By Greg Ip / Oct. 17, 2018
A study comparing Britain to peer economies finds its output is 2.1% below what it would be without Brexit.
Never in the last 70 years has a major advanced economy left a free-trade area. Brexit is providing the first real-world evidence of the costs that come from undoing the intricate bonds of globalization.
It is of course an extreme case of deglobalization: The European Union’s single market for goods, services, capital and labor is much more integrated than other free trade zones. Yet many of the barriers that are bound to rise between Britain and its partners, such as on regulations, trade penalties and immigration, are similar to those cropping up in the wider world, such as between the U.S. and its partners.
A reversal of globalization is not a catastrophe. Life in Britain was not nasty, brutish or short before it joined the EU, and predictions of panic and recession now look silly. There will also be benefits: Some production will move to the U.K. to avoid British tariffs, and the British will have more control over immigration and their laws. But a 2%-plus hit to their standard of living is not a rounding error. It should remind everyone that turning back globalization comes with a price.