Trade 101

I've been arguing with a numpty who refuses to acknowledge that Brexit has led to a decrease in trade and a consequent loss in GDP.

Lets look at the logic:

• Why do companies export? To grow their market and business. Countries like export trade, as it offsets imports, which could risk a huge imbalance of trade and money leaving the country.
• Why do countries enter into trade agreements? Because they reduce tariffs and paperwork and hence facilitate increases in trade through decreasing trade friction. Most importantly, and the key to the argument is that, if this isn't the case, then why did we ever join the EU and why have the Conservatives been scrabbling around seeking trade deals to replace lost EU trade?
• If you're in a trade deal, then it's logical to expect that leaving such trade deal will put cost barriers back in the way of trade, leading to a decrease in export trade and hence GDP, especially with your largest trade partner. It won't curtail exports completely, but there will be a significant loss when competing against countries still within the trade area, which will have lower prices than you - you're at a structural disadvantage. Even if you do manage to keep exporting into the bloc you just left, profits will take a hit because you (or your customer) have to absorb the extra costs, meaning a loss of GDP.
• If people leave your country as a result of leaving a trade bloc with Free Movement, or leave the economy and retire early, then there will be a number of job vacancies. Yes, this will lead to a drop in unemployment. This is not due to growth in the economy, but a contraction in the labour force. There are currently 1.2m unfilled vacancies (see chart below), and every unfilled vacancy reduces output, profit and hence GDP. To grow an economy, a country needs a certain amount of unemployed (and skilled) people to fill vacancies that occur because of growth - it's a necessity for growth, commonly called a reserve army of labour. The higher the growth, the larger that army has to be to absorb the new jobs.
• This is irrespective of any other factors which many be affecting productivity, be that Covid or the war in Ukraine.
• It can be argued as to how much of an effect leaving a trade deal has on the economy, but trade statistics are published and the OBR has estimated that we have suffered a 4% decrease in GDP due to Brexit alone. This is not a forecast, as my interlocutor maintains, but history, based on observed statistics prior to Covid and the Ukraine war.

How anyone can argue this is not the case defies common sense and is the hallmark of an ideologue.