Thread by @EmporersNewC

1. Some people in the US have said they don’t understand the trade benefit of Brexit, so I thought I’d explain it.

(Thread)

2. OK so in terms of trade, Brexit gives the UK the ability to do its own trade deals with the countries “where 90% of the growth will come from”. The 90% figure comes from the EU’s official statistics for the next 10-20 years.

3. But does it?

The origin and length of the 90% prediction seems to differ when cited by the UK’s Secretary of State for International Trade, Liam Fox.

(Liam is also “The President of the Board of Trade”, a title he gave himself which definitely does not sound pompous.)

4. On one occasion Liam “The President” Fox claimed it was calculated by the Department of International Trade using the September 2017 WEO database.

Narrator’s voice: There is no September 2017 WEO database.

5. The provenance is shaky because there are actually two things. The first was a 2025 estimate of 88% contained in a report cited by the EU commission in 2012. This prediction was based on short term IMF figures and made clear that the results were tentative.

6. The second is a figure calculated by the EU from short term IMF WEO figures.

Here, in one of their calculations, they cite the October 2015 WEO database...which does exist.

7. This is, of course, the same IMF that the people who campaigned for Brexit continually claimed were both consistently wrong and politically compromised.

8. More importantly, having established where the figures have come from, we can take a closer look at the statistic that the Secretary of State for International Trade seems to have so much faith in.

9. We can, for example, now see how much of this growth is covered by trade agreements of the European Union.

For example, the Economic Area (EEA) may be the deepest and most sophisticated trade deal in the world, but in 2015 it was predicted to generate just 10.8% by 2020.

10. The EU also has existing Free Trade Agreements and deeper integration through Customs Unions. When we add the predicted growth from those countries it still only amounts to 24%.

11. If we then include the EU agreements which are pending waiting for a signature, and also eliminate the Everything But Arms countries who are already on a special preference, we end up with a number of 28%.

12. However, the EU also has some service only agreements. These liberalise services in countries such as Russia, Armenia, and Tajikistan. Add all of those and we’re still only 31.6%.

13. That may be small, but even if we add all of the countries the EU is actively negotiating with, including Mercosur, the USA, Australia and New Zealand, we can only get to 49.9%.

14. The reason all of that doesn’t take us to 50% is because 40% of the predicted growth is generated by just two countries: China and India.

15. Which means that the UK are setting future trade policy based on the idea that two countries will drive 40% of growth over an extended period of time, which is not only tentative, it’s wrong.

16. The predictions didn’t just fail to take into account the downturn in China, but also a trade war that has seen the United States include trade agreement provisions which require other countries to notify them before signing similar agreements with China.

17. And while India and China are the first and second biggest contributors to global growth, the third is the European Union, and the fourth, fifth and sixth the EU is actively negotiating with.

18. Crucially, the UK is having trouble coming to a deal with the European Union, and in the event of no deal, the UK now has to try and reproduce the trade deals that it already benefits from.

19. With a deal in the balance, if the UK crashes out of the EU at the end of March, according to the latest government update, the 35% of the world’s GDP the UK has preferential access to suddenly becomes 8%.

20. As a smaller market, the UK will not only be negotiating all its future trade agreements from a weaker position, but countries with existing deals may want better terms as part of agreeing continuation.

Japan has already indicated they want a better a deal.

21. With the new deals, or many of the deals we roll-over, unlikely to contain cumulative rules of origin with the EU. Meaning the agreements will be less flexible for businesses who import components or ingredients for the products they export.

22. On a more positive note, however, the UK has committed to negotiations with the US, Australia, and New Zealand.

Or at least it is positive unless you consider the EU is already negotiating with these countries, and is making good progress with some of them.

23. Even with a positive outlook, it's hard to ignore the fact the UK will now face new political hurdles outside of the EU.

Mercosur, for example, has passed numerous acts regarding Argentina’s sovereignty over the Falklands.

24. The defence of the legitimate sovereign rights of the Malvinas Islands “through all possible diplomatic channels” is written into the Decalogue Of The Parliament Of Mercosur.

It is literally the 10th Commandment of the Mercosur parliament.

25. And if their position on the Falklands wasn’t clear enough, in 2016 the 16th of December was officially declared as the day of "International Recognition of the Rights of Argentina on the Malvinas Islands”.

I'm not saying a deal is impossible, but this may come up..!

26. Consequently, Argentina do see a benefit to Brexit. Argentina’s ‘Secretary of the Official Representation for the Malvinas Question’ has said that Brexit “would allow new opportunities for Argentina with a view to the final solution of the sovereignty dispute".

#MalvExit

27. This is partly because 70% of the Falkland’s trade is dependent on the EU. Calamari is not only the Falkland’s biggest export, it is also tariff sensitive. The Falklands also benefits from scientific funding.

28. Rules of Origin mean a deal with the EU is bad, but in the event of ‘no-deal’, the Falklands are in serious trouble, and that is why Argentina sees Brexit as an “own goal”.

29. So to summarise:

To make the most out of future world growth, the UK is going to leave the most sophisticated trade deal in the world with the market predicted to be the 3rd largest contributor to global growth to negotiate a shallow deal with it.

30. So we can risk deals worth 18% of global growth, and at best make them less flexible

31. While having to renegotiate some of our existing deals to be less beneficial with countries such as the one predicted to generate the 7th largest growth.

32. And making it politically difficult to do a trade deal with the country predicted to generate the 6th largest growth.

33. So that we have the freedom to negotiate less flexible deals with the countries that the EU is already negotiating deals with from a weaker position. Including the country predicted to generate the 4th largest growth.

34. Which wants to include in their latest trade deals a provision which may restrict us from doing a deal with the country predicted to provide the most growth.

35. While being prepared to walk away from the market predicted to generate the 3rd largest growth.

(The closest one to us, and the one we do most of our trade with.)

36. Based on a prediction of where 90% of growth will be in the next 10-20 years, which is actually next year.

37. Built from an economic forecast provided by an institution that those who support Brexit say constantly gets it wrong and is corrupt.

38. That is out of date.

39. And that, ladies and gentleman, is the trade benefit of Brexit.

A meaningless slogan based on a misunderstood prediction which disguises the fact that we’re going to seriously weaken our businesses and that our future trade deals are just a damage limitation exercise.

/End