Forgone Benefits of Economic Integration: Effects of Brexit on Ireland

Christine Arriola, Donal Smith and Frank van Tongeren

Chapter 11 in Policy Analysis and Modeling of the Global Economy:A Festschrift Celebrating Thomas Hertel, 2021, pp 339-367 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The Irish economy is more closely integrated with the United Kingdom than any other EU member state. The departure of the United Kingdom from the European Union (Brexit) will lead to new barriers to trade, which implies disruptions of closely knit value chains and is expected to have profound negative economic effects, especially on Ireland. This chapter concentrates on spillovers through trade and investigates the sectoral effects of a scenario where the UK trade relations would be subject to a set of new Most Favored Nation (MFN) tariffs and increases in trade costs related to non-tariff measures (NTMs) on goods and services. Using a multi-country computable general equilibrium (CGE) model, the analysis shows despite a less restrictive UK tariff rate schedule, Irish exports would not fair much better than if the United Kingdom adopted entirely the EU tariff rates. Total exports from Ireland to the United Kingdom could drop by as much as 17%, with agriculture and food most severely affected. Other sectors with a more diversified portfolio of export destinations, such as pharmaceutical and chemicals, would be able to compensate for the loss of trade with the United Kingdom to some extent, but overall the Irish economy would see a contraction of output and concomitant employment effects.

Keywords: Computable General Equilibrium Modeling; CGE Models; Trade Policy Modeling; GTAP; Global Trade Analysis Project; Trade Impact Assessments; Sustainability Impact Assessments; Trade and Employment; Trade and Climate; Globalization; Preferential Trade Agreements; Thomas Hertel (search for similar items in EconPapers)
JEL-codes: C68 F13 F18 Q54 Q56 (search for similar items in EconPapers)
Date: 2021
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