The economic consequences of Brexit (Vol 2)

[gazapc]

ecurie said:

US population : 320 million
EU population (excl. UK) : 446 million

GDP of USA: North of 19.5 trillion USD
GDP of EU (Excl UK): 14.5 trillion USD

And only getting worse as the EU lags behind in growth.

[Burwood]

gazapc said:

ecurie said:

US population : 320 million
EU population (excl. UK) : 446 million

GDP of USA: North of 19.5 trillion USD
GDP of EU (Excl UK): 14.5 trillion USD

And only getting worse as the EU lags behind in growth.

Get out of here with the facts. No one will trade with us. We are as good as fked

[Sway]

walm said:

Sway said:

What is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

Very easy to make opinion sound like fact...

Given that 43% of our exports go to the EU and 13% to the US - it would stretch the bounds of reality to believe that a deal with the US would offset that lost to the EU - at least in the short term.

Not to mention that for all Trump's "the UK is great... Brexit is great..." his main focus isn't on buying more stuff from abroad.

Ah, another mystic meg! So what's your prediction for the value of lost trade with the EU post-Brexit, and under what scenarios?

It seems that it has become accepted fact in some quarters that trade will be lost, yet no numbers or rationales for why...

[Sway]

ecurie said:

Sway said:

Just so we can be clear, and in time measure the accuracy of your crystal ball - what is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

Under what circumstances are these values predicated? Loss of single market but retain free trade? 'Lose' everything and default back to WTO MFN? Something else?

Very easy to make opinion sound like fact...

US population : 320 million
EU population (excl. UK) : 446 million

Fair enough, I can only assume you therefore believe that per capita spend from the EU will fall to zero, and per capita spend from US consumers will equal that of current EU customers.

Not sure of any reason why those assumptions would have much basis in fact, but at least it's now clear what predictions you're using to help form the basis of your opinion.

[Garvin]

Sway said:

ecurie said:

Sway said:

Just so we can be clear, and in time measure the accuracy of your crystal ball - what is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

Under what circumstances are these values predicated? Loss of single market but retain free trade? 'Lose' everything and default back to WTO MFN? Something else?

Very easy to make opinion sound like fact...

US population : 320 million
EU population (excl. UK) : 446 million

Fair enough, I can only assume you therefore believe that per capita spend from the EU will fall to zero, and per capita spend from US consumers will equal that of current EU customers.

Not sure of any reason why those assumptions would have much basis in fact, but at least it's now clear what predictions you're using to help form the basis of your opinion.

I don't think anyone believes that trade with the EU will drop to zero, do they?

Is it truly incredible to think that any 'hit' to UK trade can be compensated for by better trade deals with other countries round the world. Is this really impossible?

[Sway]

Garvin said:

Sway said:

ecurie said:

Sway said:

Just so we can be clear, and in time measure the accuracy of your crystal ball - what is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

Under what circumstances are these values predicated? Loss of single market but retain free trade? 'Lose' everything and default back to WTO MFN? Something else?

Very easy to make opinion sound like fact...

US population : 320 million
EU population (excl. UK) : 446 million

Fair enough, I can only assume you therefore believe that per capita spend from the EU will fall to zero, and per capita spend from US consumers will equal that of current EU customers.

Not sure of any reason why those assumptions would have much basis in fact, but at least it's now clear what predictions you're using to help form the basis of your opinion.

I don't think anyone believes that trade with the EU will drop to zero, do they?

Is it truly incredible to think that any 'hit' to UK trade can be compensated for by better trade deals with other countries round the world. Is this really impossible?

I can only go by what has been written- the original post I quoted spoke in absolutes - that there would be a drop in trade with the EU, and that any increased US trade would not mitigate this fall in trade.

When asked, the response was as above - merely a difference in populations meant there would be a drop in trade and a net drop for the UK.

My original post on this was written for two reasons - to try and understand the point of view of someone whose conclusions are different to mine, and to point out that there seems to be possible outcomes defined as facts, seemingly (considering we're talking economics which hardly has a great track record for predictability) using a particularly high quality crystal ball...

