If we vote for Brexit what happens

setmefree2

The optimal WTO option and the route to a Free Trade Agreement with the EU
The best WTO option to carry out Brexit in terms of the demands set out above is to remove the existing EU trade barriers on our imports from the rest of the world, including the EU, and go to full global free trade. By doing this we reduce consumer prices sharply and stimulate the economy. Our exporters will no longer get protected EU prices, instead they will face world prices and the global competition that implies. Half our manufacturing exports already are sold outside the EU on world markets, and one third of our manufacturers are hi-tech, fully able to face global competition. So it is a challenge for the rest that can be surmounted by tried means: go up the value chain and raise productivity. It will be assisted by greater competitiveness as those consumer prices work through the economy lowering costs, accompanied by a lower exchange rate. There are farmers and firms (like Port Talbot steel) we need to help out, which we can easily afford to do from the massive gains we make from leaving the EU.

However, we may well decide on political grounds that we should enter into a transitional trade deal on specific industries over say the next 5-10 years, to give our neighbours and our own firms some help over the adjustment process. An obvious example is cars. We exported in 2014 £11.9 billion worth of cars to the EU, and £17.9 billion to the rest of the world; we imported from the EU £31.3 billion and £4 billion from the rest of the world. Total domestic car sales were worth some £64 billion. After Brexit without a trade deal our exporters would face the EU tariff of 10% so their profits on EU exports would fall by this. As EU trade barriers on world imports are more like 20% on our calculations, EU exporters to the UK would face price falls of about 20% on their sales here, with imports here from the rest of the world undercutting them. Consequently the EU would much welcome a trade agreement on cars over say the 5 years from the end of negotiations (itself 2 years) that preserved the status quo. From the UK side there are political attractions in such a deal, since the car industry would get a breathing space in which to prepare itself for the necessary changes it would need to make to raise productivity and adjust; more importantly we could show neighbourly understanding to our EU ex-partners that would grease the future path of cooperation we all should wish to occur.
What we see here is an example of how the UK would indeed move to a trade deal on cars from a position of bargaining strength. The UK can by its own national policies perfectly well deal with the adjustment problems of the car industry. But we can benefit politically from a trade deal here both for the sake of goodwill with our neighbours and because it removes the need to make particular arrangements for the car industry.
From the point of view of a jittery British public the prospect of such specific trade deals is reassuring also. If possible British voters want cooperation with the rest of the EU, not confrontation. After a bitter referendum campaign in which harsh things have been said by EU and UK politicians, this would be a soothing prospect.

the optimal policy is quite clear and perfectly achievable. It is to move to global free trade under the WTO but be willing to negotiate an FTA with the EU on specific industries for a transitional period. So this policy needs to be clearly explained now, so that people can be reassured.

http://www.economistsforbrexit.co.uk/a-vote-for-brexit

Christine.Hamilton_2

Thanks for starting this thread. Keen to gather opinion even after the debate.

StevieJ

setmefree2 wrote: »

But he did try to take us into the Euro without a referendum - just because he failed doesn't excuse him in my eyes.

Not sure about failing he secured an opt out for the UK in Maastricht treaty negotiations.

david1951

Crashy_Time wrote: »

So would Steve find it easier to pay his massive mortgage at 0.5% base or 6%, and are the class of investors like Steve going to be bailed out again or left to take the consequences of their actions?

Steve is currently unemployed and living with his mum. However, he rents the house out at a rate that covers the mortgage. I guess if interest rates went up there would be a point at which he could not afford the payments and then he would need to sell or increase the rent. Or have a meltdown.

I'm guessing you want Steve to have a meltdown and I'm not sure what interest rate rise would be required for that to happen, but probably a few % at least.

So looks like Steve is OK for now.

I suppose my point is that interest rates would probably have to do as you say - jump suddenly to 6% - for any real crash to occur. No one is predicting that as far as I can tell. Most likely thing is we ride out the uncertainty with low rates and then increase them gradually, no?

setmefree2

StevieJ wrote: »

Not sure about failing he secured an opt out for the UK in Maastricht treaty negotiations.

When we crashed out of the the ERM (Black Wednesday/Golden Wednesday - depending on your view - 16th September 1992- he failed in what he was trying to do - which was take the UK into the Euro (without asking us).

Don't forget what the ERM was

The European Exchange Rate Mechanism (ERM) was a system introduced by the European Economic Community on 13 March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union

Did anyone ask you if you wanted Economic and Monetary Union with Europe? Unbelievable when you look back at it.

Think back to 1993 too - did anyone ask us if we wanted political union?? Equally unbelievable.

Crashy_Time

david1951 wrote: »

Steve is currently unemployed and living with his mum. However, he rents the house out at a rate that covers the mortgage. I guess if interest rates went up there would be a point at which he could not afford the payments and then he would need to sell or increase the rent. Or have a meltdown.

I'm guessing you want Steve to have a meltdown and I'm not sure what interest rate rise would be required for that to happen, but probably a few % at least.

So looks like Steve is OK for now.

I suppose my point is that interest rates would probably have to do as you say - jump suddenly to 6% - for any real crash to occur. No one is predicting that as far as I can tell. Most likely thing is we ride out the uncertainty with low rates and then increase them gradually, no?

Maybe, but the rates wouldn`t have to go near anything like 6% though to cause quite a few people in the UK sleepless nights IMO. I don`t think people are as cash cushioned as many like to think, but it is the rumblings in the financial media that low rates are starting to hurt the 1% that are ominous (if you are over-leveraged) The cuts were not for the little guy, and neither will be the rises (although the political fall-out, i.e Trump, of people realising that their savings and pensions were raped to bail out Money Street will also be something for the big players to chew on) All IMO of course.

Harper123

Crashy_Time wrote: »

http://www.thisismoney.co.uk/money/comment/article-3699739/Osborne-house-price-addiction-worse-Hammond-stop-it.html


The "Price Police" are all over the comments of course, but a sensible article nonetheless. Brexit is perfect cover to let UK property pop, letting banks lend more at safer multiples. Bloomberg yesterday had some discussion where they seemed to conclude that low rates for too long and PTB interference in markets have led to political effects like Trump and Brexit (which are bad results for "elites") Watch them try to tweak rates up in the near future.

What do you think is a safe income multiple?

Crashy_Time

Harper123 wrote: »

What do you think is a safe income multiple?

One you can pay back without emergency interest rates and a childlike belief in the HPI fairy.

Harper123

Crashy_Time wrote: »

One you can pay back without emergency interest rates and a childlike belief in the HPI fairy.

And that figure is?

iantojones40

Crashy_Time wrote: »

Maybe, but the rates wouldn`t have to go near anything like 6% though to cause quite a few people in the UK sleepless nights IMO. I don`t think people are as cash cushioned as many like to think, but it is the rumblings in the financial media that low rates are starting to hurt the 1% that are ominous (if you are over-leveraged) The cuts were not for the little guy, and neither will be the rises (although the political fall-out, i.e Trump, of people realising that their savings and pensions were raped to bail out Money Street will also be something for the big players to chew on) All IMO of course.

Very true, I reckon I.R's of just 2-3% would see a lot of people in a lot of trouble.
A recent study found a third of (so called) middle class professionals would have to resort to borrowing if confronted with an unexpected £500 bill.