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Brexit trade impacts and Mercosur's negotiations with Europe

Nogues, Julio (2018): Brexit trade impacts and Mercosur's negotiations with Europe.

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We estimate that a hard Brexit would reduce UK imports of agro industrial products from the EU by 50% i.e.by more than double the contraction in imports of other goods (22%). The UK Government has announced that it will substitute the CAP (Common Agricultural Policy) protectionist policies with market-oriented measures and policies that seek to protect the environment. Given Brexit, and given scarce negotiating resources, should Mercosur continue to give the same priority to negotiations with the EU as in recent years? The answer is most likely negative. For a number of reasons discussed in the text we argue that: i) negotiations with the EU are unlikely to deliver market access much in excess of what it has offered so far; ii) unlike these negotiations that have been dragging for around twenty years, there are clear circumstances indicating that an FTA with the UK could be completed in a relatively short period; iii) failing Mercosur to give these talks priority, other countries are more than likely to fill the UK trade gap triggered by Brexit; iv) if other countries do so, it is unlikely that in the future the UK would be willing to offer market access concessions as important as it is likely to do today and, v) the UK is one fifth of the EU GDP so balanced reciprocal concessions should be easier to achieve. What are the stakes at play? We offer back of the envelope estimates indicating that in value terms Mercosur could more than triple its meat exports and close to double its agro industrial exports to the UK within a time horizon that currently appears to be quite concrete and near.

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