Hard Brexit need not make us worse off
If we unilaterally declare free trade we will be richer, says Tim Worstall of the Adam Smith Institute
‘Brexit offers us the opportunity to charge ourselves nothing for our purchases of the goods and services of the world,’ says Tim Worstall. Photograph: Chris Ratcliffe / Rex Features
You report (4 November) on how Brexit will raise the cost of living by as much as £930 per year for a household, based on research published in the National Institute Economic Review. There is a certain logical problem with this assertion.
It is entirely true that under WTO terms we must charge the same import tariff to all other members of the WTO – essentially, the rest of the world. This is known as “most-favoured nation” (MFN) status. The WTO lays out the maximums these can be, any country being at liberty to impose something less, including a rate of zero.
Your report and the research it is based upon assume that we will charge the maximum permissible rates. But as this research points out it is we, as consumers, who pay such import tariffs. They increase the price of the imports we purchase – to the point that if we imposed maximum WTO tariffs then each British household would be as much as £930 a year worse off.
Yes, obviously, politics is involved here – but even so, why would we do something as blitheringly stupid as making ourselves poorer in this manner? The entire point of trade itself is to gain access to those imports of the things that foreigners make better or cheaper than we ourselves do. The only rational trade stance to have is thus unilateral free trade, which this country experimented with, most successfully, after the repeal of the Corn Laws. Brexit offers us the opportunity to do that again – to obey the WTO insistences on MFN status and charge ourselves nothing for our purchases of the goods and services of the world. As other research has shown, this will make us all richer, not poorer.
Senior fellow, Adam Smith Institute