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Speaker: María C. Latorre, member of the European Commission's group of experts in International Trade; Professor, Universidad Complutense de Madrid
About the talk: With less than nine months before the UK is scheduled to depart from the EU, much uncertainty surrounds the future EU and UK relationship. It is clear, however, that Brexit will increase barriers between the EU and the UK which will have harmful effects for both economies. According to the majority of economic studies and to our own estimations, Brexit will be far more damaging for the UK than for the European Union (EU). From the economic point of view, it seems less harmful for both to be able to negotiate a soft Brexit with rather small barriers. However, for political reasons the EU may want to deter other nations from following the UK’s path and may want to negotiate a self-damaging hard Brexit.
The negative impact of trade and foreign direct investment seems to be more important than UK’s contributions to the EU budget (with a maximum net fiscal saving of -0.53% of UK’s GDP), or reductions in the flows of migrants. Since massive deportation seems to be ruled out after the pre-agreement of December 8 (2018), the impact of migration would not be so harmful.
UK may try to strike other trade or Foreign Direct Investment agreements with other countries outside the EU. We have studied different policy alternatives for UK and also for the Rest of the European Union (REU) to counteract the harmful impact of Brexit. In particular, we have analyzed a unilateral tariff elimination in the UK, different FDI agreements of this economy with China, Japan and India and a comprehensive trade and FDI agreement with the US (similar to TTIP). While the FDI agreements have a negligible impact on the UK, we find some scope in the unilateral tariff elimination to raise wages and capital remuneration in that economy. When analyzing a UK-US TTIP agreement we find it insufficient to compensate the negative impacts of Brexit. By contrast, in most of the possible Brexit and TTIP joint scenarios, TTIP could be useful for the REU to overturn the limited negative effects it experiences with Brexit.
About the speaker: María C. Latorre is currently a member of the group of experts in international trade of the European Commission. She has also conducted other consulting projects for the World Bank and the Spanish Ministry of Economics and Competitiveness. Maria has been a Research Scholar at the Center for International Development at the Harvard Kennedy School and at Real Colegio Complutense at Harvard University. She has held research visiting positions in the US International Trade Commission, the CEPII and the University of Nottingham. Her papers have been published in academic journals such as World Development, Journal of Policy Modeling, Economic Modelling and China Economic Review among others.
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