Thread by @fascinatorfun

Minford’s Brexit Economist modelling that Quitters appear to accept happily (rejecting ALL others from any other source) is comprehensively debunked. cep.lse.ac.uk/pubs/download/…

1/. “Britain Alone’ policy (Minford et al, 2016, p. 74 Table 4.3) is that it will ‘effectively eliminate manufacturing’ in the UK.

2/ ”Another implication of his preferred policy is a dramatic increase in wage inequality: skilled workers’ nominal wages increase by around 11%, but unskilled workers’ wages fall by 14%.

These changes are unlikely to be an easy sell politically, to say the least.”

3/ Even so how does MINFORD come to model a benefit 10 Times other respected modelling?

The answer appears to be that he makes a number of assumptions that do not stand up to close scrutiny.

4/ “ If the UK trades under WTO rules following Brexit, but maintains import tariffs, then UK income per capita falls by 2.6%. Under Minford’s ‘Britain Alone’ scenario of unilateral liberalisation after Brexit only, UK real incomes still fall by 2.3%.”

5/. “In other words, there is a gain of only 0.3 percentage points from eliminating tariffs compared to just trading under WTO rules – this is completely insufficient to offset the other trade costs of Brexit.”

6/ He assumes that trade costs would fall by 10%.

“How on earth can trade costs fall by 10% when the UK’s average tariff is currently around 3%?”

7/ Turns out he was using data dating back to 2002 (14 yrs out of date).

In addition he assumed that the cheapest prices identified in some countries were due to EU barriers rather than purchasing a different mix of products and at differing quality from choice.

8/. It is true that regulations could mean that prices are higher in the EU as there are stricter quality controls than in other countries. The EU has tougher regulations over children’s milk and toys than China does, so sub-standard products cannot be sold.

Quality matters.

9/. He also assumes that a reduction in regulation will make selling easier and cheaper.

In fact the overwhelming evidence from most/all businesses recorded in the 32 Vol Cross Party Review suggested that harmonisation of regulation made selling easier

publications.parliament.uk/pa/ld201415/ld…

10/. It isn’t easier and cheaper to work to 28 different sets of standards when you seek to export (or import) extensively to many countries.

In fact it is often easier to work to the highest standard so you can be sure your product has a wide reach in regulation compliance.

11/. So: If we lowered the standard for toy production in our domestic market (& that might be problematic) thus making them cheaper the toys made in the EU could be sold into the U.K. market as they would exceed our safety regulation, but we would be unable to sell to them

12/. Minford appears to ignore the tried and tested gravity model (we trade most with our closes and richest countries) suggesting that improved transport, emphasis on services, IT infrastructure means that model should not be given the weight suggested by other trade experts

13/.It was plain from the evidence given to HofC SC by Christophe Bondy (Canada’s Chief Negotiator for Brexit) plus many other experts inc to SC on 6/12/17 & 24/1/17 that trading with your rich neighbouring countries WAS in practise the greatest determinate for volume of trade

14/. Here is a link to but one session.

It further points out that harmonisation of regulation was even more important when it came to services, not just products but also of people, qualifications plus FOM so experts can travel across borders with ease.

parliament.uk/business/commi…

15/. For that reason amongst others @SamuelMarcLowe and John Sandford @CER_EU suggests that gravity modelling applies to services as well as goods.

Time matters: advice, conferences, meetings. IT & improved transport reduces not eliminates impact.
7%

cer.eu/insights/brita…

16/. Minford seems to suggest that his exceptionally imperfect 1970s modelling should be preferred over modelling that has developed and tested dynamically since responsive to changing world conditions because those models are not yet perfect.

17/. “But to take the position that since no econometric work can be perfect, all inconvenient facts should be ignored is poor scholarship and bad science.”

It concludes that ALL respectable modelling suggests that all models of Brexit WILL lead to a decline in living standards

18/. I apologise to #CEPBREXIT and to @samuelmarclowe and John Sandford @CER_EU for my amateur massacring of their scholarship but given this is such a hot topic at present I wanted to get something out.

I look forward to their improvements!

Addendum. 1/. I gave little attention to Minford modelling on us applying a zero rate tariff partly for the reasons given in the thread but also because the Govt has said we will be adopting the EU tariff Schedules.

ADD2/ If we adopted zero tariffs and Lords Price and Hannay pointed out in evidence to the HofC Int Trade Select Committee on 10/1/18 there would be much reduced incentive for other countries to agree an FTA when we’ve given away our bargaining chip.

data.parliament.uk/writtenevidenc…

Argh. On reading the unrolled thread I’ve realised I got so caught up in the summary I forgot part way through to include quotation marks.

Mine was a summary of what the CEP/LSE says in their report (no doubt imperfectly). The scholarship is theirs not mine.

duh! I’ve been talking to a Mr Sandford this afternoon and swooped your name’s. So sorry.

. So sorry.