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The potential economic impact of Brexit on the Netherlands

Author

Listed:
  • Donal Smith
  • Christine Arriola
  • Caitlyn Carrico
  • Frank van Tongeren

Abstract

This paper provides estimates of the potential trade effects of an exit of the United Kingdom (UK) from the European Union (EU) on exports and production at the sectoral level as well as GDP in the Netherlands. Owing to the high uncertainty regarding the final trade agreement between the negotiating parties, the choice has been made to assume a worst case outcome where trade relations between the United Kingdom and EU are governed by World Trade Organization (WTO) most favoured nation (MFN) rules. In doing so, it provides an upper bound estimate of the potential negative economic impact stemming from disruptions in trade. Any final trade agreement that would result in closer relationships between the United Kingdom and the EU could reduce this negative impact. Simulations using the METRO model suggest that from an increase in tariff and non-tariff measures (NTM’s) Dutch exports to the UK would fall by 17% and GDP declines by 0.7% in the medium term compared to baseline. This effect is from the trade channel absent any change in foreign direct investment (FDI) or productivity. The Dutch agri-food sector would experience a 22% fall in its UK exports. There are some sectors that gain from the export opportunities provided by Brexit, notably financial services and transport.

Suggested Citation

  • Donal Smith & Christine Arriola & Caitlyn Carrico & Frank van Tongeren, 2018. "The potential economic impact of Brexit on the Netherlands," OECD Economics Department Working Papers 1518, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1518-en
    DOI: 10.1787/20cb5ddc-en
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    Cited by:

    1. Bergin, Adele & Economides, Philip & Garcia-Rodriguez, Abian & Murphy, Gavin, 2019. "Ireland and Brexit: modelling the impact of deal and no-deal scenarios," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).

    More about this item

    Keywords

    Brexit; computable general equilibrium model; European Union; international trade; METRO model; Netherlands; sectoral economic effects;
    All these keywords.

    JEL classification:

    • B17 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - International Trade and Finance
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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