Deep Integration and UK-EU Trade Relations
This paper studies the impact of deep agreements on United Kingdom-European Union trade relations. A standard gravity model is applied to assess the effect that European Union membership had on the United Kingdom's trade. The paper uses new in...
| Main Authors: | , , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/853811484835908129/Deep-integration-and-UK-EU-trade-relations http://hdl.handle.net/10986/25956 |
| Summary: | This paper studies the impact of deep
agreements on United Kingdom-European Union trade relations.
A standard gravity model is applied to assess the effect
that European Union membership had on the United
Kingdom's trade. The paper uses new information on the
content of trade agreements to build a measure of
"depth" based on the number of provisions the
agreements cover. The analysis relies on information on
goods, services, and value-added trade from the World Input
Output Database. Deep trade agreements are found to increase
goods and services trade by 42 percent, and value-added
trade by 14 percent on average. European Union membership
had a particularly strong effect on United Kingdom's
services and global value chain trade. Because of its
membership, the United Kingdom's services trade more
than doubled, and the country's backward and forward
participation in global value chains increased by more than
30 percent each. The paper uses these estimates to evaluate
the future of United Kingdom-European Union trade under
different scenarios. The findings show that United
Kingdom-European Union trade declines under all scenarios,
ranging between 6 and 28 percent for trade in value added.
This drop is sharper (particularly for services and global
value chain trade) the lower is the depth of the future
arrangement relative to the depth of the European Union
agreement. As trade flows adjust slowly to changes in trade
costs, these effects are expected to emerge over time. But
the trade-off between the depth of trade agreements and
trade intensity will delimit policy choices going forward. |
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