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Trade impacts of the Trade and Cooperation Agreement between the European Union and the United Kingdom

Author

Listed:
  • Frank van Tongeren
  • Christine Arriola
  • Annabelle Mourougane
  • Sebastian Benz
Abstract
This paper assesses the medium term impact of the United Kingdom leaving the EU Single Market under the terms of the EU-UK Trade and Cooperation Agreement (TCA) reached at the end of 2020 using the OECD METRO CGE model. The analysis does not include any transitional costs to fully implementing the new trade agreement, nor does it take into account stress on the economy as a result of COVID-19. Lastly, only the implications on services trade from regulatory restrictions on the free movement of people have been incorporated in the analysis while the wider labour market impacts of cross-border movement of people are left aside. Results from the simulation show that real GDP losses in the European Union, in the worst case scenario are expected to be around 0.6% in the medium term, but would vary markedly across countries. Ireland would experience the largest losses, while countries with loose trade links with the United Kingdom would barely be affected. The decline in trade is not uniform among sectors. European Union member states are expected to import less professional services such as financial services and insurance, communication, and other business services. UK exports are estimated to fall by about 6.3% and imports by 8.1% in the medium term. The overall medium-term loss in real GDP could amount to 4.4%.

Suggested Citation

  • Frank van Tongeren & Christine Arriola & Annabelle Mourougane & Sebastian Benz, 2021. "Trade impacts of the Trade and Cooperation Agreement between the European Union and the United Kingdom," OECD Economics Department Working Papers 1698, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1698-en
    DOI: 10.1787/eeeea3ec-en
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    More about this item

    Keywords

    Brexit; free-trade agreement; general-equilibrium model;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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