Economic impacts of UK's free trade agreements with Korea, Japan, and EU as a breakthrough of Brexit

Abstract

AbstractWith the UK‐Korea‐EU Free Trade Agreement (FTA) and the UK‐Japan‐EU FTA, the gross domestic products of the UK, Korea, Japan, and the EU will increase. The UK's exports to Korea and Japan, and Korea's exports to the UK, Japan, and the EU will increase in some manufacturing sectors, particularly the automotive sector. Likewise, Japan's manufacturing exports to the UK and the EU will grow. However, UK and Japanese exports to the EU and Korea, respectively, will decline in this sector. There will be positive welfare effects on the UK, Korea, and Japan, but negative welfare effects on the EU, China, and the rest of the world (ROW). While UK imports from Korea and Japan and Korean imports from the UK and the EU will both increase and have mixed trade creation and diversion effects, UK imports from the EU will decrease in the manufacturing sectors. Korea's imports from Japan will decline, but Japan's imports from the UK, Korea, and the EU will increase due to trade creation and diversion effects. China's imports from Korea and Japan will decline, whereas China's imports from the UK and the EU will increase. EU imports from Korea and Japan will increase due to trade creation and diversion effects, but EU imports from the UK, China, and the ROW will decline in most manufacturing sectors.