Brexit: Trade diversion due to trade policy uncertainty

Eduardo Gutiérrez Chacón, Aitor Lacuesta () and Cesar Martin Machuca
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Aitor Lacuesta: Banco de España

No 2140, Working Papers from Banco de España

Abstract: During the long process of negotiation after the 2016 Brexit referendum there was a high uncertainty about the final shape of bilateral trade relations between the European Union (EU) and the United Kingdom (UK), especially for particular sectors and firms. Given this context, the paper explores whether a fraction of Spanish trade with the UK was diverted to other markets after the referendum as a function of Spanish firms’ exposition to the British market. The paper shows that firms more exposed to that particular market (above 10% of foreign sales and purchases) were able to almost fully divert the shock in their sales and purchases, mostly to other European countries. Instead, there was an heterogeneous responses of Spanish firms with a low share of British bilateral flows over total trade. Given a particular share, trade diversion appears to be more limited for imports relative to exports and for big companies.

Keywords: policy uncertainty; Brexit; trade diversion (search for similar items in EconPapers)
JEL-codes: F02 F13 F14 F15 F61 F68 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2021-11
New Economics Papers: this item is included in nep-eec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 21/Files/dt2140e.pdf First version, November 2021 (application/pdf)

Related works:
Journal Article: Brexit: Trade Diversion due to Trade Policy Uncertainty (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2140

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