Brexit: International Trade and Productivity

Upcoming workshop: Future UK Trade Arrangements: Potential Impact on the UK Economy

Brexit presents a potential challenge to the UK economy in terms of both international trade and productivity. If the UK does not secure post-Brexit trade agreements with the EU and Non-EU countries after the transition period is over, then after this period, the UK will face higher overall trade costs due to higher tariff and non-tariff barriers to trade between the UK and both the EU and Non-EU countries. These higher barriers to trade would lead to a fall in the UK productivity growth, which since the Financial Crisis of 2008 has been notoriously slow. 

As part of a larger project examining the links between international trade and productivity, we have developed a macroeconomic model of international trade which allows quantifying the effect of changes in tariff as well as non-tariff barriers to trade (associated with various possible trade agreements) on UK productivity and other important macroeconomic variables. 

Since our economic model enables us to quantitatively evaluate various possible trade agreements, proxied by various trade costs, we provide quantitative policy evaluations for various scenarios of trade agreements between the UK and both the EU and Non-EU countries. 

The research undertaken is multifaceted in the way in which it can influence the debates currently taking place on the UK’s exit from the European Union on a number of issues, strengthening the UK government’s negotiating position in the lead-up to Brexit, inform stakeholders, businesses and key institutions in their preparation for the UK’s exit from the EU. 

The research team is led by Dr Anamaria Nicolae. The project is funded by an ESRC NEDTC Collaborative Studentship (no. ES/J500082/1), ESRC Impact Acceleration Account Fund and Research Impact Funding 

If you are interested in the research we are currently undertaking on Brexit and international trade, please contact Dr Anamaria Nicolae or Dr Michael Nower 

Policy notes 

Future UK Trade Arrangements: Potential Impact on the UK Economy 

Future UK Trade Arrangements: Potential Impact on the European Union Economy 

FAQs 

Future UK Trade Arrangements 'No Deal' Mitigation 

Briefing notes 

Analysis of the UK Government’s ‘No-Deal’ Tariff Schedule 

Project highlights and impact 

As a result of our written submission Written Submission to the International Trade Select Committee UK's trade relationship with Australia and New Zealand Inquiry, we have been invited to give oral evidence to the International Trade Select Committee on 9th January 2019, which has been presented by Michael Nower. 

Our Policy Note Future UK Trade Arrangements: Potential Impact on the UK Economy has been cited by The North East Brexit Group 2018 in their report Leaving the European Union, in which a review of the opportunities, challenges and risks to the North East economy and its key sectors, with recommendations for action are presented. 

The findings of the research project have featured in: 

1. Written Submission (published 6th of December 2018) to the Treasury Select Committee The UK’s economic relationship with the European Union inquiry with PhD student Michael Nower. The submission presents: (1) an economic analysis and forecasts of the short and long-term impact of the Government’s proposed Withdrawal Agreement and the joint Political Declaration; and (2) an economic analysis and forecasts of the short and long-term impact of the UK leaving the EU without a deal and moving to WTO rules both with or without a transition period, by providing our quantitative assessment of the impact of these scenarios on UK GDP, productivity and the average real wage. 
2. Written Submission to the International Trade Select Committee UK's trade relationship with Australia and New Zealand Inquiry with PhD student Michael Nower. The submission addresses: the nature of two-way trade between Australia, New Zealand and the UK, including the economic significance of UK-Australia and UK-Zealand trade. 
3. Written Submission (published 10th of January 2018) to the International Trade Select Committee Continuation of the EU's current Free Trade Agreements by the UK post-Brexit Inquiry with PhD student Michael Nower. The submission addresses two relevant points: (1) grandfathering will play an import role in minimizing reduction in UK GDP post Brexit, and (2) although grandfathering in general is important, many of the EU Free Trade Agreements (FTAs) and other trade-related treaties to which the EU is a party are predicted to have a limited impact on the UK economy. 

This submission has been quoted directly within the body of the House of Commons International Trade Committee report Continuing application of EU trade agreements after Brexit, First Report of Session 2017–19 (Published on 28 February 2018). 

1. Written Submission (published on the 24th of January 2017) to the International Trade Select Committee UK Trade Options beyond 2019 Inquiry with PhD student Michael Nower. The submission addresses the trade-offs faced by various government priorities, and the key role of imports in determining the effect of trade on the UK economy, based on our work on trade and productivity. 

This submission has been quoted directly in: 

1. The House of Commons International Trade Committee report UK trade options beyond 2019, First Report of Session 2016–17 (Published on 7 March 2017). 
2. UK trade policy and Brexit, The Scottish Parliament, SPICe Briefing, 7 March 2018. 

Dr Nicolae was among the panel of experts on international trade and trade models invited to talk to the Parliamentarians about the effect of Brexit on trade and the UK economy. The event was titled Brexit: An Academic Conference and took place at the Houses of Parliament on 10 November 2016.