneficial, ‘creating a level playing field for business’ can ultimately be used to justify almost any [EU] intervention.

The proposed negotiation strategy includes possible concessions by the UK, such as accepting to continue to pay the UK’s contribution to the EU budget – or part of it – for the current budget cycle.

Flanking measures would be needed to replace some major EU sectoral policies:

Current levels of funding from the EU to sectors and regions should initially be maintained domestically, including in agriculture, to prevent economic shocks whilst the surplus should be recycled to help pay down the deficit.

[…]

The UK agricultural sector will need to rely much more significantly on the domestic market to survive. To mitigate this, the Government should maintain some degree of targeted subsidy for the sector and/or maintain external tariffs to Europe at the rate the EU chooses to impose them on us. Subsidies would result in a lower price of food for consumers and may therefore be politically, as well as economically, preferable.

As acknowledged in the paper, many have tried to quantify the cost/benefit of the UK leaving the EU. To our knowledge, the most exhaustive review is in this research paper by our colleagues at the House of Commons Library. On this subject, Mansfield argues that the ultimate cost/benefit result woud largely depend on the outcome of negotiations, but warns that

although the most likely scenario shows a small positive gain, it should be emphasised that this should not be taken to mean that a UK exit would automatically be a good thing. The +0.1% gain is well within the margin of error for such estimations and, in any case, the high degree of variance between the best case and worst scenarios means that a positive outcome could not be guaranteed. Ultimately, the decision of whether or not the UK should remain within the EU is a political rather than an economic one […].

This point is reiterated in Mainsfield’s conclusions:

Ultimately, whether or not the UK exits from the EU is a political, not an economic decision. A wide range of factors, in particular the ideological question over where sovereignty should reside, will be at the heart of any future referendum.

For those who wish a wider perspective on the debate, we have already referenced the ongoing review of the balance of competences initiated by the UK Government; further insights may be  gained through the special issue of our Think Tank Review, where we collect the abstracts of 21 papers published in the last year or so on the broad political issue and some sectoral policies.

In the same vein, our colleagues at the European Parliament’s Information Office in London keep a rich ‘food for thought’ section on their website.

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