EU-UK global value chain trade and the indirect costs of Brexit
Rita Cappariello (),
Milan Damjanovic (),
Michele Mancini and
Filippo Vergara Caffarelli
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Milan Damjanovic: Bank of Slovenia
No 468, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area
Production networks in the European Union (EU) and the United Kingdom (UK) are highly integrated and Brexit poses a threat to supply and demand linkages across the Channel. In a world of Global Value Chains (GVCs), tariffs might be more harmful than in a world where trade is purely direct. In this paper we highlight the features of GVC-trade between the EU and the UK, disentangling the complex network of bilateral EU-UK value-added flows. Assuming that following Brexit the UK adopts the same Most-Favoured-Nation tariff schedule as the EU, we compute the direct and indirect costs of these tariffs, taking into account the EU-UK GVC-trade patterns. Tariffs would add almost 1 percentage point to the cost of manufacturing inputs in the UK, while the corresponding input cost in the EU would be only marginally affected, despite some heterogeneity at the country-level.
Keywords: Brexit; tariffs; global value chains (search for similar items in EconPapers)
JEL-codes: D57 F13 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-int and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_468_18
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