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Foreign multinationals in services sectors: A general equilibrium analysis of Brexit

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  • Latorre, María C.
  • Olekseyuk, Zoryana
  • Yonezawa, Hidemichi

Abstract

We examine the role of foreign multinationals in services sectors in the context of Brexit, which we define as the combination of the increase in barriers to multinationals in services sectors as well as the increase in non-tariff barriers to trade and import tariff between the UK and the rest of EU. We use a state-of-the-art Melitz approach in manufactures with multinationals operating in imperfectly competitive services sectors in a multiregional general equilibrium framework. We find that the increased FDI barriers in services sectors explain about one third of the total welfare loss of Brexit. Furthermore, our decomposition analysis (by introducing each type of barriers separately) shows that the barriers against EU services multinationals in UK are harmful to British manufacturing sectors because they face a reduced (and more expensive) supply of intermediates of services.

Suggested Citation

  • Latorre, María C. & Olekseyuk, Zoryana & Yonezawa, Hidemichi, 2019. "Foreign multinationals in services sectors: A general equilibrium analysis of Brexit," Conference papers 333062, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333062
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    2. Peter H. Egger & Johannes Schwarzer, 2020. "The effects of services trade policies. Introduction to the special issue," The World Economy, Wiley Blackwell, vol. 43(11), pages 2826-2829, November.
    3. Ortiz Valverde, Gabriela & Latorre, MaríaC. & Cubells, José Francisco, 2024. "The EU–UK Trade and Cooperation Agreement: A short and long-term comprehensive analysis including FDI," Economic Modelling, Elsevier, vol. 139(C).
    4. Zhou, Jing & Latorre, María C., 2021. "FDI in China and global production networks: Assessing the role of and impact on big world players," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1225-1240.
    5. Rammal, Hussain G. & Rose, Elizabeth L. & Ghauri, Pervez N. & Ørberg Jensen, Peter D. & Kipping, Matthias & Petersen, Bent & Scerri, Moira, 2022. "Economic nationalism and internationalization of services: Review and research agenda," Journal of World Business, Elsevier, vol. 57(3).

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