Brexit, borders, smoke and mirrors

It’s a truism, but very probably correct: if voters prioritise jobs, growth and the economy, Remain will win the EU referendum; if they put immigration and borders first, Leave will triumph.

Remain has by far the stronger economic case: the likely effects on economic growth, the public finances and trading relationships are very clear, and Leave hasn’t really even tried to explain them away. Inevitably, they’re starting to major on migration; and depressingly but unsurprisingly, many leading Leavers are doing so in a profoundly unpleasant fashion.

The evidence on migration’s impact is mixed. Economically, most agree it makes for more growth. Immigrants create demand and thus jobs as well as filling vacancies. Most people’s wages seem very marginally affected, if at all. That said, those at the bottom of the income distribution may lose slightly – although the impact is dwarfed by the economic self-harm Brexit represents, or for that matter the Conservatives’ cuts to welfare, any ‘marginal’ loss will undoubtedly affect them far more than their fellow citizens. Undoubtedly, public services have come under real pressure in areas where migration has been most rapid (though immigrants also play a large role in staffing many of those services).

So it’s completely fair to raise immigration as an issue for wages, public services and indeed a source of anxiety about the pace of change. But it’s not OK to peddle promises you can’t or won’t keep in order to score a point: and Leave has been doing exactly that.

Single market membership means free movement

There is one country in the European Economic Area which has membership of the single market without being required to accept free movement (at least for now): Liechtenstein. Liechtenstein has a population of around 37,000 and a very high proportion of people born abroad. Every other country with single market membership has to accept free movement as part of the deal.

The UK is a relatively large European country. Its net migration rate isn’t exceptionally high by the standards of western Europe. And immigrants contribute more to its public purse than they take out. There is no good reason for it to argue that it and Liechtenstein are the only two countries in the EEA who merit special exemption from free movement, and no reason to believe the rest of the EU will see fit to grant it one anyway.

Global free trade? Get in the queue

As a result, the Leave campaign has talked itself into an economic corner, tacitly arguing for leaving the single market outright. The vast majority of economists are clear this would be immensely damaging for the economy, and thus for British jobs and wages. It would hurt the real incomes of the poorest far more than immigration from EU member states ever could.

At the very least, you might expect Leavers to have some semblance of an economic alternative for the UK once it leaves the single market covering 44% of its trade and the trade deals covering more again. So far, the strategy seems to be ‘strike a free trade deal with the EU and a whole host of other countries and then be a hyper-liberal, hyper-open economy afterwards.’

This relies on other states, many either profoundly alienated or utterly bemused by Britain’s presumed decision to walk out on its neighbours, moving the UK to the front of the queue for special trade deals – a willingness which the US, WTO and others have made clear does not exist. Brexiteers often seem to think it also involves torching EU-protected workers’ rights: centre-left Leavers should think hard before lending their names to it.

Open economies have porous borders

How does all this relate to the immigration debate? Let’s look at the 2015 estimated net migration rates per 1,000 of population for the main developed economies (microstates aside) outside the EEA and Switzerland, by comparison with the UK.

UN Population Department CIA World Factbook
Singapore 14.90 14.05
Canada 6.71 5.66
Australia 8.87 5.65
Hong Kong 4.20 1.68
United States 3.17 3.86
United Kingdom 2.83 2.54
Israel 2.24 0.50
South Korea 1.27 0.00
Japan 0.55 0.00
New Zealand 0.33 2.21
Taiwan —– 0.89

Note that the free-market entrepôts (Singapore, Hong Kong) have pretty high migration levels. That’s unsurprising: they’re open to cash from abroad, trade with abroad, investment from abroad – and thus, generally, people from abroad. Multinational companies want to bring people in; relatively open labour markets attract people looking for work, and employers can find it hard to fill gaps; aggressively anti-immigration policy/rhetoric may deter investment. The US, Canada and Australia have notably higher immigration levels than ours (New Zealand’s rate has fluctuated over the years). The exceptions are the East Asian countries, and they all face severe demographic crunches. Japan, in particular, has had sluggish growth for decades and has been trying to tackle its labour market problems without more immigration – without much success.

So is Leave’s plan for Britain to assert itself as a detached, trading nation, dealing with the whole world as openly as possible and pursuing a free trade strategy with the wider world? If so, it’s singing siren songs of pulling the drawbridge up, while its economic ‘strategy’ implies throwing it down. The tenor of its campaign is ‘Stop the world, I want to get off’; the logic of its economics is ‘Ride the world at breakneck speed.’

Perhaps immigration levels would be a bit lower outside the single market; perhaps a somewhat lower share of immigrants would be unskilled workers. But Brexit wouldn’t change the fundamentals: we would still have substantial net immigration, and the ‘tens of thousands’ target would remain a chimera. (People who say Brexit would allow more liberal Commonwealth migration know this perfectly well: net migration from outside the EU is 188,000.) Being ejected from the single market we helped create, helping set off a race to the bottom on workers’ rights, losing security co-operation, undermining a leading actor on climate change and losing influence in the world is a very high price to pay for some tweaks at the margin.

Advertisements

2 thoughts on “Brexit, borders, smoke and mirrors

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s