UNCTAD: Post-Brexit UK exports could fall by $32 billion due to non-tariff measures and tariffs

25 February 2020

Non-tariff measures (NTMs) could cause major fractures in post-exit trade relations between the United Kingdom (UK) and the European Union (EU), knocking up to US$32 billion, or 14 per cent, off of UK exports to the EU, according to a new UNCTAD study.

Potential losses under a “no-deal” Brexit from tariffs that may be imposed by the respective parties are estimated at between $11.4 billion and $16 billion or 5-7% of current exports. The new study “Brexit beyond tariffs: The role of non-tariff measures and the impact on developing countries” says NTMs would double those losses.

The study also projects that even if a “standard” free trade agreement were to be signed by the parties, the UK’s exports could still drop by 9%.

The losses would deal a major blow to the UK’s economy, as the EU market accounts for 46% of the UK’s exports. Mounting trade costs due to non-tariff measures and potentially rising tariffs would more than double the adverse economic effects of Brexit for the UK, the EU and developing countries, the study notes.

“EU membership has its advantages to deal with non-tariff measures that even the most comprehensive agreement cannot replicate. This offers important lessons to other regions trying to deal more effectively with such non-tariff measures,” said UNCTAD’s director of international trade, Pamela Coke-Hamilton, while presenting the study’s findings.

Potential boon for developing countries

On the flipside, exports from developing countries into the UK, and to a smaller extent into the EU, could increase if the former doesn’t increase tariffs for third countries.

A no-deal Brexit could offer some opportunities for developing countries as trade barriers between the UK and the EU would benefit suppliers from third countries. By contrast, a deal between them would preclude the incentive to turn to third countries, the study finds.

However, the positive third-country effect could be diminished by increasing regulatory divergence. If the UK’s regulations divert over time from the EU’s, trade costs would rise for third countries due to production process adjustment costs and potential duplication of proofs of compliance. This would disproportionately affect smaller and poorer countries as well as small and medium-sized enterprises.

Full report


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