FREE TRADE AGREEMENTS AND BREXIT (thread):
Membership of the EU Customs Union prevents countries from agreeing their own trade agreements. Instead, the EU negotiates trade agreements on behalf of its member countries, which must be ratified by each state. /1
Membership of the EU Customs Union prevents countries from agreeing their own trade agreements. Instead, the EU negotiates trade agreements on behalf of its member countries, which must be ratified by each state. /1
If the UK leaves the Customs Union, it will be free to negotiate its own trade agreements.
A number of studies have estimated the gains from trade agreements with third countries. The expected effects are small relative to the fall in trade from leaving the EU. /2
A number of studies have estimated the gains from trade agreements with third countries. The expected effects are small relative to the fall in trade from leaving the EU. /2
The Government analysis leaked by @BuzzFeedUK predicts that a new trade deal with USA would add 0.2% to long run GDP compared with a Brexit cost to GDP of up to 8%.
A @CEP_LSE paper by @swatdhingraLSE @johnvanreenen & co-authors finds similar results cep.lse.ac.uk/pubs/download/… /3
A @CEP_LSE paper by @swatdhingraLSE @johnvanreenen & co-authors finds similar results cep.lse.ac.uk/pubs/download/… /3
The basic reason for this is that countries overwhelmingly tend to trade most with other countries that are economically similar and geographically close.
For the UK, that means the EU. /4
For the UK, that means the EU. /4
To illustrate this, the left panel shows that trade between EU countries and Japan increases with the GDP of the UK country. Right panel shows that French exports decrease with distance between countries. From the Handbook of International Economics by @ckhead and Mayer. /5 
The focus of modern trade agreements is on aligning non-tariff barriers (e.g. regulations). For example, the Canada-EU trade agreement is nearly 1,600 pages long, with most of the text covering very specific reservations on non-tariff measures. /6
The problem is that it is difficult to align regulations with a broad set of diverse countries. For example, regulation of pharmaceuticals in the US is starkly different to in the EU. It would be very difficult for the UK to align policy closely with both nations after Brexit. /7
The EU is constantly negotiating new trade agreements. Recent examples include Canada, South Africa, South Korea, Japan and Singapore. /8
Any gains that the UK gets from agreeing trade agreements when outside the Customs Union should be measured relative to the gains that would have occurred anyway from EU agreements. /9
Conclusion: the most important free trade agreement for the UK to negotiate post-Brexit is with the European Union. /10
