The talking heads of the IMF and OECD support Remain. Their databases don’t
Civitas, 15 June 2016
By Michael Burrage
Christine Lagarde of the IMF, and Angel Gurría, of the OECD, have supported of the campaign to remain in the EU by providing grim forecasts of the UK economy post-Brexit. Their forecasts were necessarily largely guesswork, since none of them know what a post-Brexit government will do, or for that matter, how the ongoing crisis within the eurozone will unfold.
Neither of them prefaced their predictions with accounts of the benefits that the UK may have enjoyed over the 23 years of the Single Market, or the 43 years of membership, which it will lose by leaving. Instead they compare the gains that they think, or guess, we might expect by staying, with the lesser gains or losses that they think, or guess, the UK will incur by leaving.
This is a curious form of argument since it ignores or obscures the comprehensive evidence of such benefits as the UK may have enjoyed as a result of EU membership which the databases of their own institutions’ provide, and is the one sure foundation for speculation about what might happen in the future. They are like politicians who say nothing about their party’s record in government, or company directors who say nothing of their audited accounts, and speak only about future plans.
The IMF Direction of Trade database allows us to compare the goods exports of the UK to the other members of the European Union with those of all the countries have traded with the European Union under WTO rules, meaning they are not helped by any kind of trade agreement. The Chancellor, the Treasury, and the OECD, reckoned this to be ‘the worst possible option’ for the post-Brexit UK. It was on the back of this judgement that they made their predictions about falling GDP, productivity, lower incomes in post-Brexit UK.
There are more than 100 countries which export to the EU under these supposed disadvantages, and forty of them exported goods valued at more than $1 billion in 2015. These larger exporters may be ranked in terms of the rate of growth of their exports to the EU from the inauguration of the Single Market in 1993 to 2015. When the UK is added to the rankings of these 40 countries, its rate of growth puts it in 37th position, meaning there are 36 non-member countries, including Canada, New Zealand, the BRIC countries, the United States, Malaysia, Singapore and host of emerging countries whose exports to the EU have grown at a faster pace than those of the UK over the years 1993-2015.
From this evidence, it is difficult, if not impossible, to identify either the benefits of EU membership for UK exports, or the disadvantages of non-membership for 36 of them who have been exporting to the EU under WTO rules. Why then UK should worry about leaving the Single Market and joining them? It can hardly do much worse than it has been doing for the past 23 years.
The OECD database shows the same is true of services. The services exports of sixteen non-member countries to the EU have grown faster than those of the UK over the years 2004-2012. Can helping to make the rules possibly be as important as Mr Cameron says it is, if non-members have benefited from the Single Market in Services more than its members?
There are other past predictions and promises about the benefits of EU membership and the Single Market which can easily be checked and disproven in the OECD database. Those referring to increased productivity and employment are perhaps the most notable examples. Productivity in the EU 12 has grown more slowly than in most other OECD countries since 1993, and unemployment has been consistently higher than in all of them for over 20 years.
The best case for remaining in the EU would be a documented account of benefits to UK exports, productivity and employment in the past compared with non-members. To be credible, it should also recognize the failings of its Single Market, as the European Commission has occasionally done, and of past predictions about it. Mme Lagarde, and Snr Gurría do none of these things, and hence are not credible.
They have all decided to rest their case on the difference between predictions about the possible gains that the UK might make if it decided to remain a member and predictions losses that it might incur if it left the EU, each of which requires multiple debatable assumptions. They do not even tell us how good their models have been in their past predictions.