Household shopping bills could fall by £305 a year if Britain defers to World Trade Organization (WTO) rules rather than setting up individual trade agreements with nations, claimed the former cabinet minister.
He said: "There are massive gains to every single citizen, if we leave the customs union and we escape the common external tariff.
"Every one of us eats three times a day, every citizen in this country would be better off if we have cheaper food at world prices."
The former environment secretary backs the lobby group Economists for Free Trade, which is arguing that unilateral free trade would cut consumer prices by eight per cent and add around four per cent to UK GDP.
Mr Paterson said that under this policy, farmers in Britain could then "react to market signals".
He said: "You let food-producing parts of this country rip.
"You escape the insane hideous hostility of the European Union to innovation… And you go for technology big time."
The MP said Britain's agriculture industry could follow in the steps of New Zealand, which cut subsidies and regulation for farmers in the 1980s.
He said: "If you let farmers react to market signals, extraordinary things will happen.
"The New Zealanders used to finance via head 70million wooly raggy things called sheep, they took away the subsidy they now have 30million - less than half - but they export more meat."
He added: "They've now got 2million deer and export $100million worth of venison.
"So let's let the productive areas of the country fly, on the basis of our incredible soil quality, which places like Kansas would die for, and our rainfall and our native wit and ability to develop agriculture technology."
Economists for Free Trade said that under WTO rules British exporters would be able to absorb EU tariffs - even if the block did not reciprocate with free trade.
Certain sectors could also be subsidised by savings made from not longer having to the contribute to the EU budget, according to the lobby group.