[walm]

Sway said:

walm said:

Sway said:

What is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

Very easy to make opinion sound like fact...

Given that 43% of our exports go to the EU and 13% to the US - it would stretch the bounds of reality to believe that a deal with the US would offset that lost to the EU - at least in the short term.

Not to mention that for all Trump's "the UK is great... Brexit is great..." his main focus isn't on buying more stuff from abroad.

Ah, another mystic meg! So what's your prediction for the value of lost trade with the EU post-Brexit, and under what scenarios?

It seems that it has become accepted fact in some quarters that trade will be lost, yet no numbers or rationales for why...

Are you a bit simple?
I am not an economist and people don't want to believe them anyway.
But if you are stuggling to understand why 44 is so much bigger than 13 perhaps numbers aren't your forte.

Don-tard is right it's not just about population, nor is is about GDP it's about a whole host of things, perhaps the most important being EXISTING TRADING.

[Sway]

walm said:

Sway said:

walm said:

Sway said:

What is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

Very easy to make opinion sound like fact...

Given that 43% of our exports go to the EU and 13% to the US - it would stretch the bounds of reality to believe that a deal with the US would offset that lost to the EU - at least in the short term.

Not to mention that for all Trump's "the UK is great... Brexit is great..." his main focus isn't on buying more stuff from abroad.

Ah, another mystic meg! So what's your prediction for the value of lost trade with the EU post-Brexit, and under what scenarios?

It seems that it has become accepted fact in some quarters that trade will be lost, yet no numbers or rationales for why...

Are you a bit simple?
I am not an economist and people don't want to believe them anyway.
But if you are stuggling to understand why 44 is so much bigger than 13 perhaps numbers aren't your forte.

Don-tard is right it's not just about population, nor is is about GDP it's about a whole host of things, perhaps the most important being EXISTING TRADING.

I've explained my reasoning. I understand the current figures (including the Rotterdam effect contained within them...).

What you have done is asserted that trade with the EU will fall. Also that there cannot be additional trade gained to compensate. I'll asking why you feel those assertions are guaranteed, and what sort of magnitude this impact will have and for how long. So far you've not backed up those base assertions for your statements, let alone with incontrovertible causes...

Lets not fall into insults - my mystic meg comment was merely a tongue in cheek way of saying that you appear to have formed absolute opinions about what will happen in the future.

[walm]

Sway said:

What you have done is asserted that trade with the EU will fall. Also that there cannot be additional trade gained to compensate.

That's not what I said at all.
Please don't mis-quote me, no matter where you want to put your tongue.

You might have a point, if I had said "I know exactly how long it will last and how big the magnitude will be."
But I didn't say that.
You have put up an entirely obvious straw man.

I said the EU hole will be bigger than the US can compensate in the short term - simply because 44 is far greater than 13.

If you think "walm can't tell us exactly how much bigger, therefore he is wrong" is a valid response then sadly you simply don't understand basic logic!

[Sway]

walm said:

Sway said:

What you have done is asserted that trade with the EU will fall. Also that there cannot be additional trade gained to compensate.

That's not what I said at all.
Please don't mis-quote me, no matter where you want to put your tongue.

You might have a point, if I had said "I know exactly how long it will last and how big the magnitude will be."
But I didn't say that.
You have put up an entirely obvious straw man.

I said the EU hole will be bigger than the US can compensate in the short term - simply because 44 is far greater than 13.

If you think "walm can't tell us exactly how much bigger, therefore he is wrong" is a valid response then sadly you simply don't understand basic logic!

I asked a different poster what his prediction was, and why. You answered that in a way that strongly implied that you agreed with his base assertions that a) trade with the EU would fall and b) there wasn't another area of trade growth that could mitigate that.

You've explained why you don't believe that 13% c Sam become over 40% quickly, and for what it's worth I agree.

What I'm asking is why you feel it needs to. Why do you believe trade with the EU will fall, and what sort of impact will that be that means we'd need to achieve a direct swap for the percentages. Your direct quote "the EU hole will be bigger than the US can compensate" does strongly suggest you agree with assertion a), with no consideration that there may not be a "hole" at all...

