Economists have disputed claims from a pro-Brexit campaign group that leaving the customs union and new free trade deals could create 400,000 jobs, arguing it takes no account of the risks to exports.
Analysis by the Change Britain campaign group suggests that hard Brexit, where Britain leaves both the single market and the customs union, could ultimately be beneficial for the UK, citing reports that the US, India, the South American Mercosur group, China, Canada and South Korea have all expressed an interest in trade deals.
Agreements with these countries would create almost a quarter of a million jobs, a figure that could rise to just under 400,000 if deals were struck with Japan and the Asean group of states that includes Thailand, Indonesia and Malaysia, the group’s analysis said.
But Jonathan Portes, professor of economics and senior fellow at the thinktank UK in a Changing Europe, called the report’s figures “entirely fictional statistics” and said they did not take into account possible risks of leaving the customs union.
“Successful free trade deals would increase both exports and imports,” he said. “Calculating, as Change Britain does, a speculative figure for the number of jobs created by additional exports while ignoring the jobs lost as a result of additional imports is either deeply ignorant or deliberately misleading.”
Portes said he also believed it was misleading for the report to cite extra benefits including free trade agreements with countries such as South Korea. “The report scores the impact of the EU-Korea FTA as a benefit from Brexit,” he said.
“Since this has been in force since 2011 – and would not necessarily continue post-Brexit, although it may well do so – this is a potential cost, not a benefit. Whatever your view on the economics of Brexit, Change Britain are again doing their best to distort the debate.”
A Change Britain spokesman said that though the South Korea FTA had been provisionally applied for a number of years, all tariffs only formally disappeared from 2016. “The European commission has said that many benefits would not be clear for at least 10 years – that’s why we are including these benefits in our calculations,” the spokesman said.
“We have used the same methodology as used by the EU commission in its papers on the benefits of free trade. This is the very institution that Portes is still campaigning in favour of.”
Change Britain’s spokesman said it was “a shame that experts like Portes continue to talk Britain down”.
Simon Tilford, the deputy director of the Centre for European Reform thinktank, said Change Britain “seem to assume that leaving the deepest and biggest customs union and free trade agreement in the world, the EU, with which we do half of our trade, will not have any negative economic implications and will not cost employment – that’s an unserious proposition”.
Change Britain, which developed out of the official Vote Leave campaign, is chaired by Labour MP and leave supporter Gisela Stuart and has backing from prominent MPs including Michael Gove and Dominic Raab as well as former chancellor Nigel Lawson.
The report’s figures are calculated using a European commission study from 2012 that estimated 16,700 jobs would be created for each billion euros of extra-EU exports.
“This means that the number of UK jobs that will be created from trade deals with these countries can be calculated by simply dividing 16,700 by the UK’s proportion of extra-EU exports – 14.99% in 2015,” the report says. “This process produces a new figure of 2,503 new UK jobs for each €1bn of extra-EU exports.”
Sam Bowman, the executive director of the neoliberal Adam Smith Institute, wrote in a blogpost that the numbers were “basically junk” and said the heavyweight backers of Vote Leave “can do better than this”.
“The extra exports figures come from using EU projections about the benefits of trade deals with countries and blocs like India, China and Mercosur, and dividing by Britain’s share of extra-EU trade (15%),” he wrote.
“This is fairly misleading, because it assumes that the UK could get the same terms as the EU, which is unlikely, since the UK is a much smaller economic bloc than the EU, so other countries will be less willing to give us what we want to get access to our market. It’s very much back-of-the-fag-packet stuff.”
The pro-single market campaign group Open Britain, the continuity arm of Stronger In, called the report “misleading, fantasy figures” that undermined the case for leaving the customs union.
The Labour MP Phil Wilson, an Open Britain supporter, said: “The EU helps increase the UK’s global trade links, giving our economy access to over 50 other global markets. We should be looking at ways to protect these benefits, not sacrificing them on the basis of made-up, misleading numbers by anti-EU ideologues.”
Open Britain said one key issue was that the report factors in a trade deal with India, which the Indian government has said would be reliant on an increase in student visas, incompatible with Change Britain’s desire to cut migration.
Tilford said the UK was likely to find it hard to broker deep free trade agreements with countries such as India unless it was prepared to offer visa liberalisation. “Britain was one of the biggest obstacles to an EU-India free trade agreement and the reasons for that was that the UK did not want to give greater access to Indian IT specialists,” he said.
“We’ve left the EU, so why Britain would immediately do a volte-face on that is not clear. Britain alone would have to concede much more to get access to the Indian market.”
Announcing the report, the Change Britain founding supporter and former CBI director-general, Lord Jones of Birmingham, said: “The UK has a rich history as a great trading nation. It is therefore no surprise that a number of major economies have already expressed an interest in striking free trade agreements with us.
“The only way we can make the most of these huge opportunities is to leave the EU’s customs union and take back control of our trade policy. This will create hundreds of thousands of new jobs in a range of industries right across the UK. We can then take our place as one of the global champions of free trade.”
The Liberal Democrat leader, Tim Farron, said Jones was “competing for the Booker prize for fiction” with the report’s conclusions. “Leaving the customs union would at a stroke deny us access to the economies of 50 countries. It would gamble British jobs on foreign trade agreements that are years from being struck,” he said.
A Department for International Trade spokesman said: “It’s right to take time to work out the best options for the UK’s trading relationship after we leave the European Union. As we have said before, those decisions have yet to be made.”
This article was written by Jessica Elgot Political reporter, for theguardian.com on Tuesday 3rd January 2017 12.42 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010