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Portada del sitio > Asignaturas / Teaching > Economics of European Integration > Brexit or BINO (Brexit In Name Only)? > BREXIT: TRADE DIVERSION DUE TO TRADE POLICY UNCERTAINTY

BREXIT: TRADE DIVERSION DUE TO TRADE POLICY UNCERTAINTY

Eduardo Gutiérrez, Aitor Lacuesta and César Martín Machuca. Docuemntos de Trabajo, 2140. Banco de España. 2021.

Jueves 25 de noviembre de 2021, por Carlos San Juan


During the long process of negotiation after the 2016 Brexit referendum there was a high uncertainty about the final shape of bilateral trade relations between the European Union (EU) and the United Kingdom (UK), especially for particular sectors and firms. Given this context, the paper explores whether a fraction of Spanish trade with the UK was diverted to other markets after the referendum as a function of Spanish firms’ exposition to the British market. The paper shows that firms more exposed to that particular market (above 10% of foreign sales and purchases) were able to almost fully divert the shock in their sales and purchases, mostly to other European countries. Instead, there was an heterogeneous responses of Spanish firms with a low share of British bilateral fl ows over total trade. Given a particular share, trade diversion appears to be more limited for imports relative to exports and for big companies.

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