From my perspective, I can see scenarios whereby trade with the EU could increase, along with an increase in RoW trade. I can also see scenarios where put external trade collapses. Plus many, many more which sot somewhere in the middle.

I'm trying to understand how some posters seem to have come to the conclusion that certain outcomes are so likely that they are written about as though they are already fact.

[walm]

You are still mis-remembering.
It was the US - this is a crucial point.
Not "everywhere but the EU".
That would be very different.

Sway said:

ecurie said:

What I meant is that Britain shouldn't put all its eggs in one (US) basket. A US trade deal would only partially compensate for what will be lost by leaving the EU.

Just so we can be clear, and in time measure the accuracy of your crystal ball - what is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

It was hard to find but there were some predictions from proper economists on how much EU exports would drop if we exited to WTO tariff levels, for example.
It was an ASTONISHINGLY high number. (Most likely far too high but even if they were off by 2x... it was high!!)
I will try to find the link.

[barryrs]

I think i can see where Sway is coming from here.

Most reports I have read suggest that a poor outcome to negations could result in a drop of trade of circa £5 - £6 billion with the EU. However picking up half a billion each with New Zealand and Australia or a billion with India and the US plus others could negate the loss with the EU.

[Sway]

walm said:

You are still mis-remembering.
It was the US - this is a crucial point.
Not "everywhere but the EU".
That would be very different.

Sway said:

ecurie said:

What I meant is that Britain shouldn't put all its eggs in one (US) basket. A US trade deal would only partially compensate for what will be lost by leaving the EU.

Just so we can be clear, and in time measure the accuracy of your crystal ball - what is the value of trade that will be 'lost' by us leaving the EU, and what is the increase in value of trade you predict will occur if we gain a free trade deal with the US?

It was hard to find but there were some predictions from proper economists on how much EU exports would drop if we exited to WTO tariff levels, for example.
It was an ASTONISHINGLY high number. (Most likely far too high but even if they were off by 2x... it was high!!)
I will try to find the link.

You're focussing on the second question, relating to the US. Not the first - whilst there may be some predictions relating to WTO MFN status, there aren't for many of the other still available alternative outcomes... Those predictions (or at least the ones I remember) kept everything the same except the tariff regime - that's already out of date as there are many more degrees of freedom that impact trade, one of which is fx rates.

Hence why I'm asking why you and others state as fact that there will be a "hole" in EU trade that needs filling.

[walm]

Sway said:

Hence why I'm asking why you and others state as fact that there will be a "hole" in EU trade that needs filling.

Not sure this is the link I meant, but it serves.

Some quotes:
"The empirical research literature supports the conclusion that EU membership is trade-creating.
For example, Baier et al (2008) find that goods trade between EU members is 62% higher than
trade between otherwise comparable countries that have no trade agreement between them.
Using more recent data, HM Treasury (2016) finds that EU membership raises intra-EU goods
trade by an even larger 115% relative to WTO membership."

http://cep.lse.ac.uk/pubs/download/brexit06.pdf

Since we are exiting the single market, there will be a hole.
A MASSIVE one.
Perhaps not in the 60-100% level, but even at just 10% that's nearly a ~4ppt hole.

Maybe you are arguing that the UK might be able to make such a super-duper negotiation with the EU that trade isn't affected at all.
And for that, I wish us luck, but surely you are taking crazy pills.

[paulrockliffe]

barryrs said:

I think i can see where Sway is coming from here.

Most reports I have read suggest that a poor outcome to negations could result in a drop of trade of circa £5 - £6 billion with the EU. However picking up half a billion each with New Zealand and Australia or a billion with India and the US plus others could negate the loss with the EU.

If we lost trade in the £5-6bn region, bear in mind that we would also not need to import whatever purchases were used to support those sales, so the net loss is lower. The £5-6bn is not all profit. Who knows what the element is, but you'd think it would lower the figure by maybe £1-3bn.

