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29 July 2021

Yohannes Ayele is Research Fellow in the Economics of Brexit at the University of Sussex and Fellow of the UKTPO.

Since 1 January 2021, the UK’s trading relationship with its biggest and closest trading partner—the EU—has been governed by the Trade and Cooperation Agreement (TCA). Although the TCA is a zero-tariff and quota-free trade deal, several reports indicate that it is having a negative impact on the UK’s trade with the EU (see, 1, 2, and 3). While looking at the aggregate effect of the TCA on the UK trade is important, such analysis also misses the substantial differential impact of the TCA across the UK’s devolved administrations and regions.

Regions in the same country can be affected differently by new trade barriers because of the difference in industrial production structure and, second, the differential exposure of industries to trade policy changes. In this blog, we provide a brief report on how the UK’s regional trade with the EU fared in the first quarter since the introduction of the TCA. (more…)

July 29th, 2021

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29 July 2021

Yohannes Ayele is Research Fellow in the Economics of Brexit at the University of Sussex and Fellow of the UKTPO.

Since 1 January 2021, the UK’s trading relationship with its biggest and closest trading partner—the EU—has been governed by the Trade and Cooperation Agreement (TCA). Under the TCA, UK exports to the EU face zero-tariff and zero-quota. However, to claim zero tariffs, exporters must meet the rules of origin requirements and be able to provide proof of origin. Where exporters do not meet the requirements they end up paying the tariff. Even those exporters that can meet the rules of origin requirement, because of the cost of the paperwork and requirements for proof of origin needed to claim the zero tariff, they may instead choose to pay the tariff. The latter is more likely where the tariff preference margin (i.e., the difference between MFN non-zero tariff and the zero-tariff under TCA) is very low. These problems— the rules of origin requirements and costs associated to claim zero-tariff—could be particularly challenging for smaller companies. Therefore, in practice, firms may end up paying tariffs despite the zero-tariff and zero-quota deal under the TCA. (more…)

July 29th, 2021

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23 July 2021

Nicolo Tamberi is Research Officer in Economics at the University of Sussex and a fellow of the UKTPO.

We have updated our estimates of the effects of the introduction of the Trade and Cooperation Agreement (TCA) on UK-EU trade in 2021 through to April. The methodology used was described in the UKTPO briefing paper 57 (see the appendix for details). We find that over the period January-April 2021, the TCA reduced UK exports to the EU by 18.7% and imports from the EU by 25.8% compared to the scenario in which the UK did not leave the EU.

For the analysis, we used HMRC for UK trade and Eurostat data for EU trade excluding gold from both exports and imports (HS code 7108). Over the last few months, analysts and commentators have noted a big gap between UK exports to the EU as reported by the UK and the corresponding flows reported by the EU (that is, UK exports to the EU reported by the UK and EU imports from the UK reported by Eurostat). We have investigated the issue in detail in our latest working paper and concluded that we agreed with the ONS  that UK reported data should be used instead of the EU reported mirror flows. While both the UK and the EU changed the data collection method for UK-EU trade in 2021, the changes undertaken by the EU in its reported imports are larger than those of UK reported exports.

As always, these data are provisional and could be revised in the future, so our results should not be interpreted as definitive. Our preferred estimation, which uses the synthetic control method, shows that UK exports to the EU have been dramatically affected in January 2021 (-42%) and we find some milder evidence that they were negatively affected also in April 2021 (-14.3%). Adding up the period January-April 2021, UK exports to the EU were down by 18.7%. On the other hand, UK imports from the EU saw a smaller drop in January 2021, but they remained consistently below expectations for all months of 2021 to date. Over the entire period January-April 2021, UK imports have been 25.8% less than what they would have been otherwise. This can be seen in the figures below where the blue line depicts what actually happened, the orange lines give our counterfactual synthetic control estimates for what would have happened in the absence of Brexit.

Figure 1: UK-EU trade excluding gold (HS 7108) and synthetic counterfactual

UK exports to the EU

A) UK exports to the EU

UK imports from the EU

B) UK imports from the EU

The figures show actual UK exports to and imports from the EU excluding gold (HS 7108) and the synthetic series. We estimated the model for UK trade with each EU country and then aggregated the figure to EU total.

It is clear that over the period there has been a decline in exports and imports. The decline in imports appears to have been more consistent than the impact on exports and at this stage that is still somewhat puzzling. These are also still ‘early’ impacts as they only for the first four months.

 

Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

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July 23rd, 2021

Posted In: UK- EU

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Image of Alan Winters22 July 2021

Michael Gasiorek is Professor of Economics and Director of the UK Trade Policy Observatory (UKTPO) at the University of Sussex. L. Alan Winters is Professor of Economics and Founding Director of the UKTPO.

