An updated analysis on possibilities to re-direct agri-food trade flows originated from the UK and Denmark after Brexit

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Built upon the analysis of Yu et al. (2017), this paper provides an updated analysis on the potential impacts of a set of alternative Brexit scenarios on the UK and a smaller EU member state (Denmark) with very high agri-food export intensities in the UK market, relative to a baseline scenario of 2025. The current study distinguishes itself from existing studies in its analytical attention to the flexibilities for both countries to re-direct trade within and/or outside of the EU and in its attention to specifying the characteristics of the EU agri-food markets. We show that in the scenario where the two sides trade on WTO terms, bilateral exports of agri-food products from Denmark to the UK decrease by as much as 81 percent. However, reductions of total Danish agri-food exports would be quite limited. In contrast, the UK would suffer much larger losses in its main agri-food exports and total exports. At the macro level, under the WTO scenario, nominal Danish GDP would decrease by 0.57 percent as compared to 5.2 percent for the UK. These disproportional trade and macroeconomic results across the two countries are not only due to the different extents of rising trade costs facing the two countries, they also reflect the strength of the EU in providing more flexibilities for redirecting trade as compared to the likely shallower trade deals the UK may be able to secure outside the EU. This latter point is supported by our findings that the expected benefits to the UK in forming bilateral PTAs with third countries are far smaller than its losses arising from leaving the EU. A sensitivity analysis on the size of the assumed non-tariff barriers is also conducted and the qualitative results from the main scenarios are confirmed.
Original languageEnglish
JournalTidsskrift for Landoekonomi
Issue number2
Pages (from-to)19-35
Number of pages17
Publication statusPublished - 2019

ID: 241832192