The Collapse of EU Trade Relations: A Worst Case Scenario?

11 Pages Posted: 3 May 2019

See all articles by Karen Jackson

Karen Jackson

University of Westminster

Oleksandr Shepotylo

Aston University - Aston Business School

Date Written: March 12, 2019

Abstract

This paper explores the welfare implications of two Brexit scenarios: no-deal Brexit, compared to the complete break-up of the EU where all EU member states are left to trade on WTO-only rules. Using a structural gravity approach, our estimates suggest that the rest of the EU countries have much more to lose from the disintegration of the EU compared to a disorderly Brexit. This analysis allows us to develop an understanding of the reasons for the resistance towards accepting the UK’s demands during the Brexit process. At the same time, neighboring developing and post-transition countries, such as Algeria and Ukraine, are expected to benefit from EU disintegration because they would increase their trade competitiveness with the EU relative to the other EU countries.

Keywords: Gravity model, trade policy, Brexit, EU

JEL Classification: F13, F14

Suggested Citation

Jackson, Karen and Shepotylo, Oleksandr, The Collapse of EU Trade Relations: A Worst Case Scenario? (March 12, 2019). Available at SSRN: https://ssrn.com/abstract=3351108 or http://dx.doi.org/10.2139/ssrn.3351108

Karen Jackson (Contact Author)

University of Westminster ( email )

35 Marylebone Road
London NW1 5LS
United Kingdom

HOME PAGE: http://karen-jackson.com

Oleksandr Shepotylo

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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