Actions
  • shareshare
  • link
  • cite
  • add
add
auto_awesome_motion View all 4 versions
Other research product . Other ORP type . 2019

The cost of Brexit uncertainty: missing partners for French exporters

Martin, Julien; Martinez, Alejandra; Mejean, Isabelle;
English
Published: 01 Dec 2019
Publisher: HAL CCSD
Country: France
Abstract
International audience; More than three years after the unexpected Brexit vote of June 2016, there is still no exit agreement between the United Kingdom and the European Union. Although the conditions of Brexit and the corresponding economic consequences are still unknown, the referendum has already had a real economic impact. The long discussion surrounding Brexit can be seen as a long-lasting uncertainty shock, whiach has affected firms’ investment decisions.In this note we use highly detailed customs data before and after the vote to measure the impact of Brexit on French firms’ exports to the UK. We find that the referendum had no effect on average on the value of exports but depressed export growth in sectors such as transportation or chemical industries which are more upstream in value chains. The number of new trade relationships involving French exporters and British importers has significantly declined after the Brexit vote, in comparison with other destinations. This is consistent with the uncertainty shock reducing French firms’ investment in their customer base, which is likely to penalize French exporters in the future. These results are suggestive evidence that uncertainty has a real cost and that any decision of delaying the Brexit further should compare the benefit of reaching a better deal with the economic cost induced by uncertainty. It is also important that the next EU-UK trade agreement should guarantee the stability and predictability of the trade policy that European exporters will have to face.
Subjects

[SHS.ECO]Humanities and Social Sciences/Economics and Finance

Related Organizations

Antras, Pol, Davin Chor, Thibault Fally, and Russell Hillberry (2012). “Measuring the Upstreamness of Production and Trade Flows”. In: American Economic Review 102.3, pp. 412-416. [OpenAIRE]

Baker, Scott, Nicholas Bloom, and Steven Davis (2016). “Measuring Economic Policy Uncertainty”. In: The Quarterly Journal of Economics 131.4, pp. 1593-1636.

Bloom, Nicholas, Philip Bunn, Scarlet Chen, Paul Mizen, Pawel Smietanka, and Gregory Thwaites (2019). The Impact of Brexit on UK Firms. Working Paper 26218. National Bureau of Economic Research. 9A nice illustration of this principle can be found in Handley and Limão (2017). The authors show that trade barriers for Chinese firms exporting to the US have not decreased after China entered the World Trade Organization because the country was already enjoying the “MostFavored Nation” status before its entry. Still, the trade agreement has had a massive impact on Chinese exports to the US. The reason is that, after entry, Chinese exporters were no longer at threat of losing this status as was the case before, when the Congress was voting each year over this status.

Cornuet, Flore, Thomas Ouin-Lagarde, Jérémi Montornès, and Benjamin Vignolles (2019). Assessing the impact of Brexit on the economic activity of the UK's closest partners: the trade channel. INSEE's Conjoncture in France.

Dhingra, Swati, Hanwei Huang, Gianmarco Ottaviano, João Paulo Pessoa, Thomas Sampson, and John Van Reenen (2017). “The costs and benefits of leaving the EU: trade effects”. In: Economic Policy 32.92, pp. 651- 705.

Dixit, Avinash and Robert Pindyck (1994). Investment under Uncertainty. 1st ed. Princeton University Press.

Handley, Kyle and Nuno Limão (2017). “Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States”. In: American Economic Review 107.9, pp. 2731-2783. [OpenAIRE]

Lenoir, Clémence and Bérengere Patault (2019). “Sales managers, poaching and network transmission in international markets”.

Mayer, Thierry, Vincent Vicard, and Soledad Zignago (May 2019). “The cost of non-Europe, revisited”. In: Economic Policy 34.98, pp. 145-199.

Funded by
ANR| ECODEC
Project
ECODEC
Réguler l'économie au service de la société
  • Funder: French National Research Agency (ANR) (ANR)
  • Project Code: ANR-11-LABX-0047
,
EC| TRADENET
Project
TRADENET
Firm-to-Firm Trade Networks
  • Funder: European Commission (EC)
  • Project Code: 714597
  • Funding stream: H2020 | ERC | ERC-STG
moresidebar