At the same time we'd not be sending £8bn to the EU, so I make the country as a whole better off by quite a bit before you start selling to other countries. Though the Government has more money, not business, but this could fund tax-cuts for all to spread the benefit.

Next thing to add into the mix; we have complex supplier networks with other EU-based companies. If we sell more stuff abroad, the chances are that we'll buy more from those networks to make those new sales, even if we buy more from non-EU countries as well. So the EU countries will benefit.

Obviously certain actors will ignore all of the peripheral factors and the net effect and hone in on the examples that support their world view, but it's perfectly feasible for trade in one area to fall while everyone's income rises. (If taxes are cut as a result of money not going to Brussels of course)

[Sway]

walm said:

Sway said:

Hence why I'm asking why you and others state as fact that there will be a "hole" in EU trade that needs filling.

Not sure this is the link I meant, but it serves.

Some quotes:
"The empirical research literature supports the conclusion that EU membership is trade-creating.
For example, Baier et al (2008) find that goods trade between EU members is 62% higher than
trade between otherwise comparable countries that have no trade agreement between them.
Using more recent data, HM Treasury (2016) finds that EU membership raises intra-EU goods
trade by an even larger 115% relative to WTO membership."

http://cep.lse.ac.uk/pubs/download/brexit06.pdf

Since we are exiting the single market, there will be a hole.
A MASSIVE one.
Perhaps not in the 60-100% level, but even at just 10% that's nearly a ~4ppt hole.

Maybe you are arguing that the UK might be able to make such a super-duper negotiation with the EU that trade isn't affected at all.
And for that, I wish us luck, but surely you are taking crazy pills.

Single Market is not a free trade deal. It's a customs union. Plenty of free trade deals without customs union, which they don't seem to have compared, and is most definitely not off the table yet.

Further, they are doing an analysis of countries across the EU and averaging them. Giving Greece the ability to borrow staggering chunks of cash for guaranteed purchases from Germany will be one example of an influence beyond a simple comparison of 'trade with customs union'/'trade with FTA'/'trade under WTO'.

If we look at the current situation, gbp:eur has fallen which most would agree is likely to encourage increased trade. We may be leaving the single market, but there's no guarantee that we won't have some form of free trade deal, although I accept that there are logical arguments for all sides of the probabilities that one will be agreed. Even if we revert to WTO MFN, costs are likely to be largely the same as prior to the result and pound devaluation.

Once again, I struggle to understand why it's considered (and presented as) absolute that trade with the EU will fall. Let alone what's going to happen with RoW trade.

It is this that I am trying to challenge - that economics is a defined enough science that such predictive absolutes can form in people's minds.

[FiF]

Sway said:

It is this that I am trying to challenge - that economics is a defined enough science that such predictive absolutes can form in people's minds.

Because it fits their prejudices or agenda or confirms some other message, so they take what they want from it.

Off topic, but on another thread, motoring related so various posters on Brexit threads won't have gone near it, but have challenged a statement quoting a bit of scientific research as absolute proof of 'x'. Yet the actual research is clear with the caveats, uncertainties and qualifications giving various possibilities as explanations. Yet people pick up on one possibility, twist that in a way that doesn't remotely fit the research or other background facts and research in related topics and authoritatively assert something largely of their own, or maybe the Guardian's, invention that fits their agenda.

[walm]

Sway said:

If we look at the current situation, gbp:eur has fallen which most would agree is likely to encourage increased trade. We may be leaving the single market, but there's no guarantee that we won't have some form of free trade deal, although I accept that there are logical arguments for all sides of the probabilities that one will be agreed. Even if we revert to WTO MFN, costs are likely to be largely the same as prior to the result and pound devaluation.

Of course economics is an inexact science and you need to be scenario driven regarding the negotiation outcomes.
You make some good point but I still think you are smoking crack.

For example, the GBP drop isn't the nirvana you seem to think.
Costs are very VERY far from "largely the same".

