Posted by: westlancashirerecord | November 26, 2018

The EU Has Led Us To A 20 Year Economic Meltdown

Any sort of trade deal with the EU is bound to result in economic meltdown. Here’s how and why. Economist John Poynton writes “This graph  shows our Balance of Payments Current Account – in effect our national profit and loss account, comprising mainly but not exclusively of trade – split into two separate components; our trade with the EU (the red line) and our trade with the Rest of the World (‘RotW’ – blue line).

“At the millennium our deficit with the EU was £4bn, whereas at by the time of the referendum it had plummeted to £109bn, whereas our trade with the Rest of the World has moved from a loss of £17bn to a profit last year of £20bn. I have downloaded the series from the ONS website, subtracting the EU from the total to get the RotW.

“No wonder we are now 21st in the list by standard of living. The conclusion to be drawn from all this is that Free Trade deals are fine between countries whose trade is in balance. If trade is not in balance then a Free Trade deal will only magnify that imbalance. This is just simple mathematics.

“Fortunately we have a strong Capital Account surplus, so there is plenty of foreign currency around to pay for our excess imports. But hang on a sec. That money is not ours. It can be withdrawn again at any moment by those who sent it here. We are robbing Peter to pay Paul, and if Peter cottons on he is likely to panic and withdraw his funds. Then we really would be buggered. But fortunately all seems well in the short term, which is all our politicians are concerned about.

“We have to take back our trade; to reduce and eliminate our deficit with the EU. That is the first domino in the line. No deal can achieve that. It would have to be a one-sided deal, and that is as likely as a free lunch. Only a No-Deal Brexit will give us the opportunity to change course and avoid the massive iceberg dead ahead. Even then it is only an opportunity, and several years of hard graft will be required forensically to identify all the non-tariff barriers that have been constructed against us and find ways of neutralising them. We shall have to give as good as we have received. This is about survival. We are in a trade war. It has been going on for twenty years and our dozy Treasury mandarins, away with the fairies in their Remainian dreamworld, have not lifted a finger to advise ministers to take action. Pacifists do not win wars.

“At least a No-Deal Brexit will give us an initial boost. By raising tariffs on both sides of the Channel, volumes will be reduced. This in turn will make a start in reducing the deficit, since everything will reduce in proportion. Furthermore more jobs will be created from import substitution than will be lost to export substitution. Labour Party please note!

“Last but not least there will be another £22bn for the Brexit Dividend from import tariff revenues. Funny how the BBC never mentions this! 60% of our trade is with the RotW on which EU tariffs are paid right now, amounting to approx. £15bn a year. 80% of that, £12bn, is paid across to Brussels, but after a No-Deal Brexit it will stay in London. At no inflationary cost whatsoever! The remaining 40% with the EU will attract the same tariffs, assuming we put in place a mirror image of the EU tariffs, giving us a further £10bn. Inflationary? Well not very. Average tariffs are just under 5%, and our total foreign trade is about a third of our economy, so multiplied out that gives inflation of 0.667% – on a once off basis. Its peanuts.

“We do not want or need anything from the EU. So why are we negotiating at all? We must take back control of our trade. Only a no-deal Brexit can achieve that”.

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