Brexit Trade Impacts: Alternative Scenarios

Abstract

This note develops four alternative estimates of the trade-related impacts of the United Kingdom seceding from the European Union. We contrast two basic scenarios: an exit that re-sets the UK’s relationship with the rest of the EU to a WTO-rules most favoured nation basis (“Brexit”), versus a negotiated change in the UK’s status that largely preserves the UK’s integration with the rest of the EU at a level similar to that of the European Free Trade Association (“Brefta”). A third scenario introduces a “single market” effect that reflects EU27 “home bias” (EU27 preference for EU27 products). A fourth scenario introduces a UK-US free trade agreement in a context in which the TTIP not going ahead due to the widening gulf between EU and US positions on social and environmental issues under the Trump Administration.

Keywords: United Kingdom, European Union, Brexit, Brefta, TTIP, single market, exit, CGE

JEL Classification: F13, F14