If all our exports were 100% home grown, you would be on more solid ground.
Sadly, much of the cost bar for our exports is driven by currency other than GBP.
For example, petrol is rising at the pump since oil is USD-denominated. So logistics and distribution costs don't particularly benefit.
The legendary "widget" argument earlier in the thread, made it clear that plenty of components are imported from say EUROPE and EUR-denominated. So when manufactured into the end product, there is limited cost advantage owing to GBP moves.
The main advantage is obviously UK labour, which will be cheaper, and sadly isn't a huge proportion of what makes the price of what we sell (outside the services industries).

[Tuna]

walm said:

Not sure this is the link I meant, but it serves.

Some quotes:
"The empirical research literature supports the conclusion that EU membership is trade-creating.
For example, Baier et al (2008) find that goods trade between EU members is 62% higher than
trade between otherwise comparable countries that have no trade agreement between them.
Using more recent data, HM Treasury (2016) finds that EU membership raises intra-EU goods
trade by an even larger 115% relative to WTO membership."

http://cep.lse.ac.uk/pubs/download/brexit06.pdf

Since we are exiting the single market, there will be a hole.
A MASSIVE one.
Perhaps not in the 60-100% level, but even at just 10% that's nearly a ~4ppt hole.

Maybe you are arguing that the UK might be able to make such a super-duper negotiation with the EU that trade isn't affected at all.
And for that, I wish us luck, but surely you are taking crazy pills.

Would it hurt researchers to actually put a date on the literature they produce? They're also quoting research that was done around the time of the crash, which is hardly current news (and was hardly an environment for taking historically predictive measurements).

Given the accuracy of the economic forecasts before the vote (there was a 'near unanimous consensus' that there would be immediate damage to the economy in the event of a vote to leave), I'm hesitant to accept a paper written on the basis of comparing apples to kumquats. Trade with people that we care enough about (and are close enough to) to actually write up a trade agreement is higher than trade with those that we don't is hardly conclusive evidence of anything.

There has to be some question about cause and effect too - is trade good because we have a trade agreement, or do we have a trade agreement because trade is good?

It also seems to assume that whatever post-EU agreement we sign up to is as bad as not having any trade agreement at all.

Basically, it's guesswork. These people in one breath declare it's an incredibly complex process that will take years and years to negotiate, and in the next go on to predict the outcome of that negotiation.

Edited by Tuna on Wednesday 25th January 10:48

[paulrockliffe]

Sway said:

Single Market is not a free trade deal. It's a customs union. Plenty of free trade deals without customs union, which they don't seem to have compared, and is most definitely not off the table yet.

Further, they are doing an analysis of countries across the EU and averaging them. Giving Greece the ability to borrow staggering chunks of cash for guaranteed purchases from Germany will be one example of an influence beyond a simple comparison of 'trade with customs union'/'trade with FTA'/'trade under WTO'.

If we look at the current situation, gbp:eur has fallen which most would agree is likely to encourage increased trade. We may be leaving the single market, but there's no guarantee that we won't have some form of free trade deal, although I accept that there are logical arguments for all sides of the probabilities that one will be agreed. Even if we revert to WTO MFN, costs are likely to be largely the same as prior to the result and pound devaluation.

Once again, I struggle to understand why it's considered (and presented as) absolute that trade with the EU will fall. Let alone what's going to happen with RoW trade.

It is this that I am trying to challenge - that economics is a defined enough science that such predictive absolutes can form in people's minds.

There are lots of reasons why trade within the EU would be higher than trade between other comparables. For example, the research relies on recognising where trade takes place, but this is skewed because within the EU there is less imperative to setup subsidiaries in each country. So if I was in Germany and wanted to sell lots to France I might just do that, but if I was in America and wanted to sell lots to Canada I am more likely to setup a subsidiary in Canada. In the latter case the cross-border sales wouldn't be recognised as cross-border at all.

I'm sure if you digged down into almost all examples of this sort of 'social' research you could pick holes in the argument left right and centre. It doesn't mean they're wrong, just that fixing your flag to a particular mast may well leave you looking a bit daft when/if empirical evidence shows what's really going on.