Post-Brexit trade survival: Looking beyond the European Union

As the EU and UK negotiate a new relationship, this paper explores the welfare implications of this policy change and its interaction with major trade policy initiatives. We evaluate five Brexit scenarios, based on different assumptions regarding Brexit, TTIP and various free trade deals the UK may attempt to broker with the US or Commonwealth countries. We also consider the dynamics of welfare changes over a period of two decades. Our estimates suggest that the impact of Brexit is negative in all policy scenarios, with lower welfare losses under a soft Brexit scenario. The losses are exacerbated if TTIP comes into force, demonstrating the benefits of being a member of a large trade bloc. However, they occur gradually and can be partially compensated by signing new free trade agreements. To further minimise losses, the UK should avoid a hard Brexit

Belt and Road: The China Dream?

This paper explores the impact of the Belt and Road Initiative (BRI), in terms of changes in trade costs on trade and consumer welfare in China, the EU, and the rest of the World. We employ a general equilibrium structural gravity approach and conduct a counterfactual analysis. Our key findings are as follows: (i) China and the EU are expected to make substantial gains from the BRI due to reductions in transport costs (ii) signing and implementing a deep FTA between China and the EU is equivalent to transport cost reductions of 15-20 percent (iii) the joint policy of the BRI and FTA is super-additive, magnifying the gains from the separate policies (iv) where transport cost reductions are 20 percent or more, the potential negative effect of the China-US trade war on China is more than compensated for by the BRI initiative. Our results provide evidence that the BRI has the potential to deliver significant welfare gains, particularly if combined with other trade integration schemes, and to counterbalance aggressive trade policies

Transforming East Asia: Regional integration in a trade war era

This paper evaluates the trade and welfare implications of further East Asian trade integration, through the signing of the China-Japan-Korea FTA, and continued trade tensions between the US and China. Our analysis uses a structural gravity approach to explore the effects of these cooperative and non-cooperative trade policies. Our key findings are: (i) for China, the FTA can compensate for continued trade tensions (ii) in terms of the FTA and for the members involved, reductions in tariffs are expected to lead to larger welfare gains compared to those from lower NTBs (iii) for the members involved, a deeper agreement will be more welfare enhancing. Overall, East Asian integration appears to be a more appealing prospect in light of tensions with the US

An examination of EU trade disintegration scenarios

This paper demonstrates the welfare implications of the differential disintegration of the EU. 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. At the same time, neighbouring high-income and middle-income countries, such as Bosnia and Herzegovina and Norway, are expected to benefit from EU disintegration under some scenarios because trade would be diverted from EU countries

The evolution of firm-level distributions for Ukrainian manufacturing firms

NoWe document rich variation across observed firms’ characteristics, and the accompanying macroeconomic volatility, often related to political turmoil for Ukrainian manufacturing firms. We use a unique annual firm-level data for the period from 2001 to 2009 compiled from the Derzhkomstat. To understand the evolution of distributions we utilize functional principal component analysis while accounting for the effects associated with firms’ region, industry, trade status, and firm turnover. The overall improvements in firm productivity in Ukraine’s manufacturing in 2001–2009 vary substantially by industry, trade status and with firm turnover, while regional effects are less important