An open response to LSE’s Nicholas Barr

To respond to the following open letter:

http://blogs.lse.ac.uk/brexitvote/2016/05/27/dear-friends-this-is-why-i-will-vote-remain-in-the-referendum/

"There is also widespread agreement among economists that leaving would reduce economic growth over a longer time horizon, and that the loss could be large."

He claims that the loss could be large, but the loss could also be so small as to be a gain. Yes, it represents a risk to Leave, but the same degree of risks also apply in Remain, because the EU is not static, it is generating new laws all the time.

"The argument that the UK will be able to negotiate good trade deals quickly is implausible."

Small economies can negotiate trade deals much quicker than larger economies. This is why Iceland and Switzerland, were able to form trade deals quicker than the US and the EU.

"The EU is more important to the UK than vice versa, so our bargaining power is limited."

I hate the argument about ‘bargaining power’ – because trade negotiations depend very little on the size of the economy and far more to do with how the economies of the two countries can benefit each other. It also lies about the EU being more important to the UK than the other way around. If that was the case, the EU would be happily waving “bye bye” and not worrying about the UK’s loss. The truth is, the EU sells more to the UK than the other way around, even if this difference is only marginal. And the truth also is that the UK is one of the biggest financial contributors to the EU, so there is no way anyone can legitimately argue that the UK needs the EU more than the other way around.

"Brexit risks a chain reaction, given rising nationalism across the EU"

Brexit risks a chain reaction indeed, but this is only a bad thing if you think the EU is a good project that needs protecting. Brexit is not going to generate nationalism – nationalism already exists, and the EU is only making it worse.

"Thus the EU’s rational response is to make a horrible example of the UK."

This is just arguing that the EU will behave like a bully. Hardly a good reason to stay in the EU.

"For non-EU countries (e.g. USA, China), negotiating with the EU offers access to a market of 500 million. The UK is much less of a magnet."

See above about ‘bargaining power’. Countries are perfectly capable of negotiating more than one trade deal at a time. If China doesn’t want to sell to the UK, it’s China’s loss.

China and USA are a long way from forming trade agreement with the EU, and even when formed, there is no guarantee that it will be beneficial to the UK. It is more likely to be detrimental to the UK economy, because an EU-wide trade deal is formed with the whole of the EU in mind and may neglect many details that are specifically relevant to the UK. If the UK forms trade deals it will far more likely be directly relevant to the UK, and if not, at least you know which politicians or public servants to hold to account.

"The claim that membership costs £350 million per week, i.e. £18bn per year, is plain wrong."

The EU doesn’t cost the UK £350 million per week, but £350 million per week is the figure of how much money the EU spends on the UK’s behalf. Just under half of it is spent on the UK, and all of it decided by the EU. The EU has spent money in the UK to pay fishermen to scuttle their fishing boats, as well as subsidising UK factories being moved to Turkey (Ford) and Poland (Cadbury).

"In everyday terms, the cost of EU membership is less than 30p per person per day"

30p a day is quite a substantial portion of tax. If it is roughly the cost of a cheap mobile phone contract (mine’s cheaper), that means, for the cost of the EU, one of your children could have access to a mobile phone with data.

"The reduction in the government’s tax revenues from even a small reduction in growth rates "

The reasons for leaving are far more significant than short-term economics.

"A vote to leave risks destabilising the UK through the possibility of a second Scottish referendum."

Nothing wrong with Scotland leaving. The SNP wanted to break up the Union anyway, and most in London are saying “good riddance”. But the Scots voted to stay because they identified as British as much as Scottish, not instead of. Since the fall of oil prices, Scotland is going to struggle on its own economically anyway. The UK as a whole, being a very diverse and vast economy, is not so vulnerable.

"If the UK and EU are weaker, the US is weaker. "

The strength of the US is not dependent on the strength of the EU, and there is no justification for saying that the UK and the EU would both be weaker. NATO, not the EU, serves to counterbalance the Russia. NATO will remain in place if the EU was dismantled.

"...globalisation has reduced the independence of all countries."

Indeed it has. The formation of the EU was to promote peace by increasing the economic interdependence of EU member states. This argument means the EU is no longer necessary because globalisation has superseded it.

"...the UK shares sovereignty with the UN, NATO, the World Trade Organisation, etc."

Not correct: the UK collaborates with many others in these organisations, but it does not give up, or ‘share’, sovereignty. In these organisations, the UK still remains supreme in control over its own affairs, meaning you don’t have to do what you choose not to. But in the EU, you legally have to do everything the EU demands.

"...within the UK, central government has devolved significant powers to regions and cities."

And within the EU, government is getting more and more centralised, so that more and more UK laws are being created from the European Parliament than from the UK parliament itself. This is another own goal.

"International reach. Though there is room for disagreement about how strong the effect would be, it hard to see how the UK becomes a more powerful global actor by separating itself from its own continent."

Nobody is arguing for separation. The UK will want to continue to cooperate with all European countries whether or not they are members of the EU.

"Migration. For many, this issue is the crux. The question is not whether the issue is real (it is) but the choice of policies to address it."

Immigration is a weak argument. But it is the only argument that the Leave side is winning comprehensively, so there is no point addressing it because the Remain side is putting up such a weak defense.

