Busting the Lexit Myths


EMBARGOED UNTIL 30/01/18 AT 00:01
Busting the Lexit Myths
Foreword by
Heidi Alexander MP & Alison McGovern MP
Catherine West MP, Nick Donovan, Dr Andy Tarrant,
Richard Corbett MEP, Dr Mike Galsworthy, Sarah Veale CBE,
Tom Burke and Lord (John) Monks.
Edited by
Francis Grove-White
for the
EMBARGOED UNTIL 30/01/18 AT 00:01
Open Britain is a national cross-party campaign, making the case for the UK to remain in the Single
Market and the Customs Union, and for all options about our future relationship with the EU to be
kept on the table.
The Labour Campaign for the Single Market is seeking to shift Labour Party policy towards support
for staying in the Single Market and the Customs Union. It is co-chaired by Heidi Alexander MP and
Alison McGovern MP.
Heidi Alexander MP & Alison McGovern MP
Catherine West MP
State aid
Nick Donovan
Dr Andy Tarrant
Richard Corbett MEP
Dr Mike Galsworthy
Employment rights
Sarah Veale CBE
The environment
Tom Burke
Trade deals
Lord (John) Monks
Austerity in the UK is a political choice, made by the
Government, and has nothing to do with the EU or Single
Market rules. In fact, the reverse is true. Leaving the
Single Market and Customs Union will cause an economic
loss which will reduce tax receipts and therefore risks an
extension or intensification of austerity.
The myth
The reality
Leaving the Single Market and Customs Union will
allow a future Labour government to end austerity.
“A vote to leave is a chance to stop the following regressive policies: Austerity, which is a
foundation stone of the EU, and has led to the slow, creeping destruction of pensions, education,
social housing, the NHS and every local public service, as well as strangling local government,
further adding to poverty and social inequality.”
Labour Leave letter, 21 June 2016
“Post-financial crisis, agonising austerity has been imposed – especially on the periphery. Any
attempt to create a different kind of economy from inside the EU has been forestalled through
powerful legal impediments embodied in the treaties.”
Joe Guinan and Thomas M Hanna
“[Labour Leave wants to] rebalance our economy, helping firms to achieve higher productivity,
with rising wages and investing in the infrastructure to support export-led growth.”
Labour Leave campaign
New trade deals cannot replace our lost trade
with the EU
The EU is, by some distance, the UK’s largest
trading partner. In 2016, it was the destination
for some 43% of UK exports in goods and
This is the case for good reason. The
Customs Union allows for trade in goods that is
unencumbered by customs duties or rules of
origin checks, while the Single Market ensures
common product standards, health and safety
regulations and consumer and environmental
protections, and the right to deliver services
across the continent.
It is also a simple matter of geography. No
matter which countries you look at, the evidence
is remarkably consistent: bilateral trade between
two countries is proportional to size, measured
by GDP, and inversely proportional to the
geographic distance between them.
This is
known as the gravity equation. The countries of
Europe are on our doorstep, and so it is of little
surprise that we do the majority of our trade with
them. By contrast, many of the countries often
talked up as targets for future free trade
agreements are on the other side of the world.
For example, although they are important
markets, Australia accounts for just 1.7% of UK
exports, India 1.7%, Indonesia 0.2% and New
Zealand 0.2%.
It is too often overlooked that the EU is also a
major trading power in its own right, with
preferential trade agreements in place with more
than 65 countries around the world, and
negotiations ongoing with many more. That
means the EU has deals in place with more
countries than the US (20), China (23) and
Australia (19) combined. At present, nearly two
thirds of UK exports go to countries in the EU,
the EEA or countries with whom the EU has an
agreement in place. If Britain leaves the Customs
Union, each of these countries will have an
interest securing better terms. So, while it is
possible that many of these deals can be
renegotiated as we leave the EU, this is by no
means guaranteed. And we of course stand to
lose out as the EU concludes negotiations with
other major economic powers in the coming
Many of those who advocate a hard Brexit argue
that new trade deals will compensate for the
economic cost of leaving the Single Market and
Customs Union. Yet there is no evidence for this.
The Treasury is widely reported to have analysis
showing that new trade deals cannot make up
for lost trade with Europe, though it has so far
refused to publish it. One of the most
comprehensive studies, by Monique Ebell at
NIESR, has estimated that the increase in total
UK trade from free trade agreements with
Australia, Brazil, Canada, China, India, Indonesia,
New Zealand and the US would be less than
By contrast, she estimates that leaving the
Single Market will be associated with a long-term
reduction in total UK trade of between 22% and
30%. Given that some 3-4 million jobs in the UK
are linked to our trade with Europe, the burden
of proof is on those who advocate a hard Brexit
to disprove this.
The fact is, EU members negotiate tariffs and
trade agreements with third countries
collectively, and are able to use the clout of
being the world’s largest market to secure better
terms than could be delivered by any individual
member state. Going it alone, with a small and
inexperienced negotiating team, and with the
economic imperative of needing to secure
numerous trade agreements at speed, Britain’s
position will be weak. New deals will take many
years to negotiate, and will involve major
trade-offs for minimal reward.
The EU is not ‘tariff-heavy’ across the board
the world’s poorest countries
It is often claimed that the EU has high tariffs on
imports from the world’s poorest countries, and
that remaining in the Customs Union would
mean Britain continuing to enforce these
protectionist policies. A narrative has emerged in
some quarters that the EU acts as a ‘protectionist
racket’ towards the developing world, strangling
many countries growth and development
There is little evidence to support these claims.
The European Union offers developing countries
lower tariffs on their exports into the EU through
its ‘Generalised System of Preferences’. In
particular, the EU’s Everything But Arms scheme
grants full duty-free and quota-free access to the
EU Single Market for all products except arms
and armaments, to all countries that are listed as
a Least Developed Country (LDC) by the United
Nations. There are currently 47 such countries on
the list of LDCs, and the list is updated every


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