The potential economic impact of Brexit on the Netherlands

Donal Smith, Christine Arriola, Caitlyn Carrico and Frank van Tongeren

No 1518, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper provides estimates of the potential trade effects of an exit of the United Kingdom (UK) from the European Union (EU) on exports and production at the sectoral level as well as GDP in the Netherlands. Owing to the high uncertainty regarding the final trade agreement between the negotiating parties, the choice has been made to assume a worst case outcome where trade relations between the United Kingdom and EU are governed by World Trade Organization (WTO) most favoured nation (MFN) rules. In doing so, it provides an upper bound estimate of the potential negative economic impact stemming from disruptions in trade. Any final trade agreement that would result in closer relationships between the United Kingdom and the EU could reduce this negative impact. Simulations using the METRO model suggest that from an increase in tariff and non-tariff measures (NTM’s) Dutch exports to the UK would fall by 17% and GDP declines by 0.7% in the medium term compared to baseline. This effect is from the trade channel absent any change in foreign direct investment (FDI) or productivity. The Dutch agri-food sector would experience a 22% fall in its UK exports. There are some sectors that gain from the export opportunities provided by Brexit, notably financial services and transport.

Keywords: Brexit; computable general equilibrium model; European Union; international trade; METRO model; Netherlands; sectoral economic effects (search for similar items in EconPapers)
JEL-codes: B17 C10 C68 F13 F14 (search for similar items in EconPapers)
Date: 2018-11-28
New Economics Papers: this item is included in nep-cmp, nep-eec and nep-int
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1518-en

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