"Finally, the flip side of ‘gaining control of our borders’ is reducing the right of younger Brits to live and work in other EU countries and of older Brits to retire there."

So what? Fair is fair.

"But the UK has an opt-out on the border-free Schengen agreement and thus has passport control at its borders."

If the EU and free movement is so great, why do you want an opt-out clause. An inconsistent own goal.

"Failures of security are largely domestic, including self-inflicted cuts to Border Agency staff."

UK Border Agency is amazingly tough, but European border control is often non-existent. This does not help European security, much less the UK. So why should UK want to be a part of it?

"The argument about ‘unelected bureaucrats’ is spurious."

Another lie. This is key. In the UK, you vote for the party on whose the leader and manifesto you wish to support. If you don’t like David Cameron, his cabinet, or his manifesto, you vote for someone else, usually the opposition (if they are better). In the EU, You cannot vote out of power the very people who are writing continent-wide laws. You don’t even vote them into power, and there is no manifesto promise for them to fulfil. They just exist in power.

"How likely is it that the problem will be addressed? There are grounds for optimism: the problem is recognised and other member states share UK concerns, so that pressure for change will comes from multiple sources."

Since the formation of the EU in 1992, the UK parliament has (1) abolished inherited peerages in the House of Lords, (2) held a referendum on the voting system to consider the Alternative Vote, (3) held a referendum on Scottish independence. In the same time, the only ‘reform’ of significance in the EU that I have noted are that MEPs now have to be accountable with their finances, something the UK has had for a very long time.

"...there are 55,000 EU civil servants; the UK has 393,000"

What does it mean to have 393,000 civil servants? In the UK, the statistics used includes everyone directly employed in government offices, such as council workers and cleaners. In the EU, they are administrators and consultants. The Brexit campaign states that over 10,000 EU officials get paid more than £100,000. How many UK civil servants get paid that amount?

"OECD studies show that the UK has the second least-regulated product markets among industrial countries and the least-regulated labour markets in the EU."

That statistic is misleading because the UK manufacturing industry tends to specialise in bespoke markets, such as custom yachts, aircraft jets, warships, and other very high value manufactured products. High value bespoke products require far less regulation than the mass market. The mass market is generally dominated by cheaper economies such as India and China.

"Regulation has benefits. Co-ordination (for example, common safety standards for electrical products) is a necessary part of a single market, making it easier to trade."

Coordination of international standards has existed for a very long time outside the EU. See examples such as WTO, ISO, IEEE…

"It also provides consumer protection, e.g. cheaper air fares, lower roaming charges, cleaner beaches."

All of which can be achieved just the same in independent countries working in cooperation. Political union is spurious to these goals.

"The issue is not regulation as a whole, but removing or revising the bad regulations that undoubtedly exist. That is a highly worthwhile task, but not a reason for leaving."

Actually it is. In the EU, such regulations are determined by funded lobbyists and incompetent bureaucrats and lobbyists. Outside the EU, international standards and regulations are determined by industry experts. USB, an international standard, works great. Vacuum cleaners limited to 850 Watts, not so great.

"he UK remains a sovereign country in the sense that we can at any time decide to leave the EU."

Yes, but that is not what sovereignty means. Sovereignty means being able to self-govern without outside authority or interference.

"However, we cannot as easily decide to rejoin."

If Romania and Poland can join, why would it be so difficult for the UK, an existing member, to re-join?

"Peace should not be underestimated"

Agreed. But the EU’s flavour of political union does not cause or even guarantee peace. It is causing a rise in nationalism.

"The EU has also helped to consolidate democracy in Southern European countries formerly under military dictatorships and in former communist countries in Central and Eastern Europe."

Putting the cart before the horse: Democracy was achieved before these countries joined the EU. If these countries hadn’t achieved democracy independently, they would not have been able to join the EU. To prove this point, consider this counter-example – if membership of the EU increases democracy (and peace), why hasn’t Russia been invited to join the EU?

"Membership of the world’s largest economy creates considerable economic benefits."

Disputable. It has caused imports from developing countries to be more expensive and caused domestic industries to be less competitive.

"Membership gives greater control of the international environment (climate change, control of multinationals, action on tax havens)."

Membership gives LESS control, because now the member states’ interests are represented by the EU representatives, rather than 28 separate national representatives.

"Free movement benefits the large numbers of Brits who live and work in other EU countries, something of particular relevance to younger people who live and work in other EU countries for part of their career and older people who retire to warmer climes."

I agree. But it neglects to mention that it is detrimental to those who are not able to move for work and not wealthy enough to retire to warmer climes.

"Comparing costs and benefits is not as exciting as a rousing political speech, but is the right way to approach a hugely important decision."

Fully agree. But you also have to consider all the counter-arguments fairly.

"The issue is not about the older generation’s past but about our children’s and grandchildren’s future."

Agreed. My vote for Leave is for the sake of the UK’s current generation of children and future grandchildren.

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Author: Hoong-Wai

I'm a sinner. I have an interest in economics, philosophy, politics, science, sociology, technology, theology (in alphabetical order). I care about truth and justice. I can be a contrarian.

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