Part of 1. Questions to the Cabinet Secretary for Finance – in the Senedd at 1:57 pm on 5 December 2018.
I would refer back to the chief economist's report, because he does say in it that there is a strong consensus amongst economists about the key principles of forecasting, one of which is that distance itself is a barrier and trade is generally more intensive with partners who are approximate, both geographically and in terms of their stage of economic development. The Treasury model and most of the other models that are referred to in this document use what is called a gravity model of forecasting, and the fundamental principle of that is that the amount of trade done between two countries diminishes with the square of the distance between them. But, all the data upon which this rather dubious forecasting model is based were compiled in the 1980s and before—a world in which there was no internet, no FaceTime, no e-mail, no Google Translate, no standardised containerisation, no opening up of former Marxist states, like China, for example, no World Trade Organization, even—and therefore, given that trade in services is now vastly more important to our economy and, indeed, the economy of our European neighbours than it was then, and global mobility is so much greater and the digital revolution has taken place, the assumptions upon which these forecasting models are made are wildly out of date, and that is why they produce these alarmingly out-of-kilter predictions, which are always proved to be totally wrong after the event.