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GTAP Resource #5223

"Forgone benefits of economic integration: Brexit"
by van Tongeren, Frank, Dorothee Flaig and Christine Arriola

Forgone benefits of economic integration: Brexit

Frank van Tongeren, Dorothee Flaig, Christine Arriola

Better understanding the economic effects of closer economic integration has always been a the heart of the GTAP project. This chapter looks at the benefits of integration by assessing the the opposite: the intention of the UK to leave the European Union.

This paper uses an ex-ante, ‘what-if’ simulation approach to assess possible economic consequences of Brexit. It uses the OECD METRO model to analyse consequecnes of possible future trade regimes. In a first variation the UK is assumed to face MFN treatment in all its export markets, in a second step the UK negotiates an FTA with the EU, but continues to receive MFN treatment elsewhere.

In the FTA scenario, the UK goes back to the existing zero-tariff regime for trade with the EU, but keeps receiving MFN elsewhere. Since the UK is no longer capable of influencing EU standards and regulations, it will forego some of the most important benefits of the single market. This will be more important over time as regulatory regimes diverge, and the simulations include estimates of those costs equal to half the trade cost reduction foregone by moving from intra-EU to extra-EU trade. The UK will also face rules of origin obligations (ROO) in the EU-UK FTA.

Resource Details (Export Citation) GTAP Keywords
Category: 2017 Conference Paper
Status: Published
By/In: Presented at the 20th Annual Conference on Global Economic Analysis, West Lafayette, IN, USA
Date: 2017
Created: van Tongeren, F. (4/8/2017)
Updated: van Tongeren, F. (4/8/2017)
Visits: 1,458
- Preferential trading arrangements
- European Union

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