Once more into the breach on the gravity model of trade

As seems to be turning out Brexit has not had some disastrous effect upon British trade. There’s some rebalancing between trade with the remnant European Union and the rest of the world and that’s about it. Which leads The Telegraph to tell us that:

First, the single market is wildly over-sold, and so is the textbook "gravity model" of trade, on which the Treasury and most trade experts relied to forecast catastrophe once we left the bloc. In truth, even though its cheerleaders like to sell it as the EU’s crowning achievement, and a jewel that must be protected at all cost, it does not make much difference one way or the other, and certainly not between major developed countries.

It is tariffs and quotas that count, not regulatory alignment, and those are dealt with under World Trade Organization rules, and were set aside by the trade agreement. Beyond that, it is an irrelevance.

Well, yes, and also no, not quite. The thing being that all too few understand the gravity model.

Large economies trade more with each other than do small - obvious enough, a large economy has more economic activity. Economies close to each other trade more with each other. Thus the analogy to gravity, large close economies have more influence upon each other than do small and far apart. The Earth and Moon have more gravitational impact upon each other than do Ceres and Europa, The Sun is very large and has impacts on all of them.

However, the distance that is talked of is not geographical distance, it’s economic. “Economic” here being that mixture of simple geography, transport links, artificial barriers like borders, more artificial barriers like customs declarations, tariffs, quotas and so on. At which point it should be obvious that the single market was tipping the scales in the measurement of that distance. The absence of that free movement, the reversion to all trading with the UK on the same terms - to the extent this has actually happened - means that all are now competing on the same economic distance. The same economic distance as measured by those artificial barriers such as tariffs, quotas and so on.

Lower economic distance is a good thing, of course it is, more trade makes us richer and all that. But the changes in trade barriers are allowing the gravity model to play out on that level playing field as EU membership did not. Thus the reallocation of trade relationships to non-EU members:

The UK is returning to a historic trading relationship with the rest of the world, which means trade with the EU will fall a lot more over the next few years.

That’s not a violation of the gravity model of trade it’s a proof of it.

Of course, what we should really do is abolish all those artificial additions to economic distance by simply moving to unilateral free trade. But then as we know such obviously sensible actions have no chance in politics, do they?