At the heart of the matter is our future trade framework; on it depends how far the UK can pursue the road of self-government – the control of laws and borders demanded by the Brexit majority. It is good to see Liam Fox getting off to a strong start negotiating draft free trade agreements, FTAs, with countries around the world. These countries will then lower their tariffs and trade barriers against us, and we ours against them.

Contrary to what is generally thought, however, the gain that we get from this does not come from their lowering their barriers against us.  No, the gain we get from these FTAs is that we lift our tariffs and other trade barriers on them; this means that our consumers pay less and so enjoy a rise in their standard of living.

Once these high-visibility trade agreements are signed we should make sure that we trade freely with all the rest of the world, however we can arrange it. Our ultimate aim should be to achieve unilateral free trade with all countries of the world. As this implies, we could actually short circuit all these FTAs [free trade agreements] and simply go at once to unilateral free trade, as has been done by countries such as New Zealand and Singapore; even China has unilaterally brought down its tariffs to aid its development.

It is this that lies at the heart of our EU trade relationship. The EU single market is highly protectionist, which of course is why there has been so much fuss about being outside it. This protectionism raises the prices of both food and manufactures by around 20 per cent to UK consumers, implying an 8 per cent rise in their overall cost of living. While this is nice for farmers and manufacturing firms, who make higher profits, the losses of consumers are far greater. When we leave the EU, protected prices will be replaced by world prices. This generates healthy competition which pushes up productivity, forcing firms to go “up the value chain” towards more hi-tech methods. We can also help our manufacturers enter the EU single market at zero cost by refunding them EU tariffs, which average some 2 per cent and cost some £2 billion.

The gain in GDP and living standards according to my standard world trade model is about 4 per cent; on top of that there are the gains from replacing EU regulation with our own and from regaining control of mass unskilled immigration, which is costly to the economy and politically toxic.

As for the City, it too will gain greatly from having its regulations made in free-market London instead of a Brussels hostile to “Anglo-Saxon finance”. The City fears EU protectionism but it need not worry. Suppose Brussels withdraws “passporting” and the ECB declares that euro-bonds must be cleared in Frankfurt – the result will be that, just as with an FTA, the City will sell less in the EU and more elsewhere.

The implication of all this is that the main remaining task of Brexit policy is for the Ministry of Brexit under David Davis to withdraw us from the single market and take us to unilateral free trade, to reap these huge gains from eliminating EU protectionism and regulation. Mr Davis would like to sign some broader FTA with the EU; I would like to wish him luck but the bald truth is that, as David Cameron found out, the EU has virtually no flexibility when each of 27 countries wields a veto. Mr Davis, and ultimately Theresa May, should save us all time and policy delays by simply walking away from the EU, lock, stock and barrel.

David Fuller's view

Here is a PDF copy of Patrick Minford's article.

The UK exercised its democratic right to leave the EU on Thursday 23^rd June 2016, primarily because we wish to be an independent sovereign nation, rather than a state in Europe’s journey to become a federal nation. 

Following the Brexit vote, some bureaucrats have claimed that negotiations with the EU would be tortuous and could drag on for a decade, encountering obstacles from any of the other 27 countries able to veto innumerable points not perceived to be in their general interest.  This is both a fantasy and a bluff to deter other EU countries from following the UK’s lead.  Why should the UK accept this expensive and masochistic route? 

Following the UK’s withdrawal, the EU’s percentage of global GDP growth will probably be a little less than 20 percent in 2017.  That is significant, albeit declining, and Europe will always remain an important market for the UK, which is now free to develop its own trade links with other 80 percent of the global economy.