Can Brexit be overturned with other trade and FDI agreements? A quantitative assessment

María C. Latorre, Hidemichi Yonezawa and Zoryana Olekseyuk

No 332926, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: We conduct a general equilibrium analysis including a state-of-the-art Melitz structure in manufactures and the operations of foreign multinationals in services. We study different policy alternatives for UK and the Rest of the European Union (REU) to counteract the harmful impact of Brexit. In particular, we analyze a unilateral tariff elimination in the UK, different FDI agreements of this economic with China, Japan and India and a comprehensive trade and FDI agreement with the US (similar to TTIP). While the FDI agreements have a negligible impact on the UK, we find some scope in the unilateral tariff elimination to raise wages and capital remuneration in that economy. When analyzing a UK-US TTIP agreement we find it insufficient to compensate the negative impacts of Brexit. By contrast, in most of the possible Brexit and TTIP joint scenarios TTIP could be useful for the REU to overturn the limited negative effects it experiences with Brexit.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332926

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