EU-UK trade sharply lower than in a world without Brexit – POLITICO

DUBLIN – Brexit has added a higher opportunity cost to UK-EU trade than previously thought, according to a new Irish study that compares the weakness in actual flows of goods after 2020 to a parallel universe where Britain remained in the single market.

The Economic and Social Research Institute (ESRI) in Dublin found that Britain’s exit has reduced the potential value of goods exports to Europe by 16 per cent, while EU exports to the UK have fallen even more, and a 20 per cent loss in potential represent sales.

The ESRI authors from Trinity College Dublin used a hybrid model combining UK and EU data. They started from the central assumption that in the absence of Brexit, UK import and export levels with European partners would have accurately reflected the EU’s relatively stronger internal trade performance over the past year.

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That ESRI found that trade has instead suffered both ways – but in markedly different ways.

While many UK companies producing low-margin goods have completely halted shipments to the EU, flows of goods to the UK have largely continued but at reduced volumes. ESRI said this reflected the contrast in post-Brexit border regimes. While the UK has imposed few or no regulatory restrictions on EU imports post-Brexit, UK exports now face full EU customs and sanitary controls, increasing costs and delays and making low-margin products unprofitable.

ESRI found that British exporters were losing opportunities and market share in most EU countries, most notably in their closest trading partner, Ireland, where the value of British goods fell 40 percent last year compared to the non-Brexit model. Other strong relegators were Spain (32 percent), Sweden (25) and Germany (24).

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The only EU member to record UK import gains in the ESRI model was Luxembourg, up 76 percent. While ESRI gave no reason for this, the UK government has identified power generators as its top commodity export of 2021 to the tiny duchy.

In the other direction of trade, only two EU countries were able to exceed expectations when it came to exports to Great Britain: Latvia (38 percent) and Cyprus (33 percent). Several others saw no discernible decline post-Brexit, including food and drink powerhouse Ireland.

But exporters in most EU countries have reduced shipments over the past year in line with what the report identified as reduced UK market appeal and security.

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The estimated value of these exports in 2021 had fallen the most in Malta (46 percent), followed by Finland (33), France and Greece (29), the Netherlands, compared to the report’s scenario in which the UK remains a member of the EU (27) , Belgium (26), Poland (21), Portugal (20), Spain and Sweden (19), Germany (14) and Italy (12).

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