City Research Online

Abstract

So long as the UK government liberates itself from the protectionist mindset of the European Union and reduces trade barriers after Brexit, and UK businesses respond positively to the challenge of increased international competition (through increased productivity and exports), the prospects for UK trade and prosperity post-Brexit are very bright indeed. The EU itself acknowledges that 90% of future growth in global gross domestic product will be outside the EU. The costs of remaining in the EU are very high and not all purely economic: the EU is no longer a force for global liberalisation. On the basis of both international and EU law, the monetary costs to the UK of leaving the EU should have been fairly low. Similarly, the frictional costs to both the UK and the EU of their post-Brexit trade relationship should also be low. However, as a consequence of both the concessions made by the UK in order to demonstrate its goodwill and the hard line taken by the EU in order to discourage other member states from leaving, these costs could well end up being much higher than they need be for both sides. Of particular concern is the EU’s ‘level playing field’ demand, laid out in the (albeit non- binding) Political Declaration for a future trading relationship. This would effectively prevent the UK from achieving regulatory autonomy or from pursuing an independent trade policy. The Treasury predicts a 7.7% reduction in GDP in the event of ‘no deal’ in which the UK retained the existing Common External Tariff with the rest of the world and also imposed the same tariffs on trade with the EU. However, EU barriers on trade in food and manufactures raise their prices by 20%. If the UK leaves the Customs Union and these barriers are reduced from 20% to 10%, UK GDP would rise by 4%. The cost of meeting the excessive regulatory standards of the Single Market is equivalent to 2% of GDP. If the UK also leaves the Single Market, UK GDP would rise by 6% in total, very similar to the 5.4% increase in GDP following Australia’s trade liberalisation in 1986.

Publication Type:	Article
Additional Information:	Copyright 2020, Addleton Academic Publishers. Please see the Publisher's version/PDF for the definitive version of record
Publisher Keywords:	international trade, free trade agreements, protectionism, tariffs, non-tariff barriers, Brexit
Subjects:	H Social Sciences > HG Finance H Social Sciences > HJ Public Finance J Political Science > JN Political institutions (Europe) J Political Science > JN Political institutions (Europe) > JN101 Great Britain
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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