Download Briefing Paper 51 Briefing Paper 51 – December 2020 Ilaria Fusacchia, Luca Salvatici and L. Alan Winters Key Points Introduction The Baseline Modelling Trade Policy The Effects of Brexit Incomes and Welfare Is the Global Tariff an Improvement? Has Signing a Free Trade Agreement Helped? Conclusion Key points Even with the free trade agreement (FTA) announced on Christmas Eve, Brexit increases UK-EU trade costs, reduces trade between them, and requires resources for form-filling, queuing, etc. These in turn, lead to changes in consumption which reduce UK residents’ welfare. Exports of value added will fall by nearly 5.5% relative to a pre-Brexit scenario and GDP by 4.4%. If there had been no FTA, each of these harms would have been about one-third larger and the variability of the losses across sectors would have been larger. The biggest losses in UK exports to the EU are predicted to be in motor vehicles, chemicals, and food. These large declines in gross exports of goods reduce the indirect exports of their suppliers of services very significantly Brexit will have a major impact in terms of reducing global value chains. The competitiveness of UK inputs into EU exports will induce declines in [...]

Briefing Paper 35 – July 2019 Ilaria Fusacchia, Luca Salvatici and L Alan Winters Key Points Introduction Trade in value added The Baseline Modelling Brexit The effects of a ‘No deal’ Brexit Conclusion Footnotes Bibliography Online Appendix Key points The production of exports depends on value chains – between firms in one country and, through global value chains (GVCs), across international borders. Thus exports from one UK sector depend on value added from (and hence generate incomes in) other UK sectors and other countries. Trade policies and the costs of doing trade apply to the gross value of a trade flow (e.g. a tariff is levied on the whole value of an imported car). But focusing on gross value – e.g. the decline in exports of cars as the cost of exporting to the EU rises – may be misleading because it misses the effects on the sectors and other countries that supply inputs into UK cars. Even after the immediate logistical disruptions have been smoothed out, a ‘No deal’ Brexit will cut trade with the EU, and although trade with other countries, e.g. China, will increase, it will not do so by enough to make up the loss. Moreover, [...]