Economic disintegration: Brexit, Non-tariff Measures, and UK Trade

Abstract The withdrawal of the United Kingdom from the European Union has resulted in a notable rise in trade costs between these two parties, even though the new trading relationship established a tariff- and quota-free trade in goods between the UK and the EU. Employing the synthetic control difference-in-difference methodology, we empirically establish that the EU-UK Trade and Cooperation Agreement (TCA) has had a significant and adverse effect on the bilateral trade between the UK and EU countries. This paper quantifies the ad valorem equivalents of non-tariff measures between the EU and UK and examine their impact on UK trade in 2021, subsequent to the conclusion of the Brexit transition period. Particularly, the amplified trade frictions associated with goods subject to sanitary and phytosanitary regulations, as well as technical barriers to trade, have played a crucial role in the decline of UK exports to the EU. JEL codes: F13, F14, F15, F17, F55