Professor Patrick Minford says Britain’s new trade deal with Australia is worth a potential £69billion – three times more than Whitehall’s predictions. He has called for an urgent about-face from “institutionalised” anti-Brexit bias to recognising the UK’s future as a trading superpower. In analysis published by think tank Civitas, the economist said: “Why are UK officials indulging in miserably low predictions from Free Trade Agreements?
“Official calculations are biased towards nearby countries, or the European Union in other words, when benefits from deals outside the EU are huge.
“There is a culture of ‘misberalism’ (sic) at the heart of Government modelling and we need to overhaul these methods urgently.”
He added: “Government figures look way off the mark and underestimate the benefits of our new global Free Trade Agreements.”
Prof Minford’s report looked at economic modelling used by Government officials to work out the benefits of deals.
He said the Australian pact had been forecast to offer only a “trivial gain” to the UK economy of less than 0.08 percent, or £1.9billion. But he said that rocketed to three percent – £69billion using fresh assumptions.
Prof Minford has now urged International Trade Secretary Anne-Marie Trevelyan to overhaul the way trade deals are assessed.
Ex-Brexit minister David Jones said of Prof Minford: “He was so highly regarded he was one of Margaret Thatcher’s ‘wise men’.
“Anne-Marie Trevelyan would be well advised to listen carefully.”
Since the UK quit the EU in 2020, the Government has rolled over nearly all trade deals Brussels secured outside the bloc and negotiated new ones with Australia and New Zealand.
It has also applied to join the £9billion Trans-Pacific trading bloc.
Comment by Patrick Minford
Boris Johnson’s term “misberalism” (sic) describes a frame of mind that always errs on the side of extreme negativity.
And it’s clear that chronic misberalism is widespread among officials who are cooking up trade deals for the UK.
Official misberalists predict our most recent deal with Australia will only boost UK GDP by 0.08 percent.
Yet I’ve found that this agreement alone is set to bank the UK more than £6billion and add 3 percent to our GDP.
The problem is that officials use the “gravity theory” model, which posits that trade is determined by neighbours’ demand for your products – the closer they are to us and the larger their GDP, the greater the demand.
But according to the alternate “classical” model, the main driver of trade is supply. In a straightforward comparison test, I found this model to be a better predictor of economic gains using past performance.
It’s puzzling that it isn’t the basis for official projections for the benefits of global Free Trade Agreements we strike.
• Patrick Minford is the Prof of Applied Economics