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The Economic Impact of Brexit: Evidence from Modelling Free Trade Agreements

Author

Listed:
  • Ansgar Belke

    (University of Duisburg-Essen
    Institute for the Study of Labor (IZA))

  • Daniel Gros

    (Centre for European Policy Studies (CEPS))

Abstract

This paper assesses the economic implications of the United Kingdom (UK) leaving the European Union (EU). The basic data on trade in goods and services and investment between the two parties suggest that the cost of “Brexit” could be substantial. Trade between the UK and the EU-27 is large and of a similar order of magnitude as transatlantic trade (between the EU and the U.S.). The precise nature of the (hopefully free) trade agreement UK-EU-27 is still being negotiated. All available studies concur that a significant disruption of trade links will impose economic costs on both sides. However, the EU-27 would bear only a disproportionally small share of the total cost, not just because it is about five times larger than the UK in economic terms, but also for fundamental reasons such as greater market power of its enterprises. Other studies on different free trade arrangements confirm the general proposition that the smaller party has more to gain from eliminating trade barriers (and more to lose from imposing them). This implies that the EU will have a stronger negotiating position.

Suggested Citation

  • Ansgar Belke & Daniel Gros, 2017. "The Economic Impact of Brexit: Evidence from Modelling Free Trade Agreements," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(3), pages 317-331, September.
    • Handle: RePEc:kap:atlecj:v:45:y:2017:i:3:d:10.1007_s11293-017-9553-7
    DOI: 10.1007/s11293-017-9553-7
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Tories' structural problem
      by chris in Stumbling and Mumbling on 2017-07-04 18:34:41
    2. Brexit, Marxists & the state
      by chris in Stumbling and Mumbling on 2018-10-14 11:33:22

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    Cited by:

    1. Ansgar Belke & Daniel Gros, 2021. "The slowdown in trade: end of the “globalisation hype” and a return to normal?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(2), pages 225-239, April.
    2. Bhattarai, Keshab & Mallick, Sushanta K. & Yang, Bo, 2021. "Are global spillovers complementary or competitive? Need for international policy coordination," Journal of International Money and Finance, Elsevier, vol. 110(C).
    3. Emmanuel Brunet-Jailly, 2021. "Introduction: How the British-exit is Impacting the European Union?," International Studies, , vol. 58(2), pages 133-149, April.
    4. Begg Iain, 2019. "No Longer “The Economy Stupid”: How Muddled Economics Contributed to a Chaotic Brexit," The Economists' Voice, De Gruyter, vol. 16(1), pages 1-14, December.
    5. Sanguinet, Eduardo & Alvim, Augusto, 2020. "Effects of EU-MERCOSUR trade agreement on bilateral trade: the role of Brexit," Conference papers 333194, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Eduardo Rodrigues Sanguinet & Augusto Mussi Alvim, 2024. "The effects of the EU-MERCOSUR agreement on bilateral trade: the role of Brexit," International Economics and Economic Policy, Springer, vol. 21(1), pages 227-249, February.
    7. Deaconu Elena-Mădălina & Pătărlăgeanu Simona Roxana & Petrescu Irina-Elena & Dinu Mihai & Sandu Andrei, 2023. "An Outline of the Links between the Sustainable Development Goals and the Transformative Elements of Formulating a Fair Agri-Food Trade Policy – A Measurable EU Achievement," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 17(1), pages 1449-1462, July.
    8. Laura M. Werner, 2020. "Hysteresis losses in the Preisach framework," Empirical Economics, Springer, vol. 58(3), pages 1249-1278, March.
    9. Naser Makarem & Harjinder Singh & Nigar Sultana & Darren Henderson, 2023. "Policy uncertainty and real activities manipulation: evidence from Brexit," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1415-1440, November.

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    More about this item

    Keywords

    Brexit; European Union; Free trade agreements; Trade in goods and services; FDI;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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