De-Globalisation and Reconfiguration of Trade Flows
Paper Session
Saturday, Jan. 6, 2024 8:00 AM - 10:00 AM (CST)
- Chair: Robert Zymek, International Monetary Fund
Not To Belittle NTBs: Non-Tariff Barriers and Trade During Brexit
Abstract
This paper studies the impact of Brexit on the UK’s trade with the EU relative to its trade with the rest of the world. We find no evidence that uncertainty and anticipation effects led to a significant decline in relative UK trade with the EU during the period after the UK voted for Brexit in 2016 and before the change in policy was implemented under the new Trade and Cooperation Agreement (TCA) in 2021. However, the UK’s departure from the EU’s single market and customs union at the start of 2021 caused a major shock to UK-EU trade. We estimate that the new TCA trade relationship led to a sudden and persistent 25% fall in relative UK imports from the EU. In contrast, we find a smaller and only temporary decline in relative UK exports to the EU, but nevertheless a large and sustained drop in the extensive margin of exports, driven by the exit of low-value relationships. The timing and asymmetry of Brexit effects on UK imports and exports is puzzling and provides evidence of important differences in adjustment to integration and disintegration shocks.The Extraterritorial Effects of Sanctions
Abstract
We provide quantitative evidence that the primary effects of economic sanctions on trade and welfare are accompanied by strong extraterritorial effects -- estimates of the former effects may be significantly biased if the latter effects are not taken into account. Furthermore, while the extraterritorial burden of sanctions on trade falls primarily on target countries, the corresponding effect on trade among senders and third countries is positive. General equilibrium analysis suggests that, for targets, the welfare losses due to extraterritorial effects are large and may exceed the losses due to reduced trade with senders. For senders, the gains from increased trade with third countries may outweigh the losses from decreased trade with targets to generate net welfare gains. The welfare effects on third countries are significant, too. However, the direction and size of these effects depend on three key factors: the size of the target, the size of the sender, and the economic ties among the target, the sender, and third countries.Brexit and the Trade Elasticity
Abstract
The trade elasticity captures how trade flows respond to trade costs, but this elasticity can vary substantially across product types. Regressing product level estimates of the trade elasticity from Fontagne et al (2022) on product characteristics we find that distance elasticity, product market concentration, differentiation and transports costs can explain around one-third of variation in the trade elasticity across products. We then estimate the effect of the Brexit process on UK-EU trade flows at product level using a gravity model with 40 countries. We find a reduction in total flows from January 2021 after the new Trade and Co-operation Agreement (TCA) came into effect. There is substantial heterogeneity in the effects of the TCA across product types.JEL Classifications
- F1 - Trade
- F6 - Economic Impacts of Globalization