The UK has “nothing to fear” if it exits the EU in March without a trade agreement, a report backed by Boris Johnson and Jacob Rees-Mogg has said.
Economists For Free Trade said half the UK’s global trade was under World Trade Organisation rules and this could apply to the EU until a bespoke deal is done.
Such a “clean break”, it argued, would boost long-term economic growth and cut the price of food and clothes imports.
The claims were branded “Project Fantasy” by Labour MP Chuka Umunna.
Mr Umunna, who supports a referendum on the outcome of the Brexit negotiations, said Mr Rees-Mogg and other Brexiteers were “completely out-of-touch with the lives of ordinary people”.
Ministers have said an agreement on future trade co-operation with the EU is in the UK’s interests before it leaves on 29 March, 2019.
But they are stepping up preparations for the “unlikely event” that talks break down without an agreement.
The UK and EU are hoping to agree a statement on future economic relations next month, at the same time as they settle the terms of the UK’s withdrawal from the EU.
The UK is set to quit the single market and customs union but Theresa May wants British manufacturers to continue to have full access to European markets for their goods through a free trade zone – which would see the UK sign up to a common rule book.
The so-called Chequers plan is unpopular with many Tory MPs, who argue it would compromise the UK’s sovereignty, and Economists For Free Trade said the evidence showed it was not necessary to enjoy preferential market status to trade successfully with the EU.
In the past 25 years, it said the UK had been “heavily outperformed” by countries outside the single market trading with the EU on WTO rules, such as the United States, India and China.
During that period, it said the aggregate export growth of WTO countries had been four times larger than the growth of UK exports into the single market.
At the same time, it said British exports to the rest of the world had grown more than three times faster than to the EU.
The group of economists said it was wrong to characterise leaving the EU without a trade agreement in place as “crashing out” without a deal, since the UK and the European Commission would have a duty to reach a series of individual agreements in areas such as aviation and energy.
“Switching to a world trade deal under WTO rules is no step in the dark because the UK already conducts about half its trade under WTO rules,” the report said.
Outside the EU, the report argues, the UK would be free to set its own tariffs on EU imports and if these were eliminated, it could reduce prices for consumers by as much as 8%. with those on low incomes benefiting the most from cheaper food and clothing.
On the other hand, it said if the EU chose to impose import tariffs on popular items, its large trade surplus with the UK could result in an annual boost to the UK Exchequer of as much as £13bn.
Overall, it said trading with the EU on WTO rules could boost the UK’s public finances by £80bn over the next 15 years, allowing future governments to raise spending and cut taxes.
The campaign group, led by Professor Patrick Minford, is urging the UK to leave the EU before starting talks over a trade deal modelled on the EU’s accord with Canada – arguing this would give the UK more leverage.
“There would be no time constraints, the EU would have new, non-politically inspired, negotiating guidelines, and the benefits of a clean Brexit would be coming apparent,” it said.
Tuesday’s launch of the report was attended by prominent Brexiteers, including Mr Johnson and David Davis who quit the cabinet in protest at the PM’s Chequers plan.
Responding to the report, Labour’s Chuka Umunna, a leading member of the People’s Vote campaign for a referendum on the final deal, said a no-deal Brexit would be a disaster for the UK.
“The latest Project Fantasy document from advocates of an ultra-hard Brexit promises to take us to a land of milk-and-honey,” he said.
“The reality is that, before we have even left, Brexit is forcing up prices in the shops, destabilising our economy and stripping our health service of the doctors and nurses that it so badly needs.”
Source BBC News