The UK Government’s command paper on Northern Ireland published yesterday (21 July 2021) is significant in four regards.

First, because it explicitly recognises – at length – that the Protocol is not working (at least not for the UK) and needs to be modified in form or in implementation. This is almost certainly correct. (more…)

July 22nd, 2021

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Share this article: Facebooktwitterredditpinterestlinkedinmail8 July 2021Image of Alan Winters

L. Alan Winters is Professor of Economics and Founding Director of the UKTPO. Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex and Fellow of the UKTPO.

On 1st June 2021, as part of its post-Brexit trade architecture, the UK Government launched the Trade Remedies Authority (TRA). On 11th June the TRA recommended the extension of only some of the quotas and tariffs on steel imports that the UK had inherited from the EU. On 30th June, one day before these measures were due to expire, the Government rejected the TRA’s recommendation and extended the policies on several categories of steel for which the TRA had recommended the revocation. It also announced a review to check whether the TRA was ‘fit for purpose’. What was going on? And does it matter?

(more…)

July 8th, 2021

Posted In: UK - Non EU, UK- EU

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Share this article: Facebooktwitterredditpinterestlinkedinmail Image of Alan Winters5 May 2021.

L. Alan Winters is Professor of Economics and Founding Director of the UKTPO. Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex and Fellow of the UKTPO.

The Government’s Integrated Review, Global Britain in a competitive age, published in March 2021, presents the Government’s vision for the UK in 2030 and outlines plans to achieve it. It emphasises the importance of Britain asserting its influence on the world stage by sustaining advancements in science and technology, shaping the rules-based international order, and strengthening security and defences at home and overseas. It has a section titled “Putting trade at the heart of Global Britain” and expresses support for the multilateral system, designing rules and ensuring trade is fair and efficient. The document says that it is a “guide for action”; it says lots of the right things, but on the ground the UK is going backwards. (more…)

May 5th, 2021

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Share this article: Facebooktwitterredditpinterestlinkedinmail 20 April 2021.

Michael Gasiorek is Professor of Economics and Director of the UKTPO. Yohannes Ayele is Research Fellow in the Economics of Brexit at the University of Sussex and Fellow of the UKTPO.

A decline in trade with the EU was expected following the coming into force of the Trade and Cooperation Agreement between the UK and the EU on the 1st of January. Nevertheless, when the UK January trade figures were released in early March, almost unanimously commentators were surprised by the extent of the decline. We now have the data for February and so in this blog we update the numbers and discuss their significance. (more…)

April 20th, 2021

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Share this article: FacebooktwitterredditpinterestlinkedinmailErika Szyszczak31 March 2021

Erika Szyszczak is Professor Emerita and a Fellow of the UKTPO.

Trade has become a new tool of political and economic warfare.  Recent years have seen a rise in threats and the disruptive use of use tariffs, export and import bans to further political aims by the two economic superpowers, the US and China. Other countries wishing to assert greater political influence, such as Russia or Turkey, have joined the fray. Although the disputes are characterized as being between States, the real impact of trade wars is felt by businesses, workers, consumers and ordinary citizens. The impact is felt in the COVID-19 pandemic, where critical supplies of medical products or Personal Protective Equipment are essential in a health emergency. (more…)

March 31st, 2021

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Share this article: Facebooktwitterredditpinterestlinkedinmail 23 March 2021

Michael Gasiorek is Professor of Economics and Director of the UK Trade Policy Observatory at the University of Sussex. Suzannah Walmsley is Principal Consultant and Fisheries and Aquaculture Business Development Manager at ABPmer.

Last week the UK’s trade data for January 2021 came out and the evidence was pretty striking. It showed a dramatic decline in UK exports and imports in January, and particularly so with the EU. Now some of this will have been driven by Covid-related lockdown restrictions, and some of the dramatic fall in trade with the EU itself may have been driven by firms’ stockpiling in November and December to protect themselves against the much-publicised potential border difficulties arising from the UK’s exit from the EU and the end of the transition period.

In this blog we dig a bit deeper into those numbers and focus just on fisheries. (more…)

March 23rd, 2021

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Share this article: Facebooktwitterredditpinterestlinkedinmail13 March 2021

Yohannes Ayele is Research Fellow in the Economics of Brexit, Nicolo Tamberi is Research Officer in Economics, and Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex. All are Fellows of the UKTPO.

On Friday 12 March, the Office for National Statistics (ONS) and HM Revenue and Customs (HMRC) released the UK’s trade in goods figures for January 2021, providing data for the first month following the end of the Brexit transition period. The ONS has provided their own interpretation of these data portraying a rather gloomy scene for UK trade. We have downloaded the raw data and here offer some initial thoughts on what we learn from the changes in trade flows in January 2021. (more…)

March 15th, 2021

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